Fortune Op-Ed by CEO, Stefanie Tacata
Small Brands are the Future of U.S. Apparel Manufacturing
Read on fortune.com or continue below.
With supply chain woes here to stay, bringing production back to the U.S. is looking more attractive than ever. There is a way to bring apparel factories back to the U.S.–but it means rewriting the playbook.
Apparel manufacturing offshored in the 1990s, with companies moving their production to factories in China and other Asian countries where they could benefit from the lower wages, access to cheaper raw materials, and lower operating expenses.
Thirty years later, with technological advancements in manufacturing, paradigm shifts spurred by COVID-19, and an international environmentally and socially conscious movement, reshoring apparel production back to the U.S. could be a viable option–but it requires a complete re-examination and overhaul of the supply chain.
Surprisingly, the companies best suited to answer this question are smaller, independent brands. While U.S. apparel companies of all sizes have a vested interest in supply chain innovation and reshoring, small independent brands are better positioned to manufacture in the U.S.
U.S. manufacturing is inefficient in its current state
According to a ThomasNet report in July of 2021, 24% of U.S. manufacturing companies are planning to reshore their operations by 2025. However, “planning” is not a definite term, and the reality is that U.S. manufacturing–in its current state–is still too inefficient for major companies to reshore production.
Shipping disruptions are quoted as the biggest threats to supply chain flexibility and speed. So it’s logical to assume that bringing apparel manufacturing back to the U.S. would minimize that threat. But apparel can’t be made without materials such as fabric, zippers, and buttons. These are simply more widely available (and less expensive) outside of the U.S.
Higher labor costs and overhead expenses also make it difficult for large U.S. factories to price their goods competitively and maintain profitability.
Constraints of production batch size
The COVID-19 outbreak severely damaged the apparel supply chain and left big companies scrambling for real-time solutions. Due to a carousel of mandated factory and textile mill lockdowns, shipping disruptions, and overnight shifts in consumer buying patterns, reliance on offshore manufacturing and the real cost of this codependency came to light.
Big companies produce millions of pieces at a time, making it impossible to quickly pivot production strategies due to financial restraints and lead times. Less affected are apparel companies producing small batches in the U.S. or ones producing in small enough batches to fly, rather than ship, the goods from China.
Small-batch manufacturing is a strategy small brands employ to avoid excessive inventory, and simply because smaller batches are what they can afford to produce and sell. As federal interest rates continue to rise, financing larger production runs will be a less attractive option for smaller brands trying to compete.
At Stateless, only five of our 70 smaller-brand clients have been forced to postpone collections over the past year, while the rest experienced minimal delays in their product deliveries.
The direct link between innovation and reshoring
Industry stakeholders know reshoring won’t happen without innovation. Despite inherent inefficiencies, U.S. factories are better positioned for innovative concepts like making-to-order and limited-edition production.
The “digitization” of fashion and 3D design have allowed for speedier and more efficient product development. Leading manufacturing technology companies like Lectra, Shima Seiki, and Twine now offer viable solutions for automated make-to-order production. This type of innovation helps smaller companies grow, maintain profitability, differentiate products, and recast traditional sales strategies.
The link between innovation and U.S. manufacturing benefits smaller brands as they often build pre-sale or limited-edition collections into their sales and inventory management strategies despite the higher cost of small-batch production. And with recent reports of DTC sales slowing down due to the unreliability of delivery times, these strategies allow smaller brands–a majority of which only offer their products directly to consumers–to build emotional connections with and educate their customers about the value of slower fashion.
Customers shopping via pre-sale, for example, aren’t as concerned with receiving their products overnight. Smaller brands have also led the charge in utilizing small U.S. factories to uphold their brand’s environmentally and socially conscious values.
For big apparel companies to entertain reshoring or at least regaining some control, they must innovate in their own right–and rely on U.S. factories to support their modernization. Engaging smaller US factories for prototyping, made-to-order programs, limited edition offerings, and upcycling, or leaning into digital experimentation, like NFTs and Web3, will prepare the industry for reshoring on a mass level in the future.
In terms of these first steps, bigger companies are behind, as smaller brands have already begun committing to and perfecting these new manufacturing models.
