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The ap­parel in­dus­try, hav­ing a volatile na­ture, ex­pe­ri­ences an ar­ray of trends which are of crit­i­cal im­por­tance for the func­tion­ing of the in­dus­try. They im­prove the po­ten­tial across the in­dus­try with re­duc­tion in lead times, boost­ing in­no­va­tion and col­lab­o­ra­tion, aptly serv­ing cus­tomers’ needs and help­ing in bet­ter un­der­stand­ing. This ar­ti­cle analy­ses the re­port by McKin­sey & Com­pany which high­lights the ap­parel sourc­ing hubs that will be buy­ers’ pref­er­ence over the next few years.

Ap­parel com­pa­nies are not ‘loyal’ as they have al­ways been known to be run­ning be­hind ‘low pric­ing’. Their favourite des­ti­na­tion keeps on al­ter­ing with the shift­ing re­quire­ments. Their quest for low­cost coun­tries is al­ways on ac­tive mode. While some coun­tries slip down the list of favourites over time time, some new en­trants gain ev­ery­one’s at­trac­tion. The new­comer in this list are Myan­mar and Ethiopia. McKin­sey & Co., in its lat­est re­port, has men­tioned this shift­ing ap­proach of ap­parel com­pa­nies as ‘ the next stop of the sourc­ing car­a­van’. As un­der­lined in the McKin­sey re­port, the most re­cent stops of the sourc­ing car­a­van – Myan­mar and Ethiopia – are en­joy­ing keen in­ter­est from in­ter­na­tional sourc­ing ex­ec­u­tives. The coun­tries have been re­ceiv­ing tremen­dous sup­port from their Govern­ments aid­ing them to be­come the up­com­ing al­ter­na­tives for ap­parel com­pa­nies. Com­pared to the CPO sur­vey 2017, Ethiopia has stepped up to the sec­ond place, over­tak­ing Myan­mar and Viet­nam. On the other hand, Bangladesh still en­joys the top po­si­tion as the pre­ferred sourc­ing hub over the next 5 years. Man­u­fac­tur­ers show­ing in­ter­est in Ethiopia hope to build a sus­tain­able ap­parel in­dus­try in the coun­try and do not want to re­peat the mis­takes made in gar­ment in­dus­tries in other low- cost coun­tries in the past. The coun­try’s Gov­ern­ment is also fo­cused to­wards its growth and has rolled out many poli­cies to sup­port the gar­ment in­dus­try. One such ini­tia­tive is Hawassa In­dus­trial Park, which is al­ready home to many ap­parel fac­to­ries. Phase 1 of the park, which opened in 2017, con­tains 37 mod­ern pro­duc­tion fa­cil­i­ties cov­er­ing 100 hectares. Hawassa is tar­get­ing US $ 1 bil­lion in ex­ports and 60,000 em­ploy­ees by the end of 2018. Spear­head­ing the global ap­parel ex­ports, China has long been out of the race of low- cost sourc­ing coun­tries, rea­sons be­ing in­creased lo­cal de­mand and re­duc­tion in size of avail­able work­force (higher wages of work­force). Though China’s dom­i­nant po­si­tion will re­main in­dis­pens­able in the com­ing years, the talk of the town will be coun­tries like Bangladesh, Viet­nam and In­dia. China’s ex­ports have de­clined from US $ 207 bil­lion in 2014 to US $ 177 bil­lion in 2016, ac­cord­ing to WTO. The slow­down de­picts an 8 per cent year- on-year re­duc­tion in sourc­ing value. Both Bangladesh and Viet­nam have ex­pe­ri­enced rapid growth dur­ing this pe­riod, Viet­nam’s ap­parel ex­ports nearly dou­bled in value be­tween 2012 and 2016. But China does not seem to be los­ing its im­por­tance in the com­ing years as the ap­parel sourc­ing hub. Though Bangladesh and Viet­nam have been in­creas­ing their share in global ap­parel ex­ports, they have not been able to match China’s share. Bangladesh, Viet­nam and In­dia to­gether ac­counted for just 71 per cent of China’s ap­parel ex­port value in 2016. Fur­ther, the ‘One Belt, One Road’ ini­tia­tive taken by

For­eign in­vest­ments worth US $ 1.2 bil­lion were done in Ethiopia in the first six months of the fi­nan­cial year 2016-17, of which most of them were Chi­nese com­pa­nies and half of which are li­censed in tex­tile and gar­ment man­u­fac­tur­ing.

the Gov­ern­ment is open­ing the in­fra­struc­ture in­vest­ments worth US $ 2 tril­lion which will sup­port China’s ap­parel in­dus­try. For ex­am­ple, new rail links will sig­nif­i­cantly shorten trans­port times to Europe and the ini­tia­tive will in­crease China’s ac­cess to Africa’s grow­ing con­sumer mar­ket. Even if the man­u­fac­tur­ing in China loses its mo­men­tum, China will mark its pres­ence in global ap­parel sourc­ing through its out­bound in­vest­ments. Chi­nese ap­parel man­u­fac­tur­ers have been in­vest­ing in low- cost coun­tries and set­ting up their fac­to­ries to en­joy the ad­van­tage of low- cost labour. With ap­parel com­pa­nies un­der pres­sure to step up their agility, there is also fresh fo­cus on prox­im­ity sourc­ing. Mean­while, fac­tors other than price – in­clud­ing strate­gic col­lab­o­ra­tion with sup­pli­ers and end-to- end process man­age­ment – are be­com­ing in­creas­ingly im­por­tant con­sid­er­a­tions for sourc­ing ex­ec­u­tives. The re­port reads, “Even if in­ter­est in prox­im­ity sourc­ing is keen, it does not out­weigh com­pa­nies’ fo­cus on low- cost coun­tries such as Viet­nam, Myan­mar and Ethiopia.” An­other trend emerg­ing is reshoring driven by the need for shorter lead times and more flex­i­ble pro­duc­tion to re­spond to cus­tomer de­mand for va­ri­ety and cus­tomiza­tion.

But the McKin­sey re­port un­der­lines the dif­fer­ences be­tween the ap­proach of Amer­ica and Europe. Amer­i­cans are likely to in­crease reshoring in fu­ture, sup­ported by Gov­ern­ment ini­tia­tives such as ‘Made in Amer­ica’. Some prom­i­nent US firms are even in­vest­ing in their own man­u­fac­tur­ing fa­cil­i­ties, such as Un­der Ar­mour’s UA Light­house in Bal­ti­more. Euro­pean ex­ec­u­tives, on the other hand, are more hes­i­tant about reshoring, may be be­cause com­pa­nies in the EU ben­e­fit from the ex­ist­ing pro­duc­tion ca­pac­ity within the sin­gle mar­ket.

Ac­cord­ing to World Trade Or­ga­ni­za­tion, Ethiopia’s ap­parel ex­ports ac­counted for US $ 78 mil­lion in the fis­cal year 2015.

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