Supply Chain Disorder Forces Fashion Manufacturing Exodus From Asia

Footwear factory 'Dermal' in Kotor Varos, Bosnia and Herzegovina, on Nov. 8, 2021. (Dado Ruvic/Reuters)

Fashion businesses are shifting production away from low-cost manufacturing hubs in Asia, and toward their markets in the United States and Europe.

This follows a spike in pandemic outbreaks of the CCP (Chinese Communist Party) virus’s Delta variant in Vietnam and China earlier this year.

Spanish apparel retailer Mango told Reuters that it has “accelerated” enhancing local production in Turkey, Morocco, and Portugal. In 2019, the company primarily sourced its products from China and Vietnam.

U.S. shoe retailer Steve Madden said that it had reduced production in Vietnam, and relocated 50 percent of its footwear production from China to Brazil and Mexico.

Vietnam’s recent production stoppages have caused significant disruptions due to the effects of pandemic restrictions and a labor shortage. In October, the government announced that it would fall short of its garment export target this year by $5 billion in the worst-case scenario.

Italy’s Benetton is moving production closer to home, increasing production in Serbia, Croatia, Turkey, Tunisia, and Egypt, with the goal of halving production in Asia by the end of 2022, said CEO Massimo Renon.

Turkey is among the countries drawing new interest from clothing and shoe producers. According to figures from Turkey’s Union of Chambers Clothing and Garment Council, the country’s garment exports are set to hit $20 billion this year, an all-time high, due to an increase in orders from the European Union.

Hugo Boss intends to move its manufacturing closer to its markets, or “near-shoring.” The company expects to respond to trends faster and more flexibly. CEO Daniel Grieder told German magazine Manager Magazin, “That is a real competitive advantage.”

“Many firms from the European Union, our most significant trading partner, are looking for new suppliers and new supply chains in the Balkan market,” said Muris Pozderac, secretary of Bosnia and Herzegovina’s textile and apparel organization.

In the first half of 2021, exports of textile, leather, and footwear in Bosnia and Herzegovina totaled $436 million, exceeding the total for all of 2020.

Clothing exports in Guatemala, where Nordstrom significantly increased its private-label volume production in 2020, were slightly more than $1 billion as of the end of August this year, up 34.2 percent from 2020, and even 8.8 percent more than in 2019.

A months-long shipping jam is driving up costs, delaying supply deliveries, and forcing the fashion industry to rethink its global supply chain.

Lululemon disclosed last month that it was seeking to relocate production out of Vietnam, increase the use of air freight, and prioritize production for major holiday styles.

Manufacturer of outdoor equipment Columbia Sportswear was among the brands that warned of fall and spring collection delays, as well as insufficient size assortments in some situations.

Michael Kors handbags maker, Capri Holdings, announced on Nov. 10 that it would not have enough inventory for the holiday season.

Reuters contributed to this report.