Is apparel manufacturing coming back to America?

Photo: American Giant
Oct 19, 2018
Tom Ryan

In a new report, McKinsey & Co. predicts that nearshoring — sourcing in the U.S. and countries close to it — will accelerate in the apparel industry in the years ahead. One reason is because fashion trends are becoming more unpredictable and don’t last as long.

Traditionally, apparel companies “spoon-fed” trends via ad campaigns in a “push” model. Now, style cues are coming from Instagram, user reviews, celebrities and others with large followings on social media in a shift to a faster “pull” model.

McKinsey added, “By reducing time to market, apparel companies can act on nascent trends, scale up their winners, and eliminate their losers — all within a single season. It used to be that a six-month fashion cycle was considered fast. Today, speedy time to market means no more than six weeks and some retailers are able to do it even faster.”

Another reason for nearshoring’s appeal is that consumers are increasingly aware of the environmental impact of over-production from long lead times.

At the same time, offshoring costs are rising due to higher wages for Asian factory workers and strains expected on Asia’s manufacturing capacity due to greater local demand for apparel. Any tariffs would also impact sourcing from China. Executives at last week’s Sourcing Journal Summit agreed that tariffs would inevitably hit a wide range of apparel items and are a long-term challenge for the industry.

Even if nearshored apparel is costlier to produce, it can still be economically viable in certain cases, according to McKinsey’s study, due to savings in freight and duties. Any cost premium could further be worthwhile if the quicker turnaround results in more on-trend merchandise that avoids markdowns.

A primary challenge to nearshoring is building an infrastructure to compete with Asia’s modern manufacturing expertise. But advances in automation, including 3D-printing and robotics, promise to support increased labor efficiency, throughput and flexibility. For certain products, automation “makes onshoring to the United States economically viable.”

DISCUSSION QUESTIONS: Do you see apparel production coming back to the U.S. and nearby countries? What will this mean for U.S. retailers?

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"It is entirely conceivable that some categories will return to manufacturing domestically and still be financially viable."
"I’ve been predicting this for about five years. It has to happen."
"...manufacturers and retailers will benefit from a more agile design and supply chain. This is a huge advantage..."

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11 Comments on "Is apparel manufacturing coming back to America?"

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Art Suriano

I think apparel production, as well as many other manufacturing needs, will return to the U.S. over the next few years. Our economy can now support it, and because of technology, we won’t need to have the large labor force once required which will help keep workforce costs down. Fashion does change rapidly, and now with technology developing custom-made clothing faster and cheaper we will eventually have “design your own clothes” opportunities for those who feel incredibly creative. No doubt there will be templates to choose from along with easy modifications the customer can make. Technology is changing everything, but in this case, it will bring jobs back to the U. S.

Paula Rosenblum

I’ve been predicting this for about five years. It has to happen. You can’t be fast enough or innovative enough if you’re sourcing product half a world a way from the point of demand. Cannot.

It may come back to countries adjacent to the U.S., but it is definitely coming.

Bob Amster

It is a reversing trend. Mass merchants used to have nine-month lead times to manufacture apparel first, in Japan, then Taiwan and then China. With fast fashion trending, more efficient production, and a need to reduce the time to market, it is entirely conceivable that some categories will return to manufacturing domestically and still be financially viable.

Mohamed Amer
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
10 months 5 days ago

Apparel production cycles are radically changing through technology and human behavior.

The Instagram and Pinterest generation have decentralized fashion; IoT and machine learning-fueled fashion runway apps are cutting weeks, even months, in the design-to-purchase cycle. So for fashion-oriented apparel and active wear brands, we’re seeing a definite shift to more nearsourcing that also aligns with environmental concerns.

The open question is whether basic apparel will also enjoy a similar resurgence. The economics of the latter suggest it’ll be a few years out before we reach a new equilibrium in the sourcing mix.

Lee Peterson

McKinsey needs to dig a little deeper on this topic. From my personal experience, the apparel manufacturing facilities and logistics here in the states are so inferior to those in Asia and across the Pacific Rim, we’re talking about decades of investment in terms of catching up. And I mean all aspects of manufacturing; quality, price, speed, quantity, consistency, on and on. Right now, with few exceptions, you’d be asking consumers to pay more, wait longer and accept lower quality. The American apparel consumer is so spoiled by what’s happened in the industry in the last 30+ years, it’s hard to imagine that happening.

