Nearshoring Attractive to U.S. Fashion Industry

Given the average “shelf life” of an article of clothing in some fashion retail chains is about six weeks before discounting begins, it’s easy to understand why the allure of shorter inventory lead times and distribution flexibility would be appealing.  That would explain why U.S. retailers are increasingly moving currently outsourced manufacturing processes away from Chinaand other Asian nations, closer to home in Mexico and throughout Latin America.  Apparel retailers have a very short window of time in which an item is “hot,” and customers will simply move on if they are unable to acquire an item when they want it.

According to a new white paper by Sourcing Journal Online, Levi’s, Hanes, Carhartt, Gap, Wal-Mart, Lee, and JC Penney are among the U.S. apparel companies that have moved manufacturing back from China in recent years.  These companies join a growing list of companies from all business sectors recognizing the advantages of bringing manufacturing back to North America:

  • Lower labor costs.
  • Favorable trade agreements including:
    • North American Free Trade Agreement (USMCA)
    • Central American Free Trade Agreement plus the Dominican Republic (CAFTA-DR)
    • U.S.-Columbia Trade Promotion Agreement
    • Caribbean Basin Trade Partnership Act
    • Hope II (offers incentives for Haitian textiles)
    • Shorter supply chains
    • Faster lead times
    • Better quality control
    • Access to trained labor force
    • Greater flexibility

Shortened lead times and added supply chain flexibility are especially important to fashion retailers in today’s age of “fast fashion,” where success depends on a manufacturer’s ability to move products to stores as quickly as possible, so as to capture current market trends.  As the Sourcing Journal paper points out, fast fashion leaders’ lead times have been reduced from 90 days to 4-6 weeks, with inventory refresh rates up to twice as fast as traditional retailers – “40 days on average, versus 80-90 days,” the paper noted.

Although China is still the outsourcing destination of choice for the vast majority of American companies, Mexico and North America are making steady in-roads.  A recent study by international business consultants AlixPartners found that 42 percent of senior executives have either already taken steps to near-shore manufacturing operations, or plan to do so within the next three years.  These findings are reinforced by a survey, which found that 21 percent of North American manufacturers reported bringing production back to, or closer to, North America within the past three months – a nine percent increase over a similar survey conducted three months prior.

As businesses consider the feasibility of near shoring, an essential component will be an experienced and capable logistics partner.  A partner who, according to Sourcing Journal, “can meet the rigorous demands placed on brands and retailers today by consumers and global market conditions… a partner who is flexible, reliable, innovative, and able to move product on short lead times.”