Retailers lose love for Asia: Snarled supply chains force manufacturing
exodus to Balkans, LatAm
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[November 09, 2021] By
Siddharth Cavale and Corina Pons
(Reuters) - Major clothing and shoe
companies are moving production to countries closer to their U.S. and
European stores, smarting from a resurgence in cases of the Delta
variant of the coronavirus in Vietnam and China that slowed or shut down
production for several weeks earlier this year.
The disclosures come amid a massive shipping logjam that is driving up
costs and forcing companies to rethink their globe-spanning supply
chains and low-cost manufacturing hubs in Asia..
The latest example is Spanish fashion retailer Mango, which told Reuters
on Friday it has "accelerated" its process of increasing local
production in countries such as Turkey, Morocco and Portugal. In 2019,
the company largely sourced its products from China and Vietnam. Mango
told Reuters that it would "considerably" expand the number of units
manufactured locally in Europe in 2022.
Similarly, U.S. shoe retailer Steve Madden on Wednesday said it had
pulled back production in Vietnam and had shifted 50% of its footwear
production to Brazil and Mexico from China, while Rubber clogs maker
Crocs said last month it was moving production to countries including
Indonesia and Bosnia.
Bulgaria, Ukraine, Romania, the Czech Republic, Morocco and Turkey were
some of the countries drawing new interest from clothing and shoe
producers, though China continues to produce a large share of the
apparel for U.S. and European clothing chains.
"We are seeing a lot of growth in freight and trucking activity in the
former Soviet Republics ... a big rise in Hungary and Romania," said
Barry Conlon, chief executive of Overhaul, a supply chain risk
management firm.
In Turkey, apparel exports are expected to reach $20 billion this year,
an all-time high, driven by a spike in orders from the European Union,
Turkey’s Union of Chambers Clothing and Garment Council data showed. In
2020, exports totaled $17 billion.
In Bosnia & Herzegovina, exports of textiles, leather and footwear
amounted to 739.56 million marka ($436.65 million) in the first half of
2021, which was higher than for all of 2020.
"Many companies from the European Union, which is our most important
trading partner, are looking for new suppliers and new supply chains in
the Balkan market," said Professor Muris Pozderac, secretary of the
association of textile, clothing, leather and footwear in Bosnia &
Herzegovina.
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A worker makes a shoe at the footwear factory 'Dermal' in Kotor
Varos, Bosnia and Herzegovina November 8, 2021. Picture taken
November 8, 2021. REUTERS/Dado Ruvic
In Guatemala, where Nordstrom significantly shifted its private-label volume
production in 2020, clothing exports were a touch over $1 billion as of the end
of August this year, up 34.2% from 2020 and even 8.8% higher than in 2019.
To be sure, many companies are also still heavily reliant on Vietnam, where
recent production stoppages have caused significant disruptions. Vietnam’s
government said in October that it will fall short of its garment exports target
this year, by $5 billion in a worst-case scenario, due to the impacts of
coronavirus restrictions and a shortage of workers.
Factory inspections in Vietnam - a proxy for retailer manufacturing orders -
fell 40% in the third quarter versus the second quarter, with production during
those months quickly moving to Bangladesh, India and Cambodia. Inspection rates
in Vietnam were still hovering at lower levels in the fourth quarter, with a
small uptick seen in late October, said Mathieu Labasse, vice president of QIMA,
a supply-chain quality control and auditing firm that represents more than
15,000 brands.
Apparel maker VF Corp and outdoor gear maker Columbia Sportswear were among
companies that warned that there would be delays in fall and spring collections
and in some cases insufficient size assortments.
Michael Kors handbags maker Capri Holdings said on Wednesday that it would not
have the inventories it wanted for the holiday season, while athletic gear maker
Under Armour said on last Tuesday it was canceling purchase orders from Vietnam
just to help get "the factories get back up and caught up."
($1 = 1.6937 marka)
(Additional reporting by Ceyda Caglayan in Istanbul and Diego Ore in Mexico
City; Editing by Steve Orlofsky)
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