For some years now, ‘Made in America’ and ‘Buy American’ are defining what the ‘New America’ is! For many American shoppers, these terms not only evoke patriotism but also inculcate a sense of buying high-quality products – be it apparels or fashion items. And all this, while easing apprehensions of offshore apparel sourcing that also include highly slackened industry regulations – notwithstanding the constraints of working abroad.
There’s been lot of talk of reshoring lately in America, but before delving further, let’s first understand in simple words what is reshoring. While reshoring – or onshoring – is the process of bringing back the production and manufacturing of products to the company’s original country, offshoring is the process of getting the manufacturing of products done abroad to save labour and manufacturing cost. Notably, apparel industry was one of the first in the US to succumb to offshore manufacturing.
America’s hunt for low-wage countries began almost 4 decades back and today it has reached a stage, where only 3 per cent – or even little – of its consumption is locally sourced. For many years, apparel firms across the US were clear that shifting garment production to low-wage countries like China would help them attain lower cost. Yes, it was true then, but advanced technology – and importantly the awareness of using modern technology in apparel factories of foreign countries – has changed the equation in last 5 years. Today with various processes of sewing and knitting technology getting automated in many Asian countries, including China, it is hardly attractive for American apparel firms to move abroad – in fact it is less fascinating and less practical now.
According to Bureau of Economic Analysis, 2020, the output of the US textile manufacturing (measured by value added) totalled US $ 18.79 billion in 2019, which is a rise of nearly 24 per cent from what it was in 2009. In comparison, the US apparel manufacturing has slumped to US $ 9.5 billion in 2019 which is 4.4 per cent fall from what it was 10 years back.
Notably, COVID-19 has hit American textile and apparel production significantly. The value of US textile and apparel output has fallen by as much as 21.4 per cent and 14.9 per cent, respectively, in the second quarter of 2020, compared to the previous year. In fact this result is worse than a 15 per cent slump seen during global economic crisis a decade back.
The pandemic has actually led to over 83,700 job losses in the US textile and apparel manufacturing sector between March and April 2020, of which around 80 per cent have returned as of September 2020. Nevertheless, the falling trend in employment has not been changing much for the American textile and apparel manufacturing sector.
Despite all this, one cannot overlook that the US domestic sector has started recovering lately – though at a snail’s pace. That’s something America will be happy about because getting rid of apparel trade deficit would bring down the entire trade deficit by US $ 120 billion annually (25 per cent of the total), which would significantly create over 1 million manufacturing jobs in the US. Manufacturing apparels in the US would enable firms to overcome several issues pertaining to logistics or trade barriers.
The below figures (thanks to data provided by Dr. Sheng Lu’s source) tell us clearly the scenario of textile and apparel manufacturing jobs in the US in last 15 years.
Reshoring/Onshoring has always focused on products whose size and weight such as transportation equipment, or frequency of design change/volatility of demand like that of some apparels, suggest that offshoring has never offered great total cost savings.
Apparel manufacturing has to come back to US; the good part now is that the awareness to get back jobs to the US is increasing – and increasing at a good pace.
Amidst pandemic, IBuyAmericanStore.com gains popularity
All through the pandemic, one saw a significant surge in traffic to IBuyAmericanStore.com. In addition to the rise in traffic, what’s noteworthy was the increase in the number of enquiries from people who were keen to buy American made apparels or for that matter any item made in America.
If there was anything good or positive to come out of pandemic for the Americans, then it was the awakening of the Americans as to where their products are being made. The pandemic made them realise more the disadvantage US was at especially when there was any supply disruption. And it is this realisation that has helped them win half the battle. Today, Americans are demanding more of consumables made in the US, and are showing increasing willingness to go out and purchase more of ‘Made in America’ apparels. A research from the Cotton Incorporated Lifestyle Monitor shows that 52 per cent of consumers say that it is important to them that their dresses are made in the US – and that matters.
The Americans, however, know that they shouldn’t be losing this momentum, and should continue to pursue products made in the US. That’s the only mode of survival and success for them going forward.
Onshoring apparel manufacturing is what the US wants now and why!
