Businesses are moving their production centres closer to US and Europe to avoid supply chain disruptions.

Major clothing and shoe companies aremoving production to countries closer to their US and European stores, as there is resurgence in cases of the Delta variant of the coronavirus in Vietnam and China which had resulted in slowing down or shut down of production for several weeks earlier this year.

Additional to this the massive shipping supply chain logjams are driving the costs and forcing the companies to reconsider their globe-spanning supply chains and low-cost manufacturing hubs in Asia.

The latest joining the list of companies shifting their manufacturing hubs from Asia is Spanish fashion retailer Mango, which has accelerated its process of increasing local production in countries such as Turkey, Morocco and Portugal. The company earlier in 2019 had sourced its products largely from Asian countries China and Vietnam. Now, Mango is considering expanding its units manufactured locally in Europe in 2022.

In the same way, US shoe retailer Steve Madden also pulled back its production in Vietnam recently and shifted half of its footwear production to Brazil and Mexico from China. Rubber clogs maker Crocs also moved its production to Indonesia and Bosnia.

Bulgaria, Ukraine, Romania, the Czech Republic, Morocco and Turkey were some of the countries drawing new interest from clothing and shoe producers, though China continues to produce a large share of the apparel for US and European clothing chains.

According to Turkey’s Union of Chambers Clothing and Garment Council data, the apparel exports from Turkey are likely to touch an all-time high of $20 billion this year with the spike in orders from the European Union.  The exports from Turkey earlier in 2020 totalled $17 billion.

The export of textiles from Bosnia and Herzegovina, along with leather and footwear amounted to 739.56 million marka ($436.65 million) in the first half of 2021, which is higher than the same period in 2020. Currently, many companies from the European Union are looking for new suppliers and new supply chains in the Balkan market.

In Guatemala, where Nordstrom significantly shifted its private-label volume production in 2020, clothing exports were a touch over $1 billion as of the end of August this year, up 34.2 per cent from 2020 and even 8.8 per cent higher than in 2019.

However, many companies are also still largely dependent on Vietnam, where recent production stoppages have caused significant interruptions. Vietnam’s government said in October that it will fall short of its garment exports target this year, by $5 billion in a worst-case scenario, due to the impacts of coronavirus restrictions and a shortage of workers.

According to a supply-chain quality control and auditing firm that represents more than 15,000 brands factory inspections in Vietnam – a proxy for retailer manufacturing orders – fell 40 per cent in the third quarter versus the second quarter, with production during those months quickly moving to Bangladesh, India and Cambodia. Inspection rates in Vietnam were still hovering at lower levels in the fourth quarter, with a small uptick seen in late October.

Apparel maker VF Corp and outdoor gear maker Columbia Sportswear were among companies that warned that there would be delays in fall and spring collections and in some cases insufficient size assortments. Michael Kors handbags maker Capri Holdings said recently that it would not have the inventories it wanted for the holiday season, while athletic gear maker Under Armour said that it was cancelling purchase orders from Vietnam just to help get “the factories get back up and caught up.”

Source : maritimegateway