Feedback Here

fbook  tweeter  linkin YouTube
Global contents also translated in Chinese

Nearshoring gains ground with focus on speed to market

A McKinsey and Germany's RWTH Aachen University study states, Western countries sourcing from across Asia will shift production to neighboring countries. Western companies expect more than half of the clothes they source to come from "nearshoring" by 2025. British fashion brands like Burberry and others moved some of their production back to England as the tag ‘Made in England’ became attractive to luxury buyers after an import boom in the 1990 and early 2000. Hugo Boss, the German fashion label, has started selling a ‘Made in Germany’ collection, produced completely in Metzingen, the company's corporate seat.

 

Nearshoring gains ground with focus on speed to market 002A McKinsey and Germany's RWTH Aachen University study states, Western countries sourcing from across Asia will shift production to neighboring countries. Western companies expect more than half of the clothes they source to come from "nearshoring" by 2025.

Resurgence of domestic markets

British fashion brands like Burberry and others moved some of their production back to England as the tag ‘Made in England’ became attractive to luxury buyers after an import boom in the 1990 and early 2000. Hugo Boss, the German fashion label, has started selling a ‘Made in Germany’ collection, produced completely in Metzingen, the company's corporate seat.

However, this strategy is not attractive for low-priced and mid-range clothing producers who have to constantly compromise between low production cost and a short time to market. These producers, in recent years had moved their production to cheaper countries such as Vietnam and Bangladesh; in 2017, China's share of apparel imports dropped both in the European Union and the US.

Failure to respond to consumer demand may result in huge volumes of unsold clothing. Producers must treat short lead timesNearshoring gains ground with focus on speed to market 001 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.

Need to focus on quick delivery

Eventually, producers in China, Vietnam and Bangladesh will need to concentrate on delivering quickly to markets in their immediate neighborhood, creating capacity shortage for Western buyers.

As McKinsey states cheaper freight and lower duties make it less expensive to produce a pair of basic jeans in Mexico than in China for the US 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 US and moving production home -- to the US and Germany -- is still a non-starter; it increases cost by 17 per cent in the US and by 144 per cent in Germany.

But as lead times gain importance, shortening them compensates for some of the labor cost disadvantages by increasing the share of clothes sold at full price. Raising it by 6.1 per cent for a garment that takes 60 minutes to produce would justify the transfer of production from China to the US.

Automation to reduce costs in Western countries

Automation can drive down the cost in Western countries. Now, sewing a pair of jeans takes an average 19 minutes, more than half of the total production time. McKinsey and RWTH Aachen figure robotics can cut that time by 40 to 90 per cent. At another important step, distressing jeans, technology exists to cut the time necessary from about 20 minutes to 90 seconds: Levi's does it with lasers.

Almost 82 per cent of sourcing managers surveyed by McKinsey say production of simple garments will be fully automated by 2025. If they're right, production is coming back -- but jobs aren't. And China isn't likely to fritter away its current advantage even as it becomes more expensive: Chinese garment companies are building factories in cheap labor countries closer to Europe such as Ethiopia. With these caveats, it's likely that buyers of mass market clothes, not just expensive designer threads, will be dressing in garments from geographically closer countries soon.

 
LATEST TOP NEWS
 


 
MOST POPULAR NEWS
VF Logo