Reduced shipping time and improved oversight
Offshoring definitely brings down the production cost but what about the shipping time? The world – including the US – has understood it so well that to ship apparels or for that matter any product within a country saves cost as well as time. Susbtantiating further on this, Rachel Weeks, Chief Executive Officer, School House, says, “As it’s harder and costlier to oversee production in another country, it can also be difficult to ensure that your manufacturers are complying with deadlines.” She says that ever since she has moved apparel manufacturing to the US, the profit margins have risen considerably by 13 to 18 per cent.
Offshoring expenses are bit high to handle now!
The whole exercise of offshoring had started only to save cost but alas that’s not been the story especially in the last decade. A big garment and textile hub like China witnessed a jump of 10 per cent in labour cost in 2013 and it has been increasing since – with quality not growing at the same pace.
At the same time, lower energy costs in the US have not only made domestic apparel manufacturing more affordable, but have also started giving shoppers in the country more opportunity to spend money for more costlier products that are ‘Made in America’. As we mentioned at the beginning, it’s about buying high-quality products as well as feeling patriotic about the whole situation. In this new set-up, offshoring doesn’t fit in anywhere.
Improvements in enterprise resource planning (ERP)…
To ensure onshoring/reshoring is profitable for the apparel business, a good data access is a requisite. According to KPMG, the Netherlands-based multinational professional services network, poor enterprise resource planning, better known as ERP, has been one of the biggest hurdles apparel firms have been facing while deciding if reshoring is needed or not. It further says that today’s ERP solutions streamline the process of running a clothing business, from sourcing textiles to meeting customer orders, while providing a single knowledge base for data that’s accessible across one’s company.
Brands too want it that way…..
As more and more American brands come forward and encourage reshoring, it will further help the country in bringing back apparel manufacturing to the US in addition to providing positive publicity to the retailers. Walmart has been doing it since 2017! Walmart’s US $ 250 billion US manufacturing programme aimed at bringing back at least 250,000 manufacturing jobs to the country.
Many retailers, including apparel bigwigs, are increasingly bringing manufacturing jobs back home and most of them feel it would not only get them positive publicity, but also give better supply chain control and a reputation for quality. Talking of positive publicity, when Walmart announced its commitment to increase its American-made purchases by US $ 50 billion annually by 2023, the consequent publicity gave a big PR boost not only to the reshoring initiative but to Walmart as well.
In fact, Walmart tops the list of American retailers that has maximum number of ‘Made in USA’ apparel products. Of the 13,238,526 apparel products offered by Walmart (during 2017-2018), 60,420 are ‘Made in USA’ apparel products. At distant second is Nordstrom Rack that has 21,478 ‘Made in USA’ clothing products from the total 314,228 apparel products it offers. Not far behind from Nordstrom Rack is HauteLook, which has 17,651 ‘Made in USA’ apparel products from the 208,290 clothing products offered by fashion brand.
Apart from Walmart, Brooks Brothers, a brand that has consistently made some of its clothes in the US since 1818, has reshored 70 per cent of suits from offshore locations in recent times majorly owing to rising wages, quality issues and lead time. Consequently, it has seen a surge in its staff from about 300 to 530 at their Haverhill unit in Massachusetts.
Similarly, in an effort to spur local manufacturing, Under Armour too had few years back converted a former South Baltimore bus garage into an innovation centre called ‘City Garage’. Located inside City Garage is Under Armour’s UA Lighthouse – a 35,000-square foot design and manufacturing centre. The entire objective has been to bring design and manufacturing under the same roof so as to drive innovation, attract talent and reduce the supply chain to deliver products to consumers more efficiently and on time.
More on this, John Martynec, Senior Vice President of Manufacturing, Under Armour, said ,“We are constantly striving to add production and products that we can make in the US with a very quick lead time.” Under Armour found that design, prototyping and production were reduced from 18 months to just 4 months. Notably, many other apparel labels like Zady, Reformation and Nasty Gal too are now making some – or all – of their products in the US.
And it’s not just Walmart, Brooks Brothers or Under Armour! There are many more….
