Your clothes could be made in Amer­ica again

The Charlotte Observer (Sunday) - - Opinion - BY LEONID BERSHIDSKY Bloomberg

Euro­peans and Amer­i­cans have grown used to buy­ing clothes made in Asian coun­tries. But ap­parel-in­dus­try sourc­ing ex­ec­u­tives are sure that’s chang­ing: By the mid­dle of the next decade, much more of our clothes will be made closer to home.

China and Bangladesh are the two big­gest sup­pli­ers of ap­parel to Eu­rope. In the U.S., China and Viet­nam are the top two im­port sources. But al­most a quar­ter of ap­parel-sourc­ing ex­ec­u­tives who par­tic­i­pated in a study by McKin­sey and Ger­many’s RWTH Aachen Univer­sity said they ex­pect more than half of the clothes they source to come from “nearshoring” in 2025. This means much of the pro­duc­tion for Western coun­tries will move out of Asia to these mar­kets or to neigh­bor­ing coun­tries.

The mak­ers of de­signer cloth­ing have moved some of their pro­duc­tion home in re­cent years to stress their her­itage and in­crease con­trol over sup­ply chains.

Burberry and other Bri­tish fash­ion la­bels have moved some of their pro­duc­tion as “Made in Eng­land” be­came at­trac­tive to lux­ury buy­ers af­ter an im­port boom in the 1990s and early 2000s.

Hugo Bosss, the Ger­man fash­ion la­bel, has started sell­ing a “Made in Ger­many” col­lec­tion, pro­duced com­pletely (ex­cept for some fab­rics) in Met­zin­gen, the com­pany’s cor­po­rate seat.

Such “value-based reshoring,” how­ever, isn’t an at­trac­tive strat­egy for low-priced and mid-range cloth­ing pro­duc­ers. They must con­stantly look for a com­pro­mise be­tween a low pro­duc­tion cost and a short time to mar­ket.

In re­cent years, as wages rose in China, they’ve moved pro­duc­tion to coun­tries that are still rel­a­tively cheap, such as Viet­nam and Bangladesh; in 2017, China’s share of ap­parel im­ports dropped both in the Euro­pean Union and in the U.S.

But speed­ing de­liv­ery to mar­ket is an in­creas­ing ne­ces­sity, and con­sumers are in­creas­ingly con­cerned about the low wages and high en­vi­ron­men­tal costs of off­shore pro­duc­tion.

Fail­ure to re­spond to de­mand for an item con­sumers have seen on In­sta­gram may mean huge vol­umes of un­sold cloth­ing. Un­able to tell con­sumers what they should wear, pro­duc­ers must treat short lead times as the No. 1 pri­or­ity. Fast fash­ion is giv­ing way to ul­tra-fast fash­ion, as prac­ticed by on­line re­tail­ers such as Boohoo, Asos and Le­sara. This doesn’t work well with ship­ping from Asia: De­liv­ery to big Western mar­kets takes about 30 days by sea.

So far, higher pro­duc­tion costs near the big Western mar­kets are still an ob­sta­cle. McKin­sey cal­cu­lated that cheaper freight and lower du­ties al­ready make it less ex­pen­sive to pro­duce a pair of ba­sic jeans in Mex­ico than in China for the U.S. mar­ket and in Tur­key for the Ger­man mar­ket.

But Bangladesh still sig­nif­i­cantly un­der­cuts Tur­key for the Euro­pean mar­ket and matches Mex­ico’s costs for the U.S. And mov­ing pro­duc­tion home – to the U.S. and Ger­many – is still a non­starter; it in­creases cost by 17 per­cent in the U.S. and by 144 per­cent in Ger­many.

But as lead times gain im­por­tance, short­en­ing them com­pen­sates for some of the la­bor cost dis­ad­van­tage by in­creas­ing the share of clothes sold at the full price.

Rais­ing it by 6.1 per­cent for a gar­ment that takes 60 min­utes to pro­duce would jus­tify the trans­fer of pro­duc­tion from China to the U.S., McKin­sey cal­cu­lated.

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