From Adidas AG to Nike Inc., apparel and footwear makers have been shifting their supply chains out of China, pushed by geopolitical tensions and pulled by lower manufacturing costs. But many are finding that locating other production hubs presents its own set of difficulties in the face of growing uncertainty in the global economy and declining customer demand. Some people are even removing their stumps and returning to the mainland.
“That mature ecosystem, established over decades in China, not only ensures competitive price points, but also delivers stable quality at mass production that’s hard to copy,” Laura Magill, the global head of sustainability at footwear brand Bata Group, said.
The pullback of clothing firms runs the risk of destroying some of the $1.8 billion that Chinese manufacturers have invested in turning to their Asian neighbours, such as Vietnam and Thailand, as reported by the China National Textile & Apparel Council. Over time, a number of those nations have experienced an increase in their exports to industrialised countries at the expense of Asia’s largest economy.
According to Duong Thi Ngoc Dung, the vice chairperson of Vietnam’s Textile & Apparel Association, the majority of the materials used in the country’s textile sector are still sourced from China, including buttons, thread, labels, and packaging, with only 30% to 40% coming from domestic production.
Language barriers and culture shocks are also hurdles to managing workers in Southeast Asia, some of whom are less experienced than employees in China.
Another country that has benefited from certain manufacturers’ decision to diversify away from China is India. In an effort to diversify from its primary centre in the mainland, Apple Inc. is also stepping up production in the nation, while Fast Retailing Co.’s Uniqlo has said that it will search for additional manufacturing partners in the region.
But it’s unclear if any other country, even one with a population comparable to China’s, could match its enormous manufacturing ecosystem.
