Rethinking Where and How to Source
There is an old saying in real estate, “you make a profit on a house when you buy it not when you sell it”. This goes for sourcing product as well. In fact when you really get down to it where you source determines almost everything about your product, your time to market, and your profit.
There has been something interesting going on in the supply chain world for the past few years, the further evolution of China. Seemingly everyone went into China over the past 20-plus years to set up their manufacturing relationships because China had incredibly low labor costs and the ability to produce and export with muscle. Today things are changing in China. The consumer class is rising faster and faster and labor rates are going up. This is making China less attractive to many that need to source their production at a competitive price. I heard someone say that “if it weren’t for cheap labor, China would just be a faraway place that makes things with long lead times”.
What about apparel sourcing? Brands still need to still source great production at a price that allows them to be profitable. Consumers on the other hand are not really in the mood to absorb higher prices at the shelves. So now what? What does this mean for Suppliers in the rest of the world?
Well China is not going to go away over night (or ever really) and will still continue to be a massive exporter. Countries like Mexico, USA, Colombia, and Turkey are particularly well positioned to pick up the production business that sourcing people need to place somewhere if they pull out of China.
It is likely we could see a complete reconfiguring of the global supply chain over the next ten years of who supplies what to whom and how they do it.
There is a resurgence of sorts in the USA with “Made in America” and the cost to manufacture in the USA is not as high as we have been told it is. There is also a growing consumer appetite for “Made in America”.
Colombia should also see an increase in business from North America on account of how much progress it has made in the past decade and the inevitable further cooperation Colombia will see in the Western hemisphere as other Latin American countries get mired down in their own counter-productive affairs.
Mexico is poised for huge growth if it plays its cards well. It is next door to a giant consumer base that, although is in funk right now will come through eventually. Lead times are short, product is good, and Spanish (unlike Chinese) is easy to learn.
Similarly Turkey is well positioned to grow its factory base to supply European Buyers that also want to produce closer to home.
It may very well be in the future that a new model of supply chain management arises, one where price advantage will come not from labor costs but from being more lean and focusing on reducing waste in raw materials, time, and delivery across shorter distances as more countries rethink ramping up their home field advantage in production.
Tony Forcucci is the Global Director of the Apparel and Textiles Sourcing Marketplace at MFG.com, the world’s largest online platform for sourcing.
