China was oncea preferred destination for textile and apparel manufacturers from all over theworld. Now, there is a silent relocation of Textile and Apparel Industries from China.
For many years, China had been an attractive destination for low production costs, and availability of abundant andcheap labor for textile and apparel manufacturers. However, the country is now risingsteadily over the years with its production and labor costs increasing;gradually. Many of the foreign manufacturers who were running their operationsin China are now shifting their functions out of the country. Fast climbinglabor costs, quality issues, and pesky production tribulations are now forcingmany of the manufacturing operations out of the country.
Chinese based companiesencounter issues:
Apparel industry being morelabor intensive, the manufacturers found China as a profitable option due tothe availability of cheap labor. Companies thought they are saving money,thereby taking a new level of risk within their supply chains. But, when theyventure into emerging economies problems pop up. Previously China was the main target for companies seeking cut-rate manufacturing. Currently, with therising wages in the country, Chinese made apparels are becoming less competitive.They encounter issues such as; higher prices for fuel and raw materials,growing wage demands, etc.
Recalls made on Chinese madeapparels:
More Chinese made apparelsexported to the EU and US were recalled during the previous year; 2009. Majorityof the recalled Chinese apparels were sportswear, childrenswear, and specialtygarments. The Consumer Product Safety Commission (CPSC) of US recalled 163Chinese exports, of which 21 cases were related to apparels made in China. Recent declaration by the EU recalling Chinese made electric blankets as they didnot meet fire safety regulations also have created an adverse impact on Chinesemade garments. Out of 92 textile and apparel products recalled by the EU induring last year, Chinese made garments accounted for 65. Japan, a major importer of Chinese apparels declared that, it would from 2010 onwardsrestrict and monitor the chemicals used in their products. Industry expertspredict a negative impact on Chinese made apparels in the global market. (Source:ATA Journal for Asia on Textile and Apparel, Dec 2009 Issue).
Companies which once shifted fromHong Kong to China to take the benefits of reduced costs are now shifting againto countries like Laos, Cambodia and Vietnam. In countries like Nicaragua, Trade Preference Level (TPL) benefits and provided, enabling quota-free entry of productsmade in Nicaragua into the US under the CAFTA regulations. A survey about theGerman companies in China reveals that one out of every five German companiesoperating in China is planning to pull out their operations.
The Silent Transition:
Textile and garment companies who had set up their operations is China with the intention of taking advantage of its cheap labor and production costs are now realizing that their money is not stretching as it once used to be. Apart from this, rising energy costs, elimination of many of the prevalent tax incentives, stricter environmental regulations, scarcity of skilled labor force, and especially the rising value of Chinese Yuan against the dollar are all working against the production sources in China.
Increasing costs are forcing some brands to shift the manufacturing contract outside China. Transition to other countries such as Bangladesh and Vietnam is happening quicker than expected. Multinational companies are shifting to less developed countries such as Malaysia, Indonesia, India, Vietnam, and Cambodia which has cheap labor availability. Other places of Asia, Eastern Europe, and Latin America are also considered.
Manufacturers keep seeking low cost production sources all around the world. They need to collect all relevant information to be successful in those countries. Most of the apparel companies do outsource their business elsewhere, and key to be successful in this process in an integrated fashion is always a challenge.
References:
1. &sec=article&uinfo=<%=server.URLEncode(2653)%>" target="_blank">http://www.apparelmag.com
2. &sec=article&uinfo=<%=server.URLEncode(2653)%>" target="_blank">http://chinachallenges.blogs.com
3. &sec=article&uinfo=<%=server.URLEncode(2653)%>" target="_blank">http://www.oregonlive.com
4. &sec=article&uinfo=<%=server.URLEncode(2653)%>" target="_blank">http://www.supplychainbrain.com/
5. &sec=article&uinfo=<%=server.URLEncode(2653)%>" target="_blank">http://www.adsaleata.com
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