Altering apparel supply chains?

With supply-chain risk mounting, industry and technology developments point to more near-shoring and on-shoring production possibilities.

Around February 10, factories in China began to resume production, as coronavirus quarantines ended and workers began returning to their jobs. By late March, conservative estimates showed factories running over 60% of capacity. Presumably, the United States economy will also once again be open for business—hopefully in the not-too-distant future.

Cargo operations in China were reported to be running smoothly, with normal operations at ports, airports, trucking networks, and cargo terminals. The bigger problem has been the availability of transportation capacity to and from China as ocean carriers cancel sailings and airlines drop flights.

With China, the original epicenter of the pandemic and the largest source of apparel sold in the US, accounting for 42% of imports, some are speculating about how apparel supply chains may change post-virus. The fact is that they are already in a state of flux—with other Asian nations being the primary beneficiaries of that trend—but that recent business and technological developments could point to more near-shoring of production as well as more domestic sourcing.

Still, “Asia as a whole continues to lead as the dominant sourcing base for U.S. fashion companies,” said Sheng Lu, an associate professor in the Department of Fashion & Apparel Studies at the University of Delaware.

Rethinking China

Investment portfolios benefit from diversification, and supply chain investments are no different. Apparel companies were rethinking their reliance on China as a manufacturing base well before COVID-19 struck, and that process accelerated once President Donald Trump and his tariffs came on the scene.

According to Lu, “China plus Vietnam plus many” is the sourcing mantra for many in the U.S. apparel industry, with those two, plus India, being the top three sourcing origins. According to a study conducted by Lu on behalf of the United States Fashion Industry Association (USFIA), well over half of the companies source from ten or more countries, and a quarter source more from Vietnam than from China. But China continues in its role as the world’s biggest exporter of textiles and apparel—including fabrics for garment makers in places like Vietnam and Bangladesh.

Bangladesh, Cambodia, the Philippines, Indonesia, Malaysia, and Pakistan are some of the other Asian countries high on the list of manufacturers seeking to diversify their supply chains. Workers earn as little as $63 per month in Bangladesh.

Bangladesh is the number-six sourcing destination for U.S. companies, according to Lu’s study. But despite price advantages, Bangladesh doesn’t offer the speed to market and production flexibility many are looking for—and also features heightened compliance risk. The study also indicated waning enthusiasm for sourcing from Africa.

It’s also worth noting that, as of late March, the Bangladesh government kept apparel factories open despite the spreading coronavirus—and even as it suspended safety inspections.

The coronavirus pandemic underscores the production and logistics risks associated with apparel manufacturing, leading to the question of whether new sourcing opportunities in the U.S. are in the cards. In 2019, the U.S. ranked as the number-ten sourcing base for the domestic apparel industry, with 43% usage, according to Lu.