For “near” countries, it may be different as most retailers have already set up manufacturing in the Caribbean, Central America and Mexico. But if we continue to force ugly tariffs on those regions/countries, please see my paragraph above.

Jeff Sward

During my year+ in China, I watched time and again while bulk inventory was delivered in three to five weeks from order to on floor. On-trend product was tested, ordered, delivered and re-ordered all IN SEASON. The importance of the ability to maximize winners IN SEASON while moving away from losers cannot be overstated. You need high margins when you are guessing. When knowledge and time are your friends, it becomes a whole new equation. You still need maintained margin, but COG becomes a completely different variable.

Ricardo Belmar

I think Lee is correct here. While it could be done, there is a need for significant investment in the supply chain and logistics around manufacturing in the U.S. for apparel. However, I agree for nearby countries the situation and cost structure may be more suitable for the near term. The need for speed in going from trendy runway to in the store for shoppers to buy has become so great, something must change. You just cannot deliver on the promise if everything you manufacture is half a world away. We may see a segmentation occur here, where the more luxury-oriented apparel may gain a production advantage as it can support a higher price to compensate for the lack of needed infrastructure, while basics will take much longer to adapt. The change is coming, but this isn’t something where simple tariffs can create the necessary forcing function. It must evolve and will do so over a period of years.

Lisa Goller

Nearshoring and reshoring apparel have recently been in style as a way to protect retail profitability and people.

Amid the current politics of protectionism and consumer demand for products “Made in the USA,” reshoring is seen as a way to slowly reinvigorate U.S. manufacturing jobs, which decreased 29 percent since 2000, according to the U.S. Bureau of Labor Statistics.

More apparel retailers are turning to nearshoring to:

  • Shorten the supply chain;
  • Reduce shipping costs;
  • Boost speed to market;
  • Counter rising raw material costs; and
  • Adapt to evolving consumer demand.

American companies like Everlane, Theory and Shinola differentiate their brand by manufacturing some or all of their goods in the U.S.

However, nearshoring isn’t for every company. When deciding where to locate production, apparel brands must consider total manufacturing costs, such as inventory costs, and political, economic and ethical risks.

Cynthia Holcomb

Apparel manufactured in Japan versus Hong Kong versus Italy, for example, all has a different “make.” Meaning the same exact garment will look different based on the country manufacturing it. The “needle” makes the difference — meaning machinery, expertise, automation, environmental laws all play a role in the look and feel of the end product.

As an apparel manufacturer myself, producing products in the ’80s and ’90s domestically, the U.S. “needle” was never that good. Clunky make. I think it is exciting that apparel manufacturing seems to be in the process of a resurgence here in the U.S. driven by new apparel entrepreneurs. For both retailers and new apparel brands, building a product to meet current “needle” expectations will take time and training.

Ralph Jacobson

I see more manufacturing of all product categories coming back to the U.S. as short-term product pricing, availability, tariffs and labor volatility settle over the longer term. I truly believe this short-term pain will result in long-term stability for U.S. manufacturers, and ultimately retailers. No pain, no gain, right?!

Ken Morris

While there are several apparel brands that are currently made in the U.S., they are typically niche or luxury brands that can afford to charge premium prices. With advances in technology and supply chain efficiencies and now the increased tariffs on clothing manufactured abroad, the feasibility of manufacturing clothing in the U.S. is becoming more realistic.

In addition to creating more jobs in America and appealing to consumers’ pride in American made products, manufacturers and retailers will benefit from a more agile design and supply chain. This is a huge advantage, as consumer trends are shifting faster than ever and retailers can’t afford to mark-down massive amounts of underselling merchandise that are out of trend. And with 3D printers becoming more agile and affordable, one day we may see most products being built to order with markdowns and obsolete inventory becoming a thing of the past.

"It is entirely conceivable that some categories will return to manufacturing domestically and still be financially viable."
"I’ve been predicting this for about five years. It has to happen."
"...manufacturers and retailers will benefit from a more agile design and supply chain. This is a huge advantage..."

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