The general perception today is that most of the apparel brands across the globe today is ‘Made in China’, which is not true. A closer introspection distinctly tells us that there are several ‘America Made Only’ apparels. We spoke about Walmart, Brooks Brothers and Under Armour, but then there are many more.
There’s All American Clothing Company! As the name suggests, it is a pure American apparel label that is known to make high-quality dresses at affordable cost. Why shouldn’t anyone buy from them then? The company that makes thousands of jeans ever year endeavours to support millions of families in the US by providing jobs. Then there’s California-based outdoor wear brand Battenwear that stands out in the market mainly on the basis of the comfort and multi-functionality that it provides.
Another American label that’s growing in popularity is Buck Mason that beautifully blends old apparel-making techniques with new technologies to produce perfect dailywear – reason good enough to make it one of the leading menswear labels in the US today.
For those from India and the subcontinent, Emerson Fry, a made-to-order clothing brand based in the US, would generate interest. The brand has exquisite India collections, and focuses on women’s apparels. Similarly another American label, known for women’s tops, bottoms and jumpers, which is gradually making a name for itself is Flynn Skye – a brand made for women by women.
Like Buck Mason, another ‘American only’ menswear brand that’s becoming a favourite with all is Gitman Bros. Tracing its roots to the 1930s, the label is synonymous with the rich heritage around US apparel manufacturing. It is today one of the few exclusive shirt brands with operations in the US. These are just few of some of the top American brands that are not only manufactured in the US, but are also gaining popularity amongst American youth and all.
So, America is on its way! Here one also needs to mention the impeccable growth that Los Angeles Apparel, a manufacturer, designer and distributor of clothing based in South-Central Los Angeles, has seen in recent times. Founded by Dov Charney in 2016, Los Angeles Apparel is a vertically integrated and fully automated apparel maker in the US that presently employs more than 1,800 staff. The factory buys textile and yarn products ‘Made in USA’, supporting local manufacturing, with more than half of yarn utilisation acquired from local sources – and all this in just 3 years.
Similarly, founded in 2005, TEG has had 15 years to perfect all aspects of production – design, sourcing, technical review with a pattern maker, samples, fittings and adjustments are just a few of the several ways it treats every project of its clients’ as its own. Today it has reached a stage where TEG is currently one of the leading apparel manufacturers in California. And there are more like Los Angeles Apparel and TEG. America has done it before and it surely has everything to do it again.
According to Statista, between 2010 and 2018, about 560 American manufacturing companies operating in apparels and textiles were reshoring or receiving foreign direct investment (FDI). The Reshoring Initiative’s 2018 data report distinctly stated that the reshoring and related FDI together totalled over 145,000 jobs in 2018. “This brings the total number of announced manufacturing jobs brought to the US from offshore to over 757,000 since the manufacturing employment low of 2010.” And there seems to be no way the trend is going to stop anytime soon, with global trade still battling all kinds of turmoil. As per latest analysis, apparel and textiles sector (Reshoring + FDI) for the period 2010-2019 is the seventh largest industry that has created around 40,012 jobs.
The new US Government is committed to get back jobs to the US…
It is clear now that the new US President Joe Biden too wants more apparel – or any – manufacturing in the US quite like Trump. While Trump’s way of doing it has been through tax cuts and executive orders, Biden launched a plan in September 2020 that pledged quite a few incentives across different categories – with a focus on revitalising those factories that are shut.
In fact, an outline, released by his campaign before the recent elections, listed a ‘Made in America’ tax credit for companies that bring back jobs from China. It then read “The goal here is not pure self-sufficiency, but broad-based resilience”. Many analysts believe that he may also use federal procurement dollars to enhance domestic manufacturing across different categories by buying from the US manufacturers.
Made locally is now the latest fad. Every country seems to be sold on this particular economic philosophy. Patriotism and ‘made in one’s own country’ is the in thing now everywhere and a lot will depend on how the ‘president elect lives up to his ‘Made in America’ promise to give reshoring a further boost. 2021 will give us some idea where the Biden’s US is heading to with regard to apparel reshoring.
As Marilyn Monroe once rightly said ‘Within crisis, are the seeds of opportunity’