The Pros and Cons of Manufacturing Apparel in the US
It would not be difficult to find older Americans who had a family member or friend that worked in apparel factories in the US about 25 years ago. But that would not be the case if you asked the same question today because 90% of those jobs belong to overseas apparel production.
Moving the industry across borders were for some of the same reasons a new movement of “reshoring” is emerging today. Is this movement going to help US apparel factories find a balance between the costs and benefits of getting manufacturing closer to the end consumer?
Let’s explore some of the pros and cons of manufacturing apparel in the US versus overseas.
WHY DID WE MAKE THE MOVE TO OVERSEAS APPAREL PRODUCTION?
US apparel factories began to move away in the 1990’s- many going to China. Prior to that time, the US was limited to how much apparel we could import due to the trade laws of the day.
The US was also liberalized when China joined the World Trade Organization around the same time.
In the beginning, when everything was running as planned, apparel companies benefited from the lower wages paid in Asian countries. Clothing manufacturing was very labor intensive so hourly wages was a big factor to the bottom line.
However, current mechanization advancements and automation is making it more appealing to bring overseas apparel production back to the US.
WHY ARE US APPAREL FACTORIES COMING BACK?
The overseas apparel production and global supply chains provided a boost to profits when it all ran smoothly, according to the International Institute for Management Development. “But the disruption from the COVID-19 pandemic has been immense” (1)
Roughly 40% of overseas apparel production comes from China. The pandemic caused Western markets to suffer from significant delays in manufacturing and distribution. This was due to the shutdown of China factories that lasted for weeks.
This big disruption got companies to begin rethinking the logistics of their supply chains.
According to a ThomasNet report in July of 2021 that looked at the impact of COVID-19 on manufacturing, two-thirds of manufacturing companies are considering the move back to North America. That number rose from 54% the previous February. (2)
The conversation seems to be heating up.
A survey by McKinsey found that 75% of fashion companies they surveyed saw “shipping disruptions as the greatest threat to flexibility and speed.” (3) The ThomasNet report found that the same percentage claimed they are considering “nearshoring” by 2025, with 24% planning to “reshore” their operations.
Some benefits of re-opening US apparel factories include the following:
Increased overseas apparel production costs have been increasing over the last couple of years in the form of wage increases and higher energy costs.
Supply chain issues have been the big issue during the pandemic. Reopening US apparel factories so they are closer to the consumer eliminates many of those delays.
Eliminating shipping costs saves energy, reduces pollution, and creates faster turn around times. During the pandemic, and beyond, ports have been overwhelmed and unable to keep up with increased demands.
Another growing consumer movement is a demand for sustainable apparel options that are made in the USA.
Less disruption in supply change due to geo-political issues. However, there are still disruptions in raw-materials due to increased extreme weather events.
Nearshoring or reshoring allows apparel factories in the US to be more flexible with in-season production and reduce overproduction. (3)
New development in AI (Artificial Intelligence) and IoT (Internet of Things) are changing the appearance of US apparel factories. This combination allows for on-demand production and no need for inventories. While it is not for everyone, it is great for high volume, low-priced brands. Plus, it checks off the boxes for reduced transportation costs, less waste, and less pollution.
Automation may emerge as being essential to economic viability. Cutting and sewing one item or 5,000 items are the same process which means a retailer can receive an order within a week to test demand before they make a larger purchase.
This is not possible with overseas apparel production.
CONCLUSION
Final decisions are no longer just about price and profits. Recent events have brought supply chain resiliency to the forefront.
To know for sure if reshoring is for you and your business you need access to good data, and the answer may be to continue with overseas apparel production. Stateless can help you navigate the industry and ensure you receive the best product at the best cost and on time. Let’s talk.
--------------------------