Moving LocalFor-Local to the Top of the Agenda THE COVID CRISIS UNDERSCORED CHALLENGES INHERENT IN OVERSEAS PRODUCTION, BUT IS NEARSHORING THE SOLUTION? G L E N N TAY LO R
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he apparel supply chain has been inundated with some major obstacles in recent years, including a trade war between China and the U.S., a global pandemic that first suffocated supply and then demand, as well as shipping delays due to congestion at major ports. All of these factors have increased the challenges related to inventory management, As a result, an increasing number of retailers and brands at least consider the idea of bringing more manufacturing operations closer to home. And apparel focused firms aren’t alone. According to a September 2020 study from the Capgemini Research Institute, 65 percent of retailers and consumer product firms are investing in regionalizing and localizing their supplier base, while 58 percent of retailers and 72 percent of consumer product firms say they are investing in regionalizing and localizing their manufacturing base. The one obvious benefit that brands have in nearshoring their manufacturing operations is that the product is much closer to the end consumer. That alone cuts down
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air and sea freight costs and production lead times, enabling brands to capitalize on trends rapidly, or ship product to customers quickly upon purchase. Additionally, brands may be more apt to embrace nearshoring as a means of creating smaller batches, madeto-order goods or customizable product to boost sell-throughs. “It’s about being able to react in season if a product goes viral or demand goes down, such as in the case of Covid,” said Gabi Ledesma, vice president of consumer products and retail at Capgemini. While Ledesma said these reasons for nearshoring were prevalent prior to Covid, “they have since accelerated because of the dominance of the online sale over the last 12 months.” Local sourcing also better for sustainability, which is becoming more of a consumer imperative, he said. “When it comes to sustainability, countries like the U.S. have a better reputation than those in Southern Asia, for instance,” said Ledesma. “Consumers are going to look at that, and also the impact on emissions. Sourcing locally produces a lot less CO2 in the atmosphere
“For the apparel companies that have slim margins, they’re going to be very challenged to move production here today.” —Gabi Ledesma, Capgemini
