There is an irony in the fact many apparel brands diversifying outside of China are going full circle, but it makes sense as the benefits far outweigh the cons, writes Gherzi Textile Organisation partner Robert P. Antoshak.

Once upon a time US clothing brands owned their manufacturing. Today, that’s a rarity. In the 1970s, clothing companies saw manufacturing as a fixed cost, a cash drain, with limited upside. The value, so the thinking went, was in the brand itself. Making stuff took a backseat to designing stuff.

Moreover, in the 1990s, brands dumped manufacturing and outsourced production when quotas went away without quantitative restrictions that helped keep domestic production in the US. For many companies, outsourced manufacturing was cheaper than owning vertical manufacturing. Additionally, there were so many manufacturers in Asia that brands could easily play textile mills off of textile mills, cutters off of cutters, and so forth, with lower prices and quality improvements as the ultimate prize for brands.

Also, back in those days, labour workplace protections and environmental regulations were considered — to quote a friend of mine —”flexible.” Indeed, whatever regulations were on the books were not effectively enforced. And then, of course, we had the sharp disparity in worker wages in Asia compared to the US.

So, a business case was made for offshoring. In short, it costs less to go offshore. And a plethora of suppliers stood ready to make textiles and clothing for US brands. Further, a burgeoning port and transportation infrastructure facilitated just-in-time product replenishment. Once offshoring reached its zenith in about 2018 or so, globalised supply chains enhanced the ability of brands to source practically anything from just about anywhere.

The world changes

It was a dreamy system — until it wasn’t.

That’s when the pandemic wrecked the party. What worked previously became a dilemma for brands. They couldn’t get their stuff when they needed it. Ports were clogged. Manufacturers were shut down.

What’s more, consumers were stuck at home. So, their purchasing habits changed. Retail went from a tactile experience to a virtual one. B-to-C took on a new meaning as a firehose for online retailers who could successfully navigate the rapidly evolving sourcing landscape to meet consumers’ one-click demand for clothing.

While the supply chain sorted itself out of the pandemic, brands began to look for better sourcing hedges. China was the unchallenged leader in textiles and apparel. Everyone sourced there. However, as the pandemic showed, too many brands had too much of their business vested in China. When China buckled, brands were left to pick up the tab. In fact, “just-in-time” became “get-in-line” for brands. Efficiency lost its mojo.

Many brands diversified out of China to suppliers in Southeast Asia and elsewhere. Beneficiaries were suppliers in Mexico and the CAFTA region and, to a lesser extent, suppliers in the US. Gosh, what an irony. The business went full circle. Brands that abandoned the US years earlier scrambled to find suppliers domestically. Oh my, what was the world coming to?

A side note: What do you get when a sourcing professional who has never worked outside of Asia calls trying to understand how CAFTA or USMCA works? Answer: A dazed and confused sourcing professional. “What do you mean you can source from Mexico without paying tariffs?” is a common question. It was back to sourcing school for many of those folks accustomed to sending an email to Asia, and everything “just happened.”

North and Central America apparel sourcing

This region has different rules, some good and some bad for brands. Let’s be honest: Nearshoring has its benefits, but it also has its problems. Price remains a problem for some, but proximity to the consuming market can help offset that. Even so, full-package sourcing can be challenging at times. Shortcomings in the supply chain infrastructure can also prove problematic, as is the ability to scale rapidly.

As many have observed, we live in a time of change. Politics and geopolitics are changing. Great power competition is back in vogue, which means supply chains are potentially vulnerable to disruption from conflicts. Consider the war in Ukraine, tensions in the Taiwan Strait, or the Suez. All threaten supply chains and efficiency. Worried about inflation? You should be when container ships are forced to sail around the African continent instead of through the Suez Canal.

The term “risk management” garners new significance in this world. Strategies requiring greater sourcing diversification make great sense in a world increasingly plagued by unpredictable pressures. Yikes. Where to turn?

Well, some US brands have rediscovered the neighbourhood right in their backyard. There are many suppliers throughout the Americas, and free trade agreements like CAFTA-DR and the USMCA that help sourcing companies facilitate their production options in the region. At the same time, the area is developing. Investment has flowed in, with much more already planned.

Regional investment makes a difference

Critical investment targets include expanded textile production and expanded capacity to handle woven goods. Employee training and new initiatives to build environmentally sustainable production models have also become a priority. Investment in transportation and energy infrastructure has also gained prominence to enhance the region’s speed-to-market capabilities. 

More needs to be done, for sure. However, renewed interest from clothing brands to source from local manufacturers makes a considerable difference. It always helps to have buyers looking to buy.

There’s been talk in the trade that brands and retailers are sourcing holiday merchandise early this year to mitigate shipping risks due to ongoing Red Sea and Panama Canal delays. This is a sensible strategy, but it should also include sourcing locally. When lead times are measured in weeks instead of months, doesn’t it make sense to consider regional or domestic sourcing?

Take a look: Suppliers want your business

Here’s another factor to consider: Available capacity. There’s slack in the regional supply chains — from yarn to garments. And there’s more. Regional investment in technology has helped many manufacturers boost their efficiencies and cost competitiveness.

Nearshoring makes it easier for companies to monitor operations, perform quality checks, and control processes. Local proximity can also foster more robust, more effective relationships with suppliers and partners. After all, trips locally are measured in hours, not days.

One last point: When it comes to speed to market, shorter supply chains and shipping distances lead to faster product delivery times to the market. Nearshore operations can also respond more swiftly to changes in demand and market conditions.

Are you considering sourcing locally? It’s worth a look.

By Just Style