By Just Style
This article was published in Just Style July 6, 2021.
The year continues to see apparel and textile suppliers to the US double down on orders in a bid to recover from a catastrophic 2020 linked to factory and store closures amid the Covid-19 pandemic. Latin America, in particular, enjoyed a spike in shipments during May.
The latest figures from the Department of Commerce’s Office of Textiles and Apparel (OTEXA) show the volume of US apparel imports from all sources increased by 10.4% month-on-month in May to 2,280 million square metres (MM2), up from 2,066 MM2 in April.
Compared to the same month last year, the US saw a 140.56% spike in apparel shipment volumes. In value terms, imports spiked 132% to US$6.1bn on the prior-year period. It is, however, difficult to draw comparisons on a year-on-year basis due to the impact of the Covid-19 pandemic and factory closures worldwide which skewed last year’s results.
In terms of individual supplier countries, all of the top ten recorded substantial year-on-year increases in apparel import volumes during May.
El Salvador booked the largest year-on-year increase in shipments of 887%, although its shipment size is the smallest of the ten largest suppliers to the US at just 55 MM2 for May.
Honduras saw a 673% year-on-year increase in shipments to 78 MM2, followed by India with a 550% increase in shipment volumes to 127 MM2.
Pakistan’s shipment volumes rose 341% to 85 MM2, while Bangladesh’s grew 288% to 232 MM2. Bangladesh is the third-largest supplier of apparel to the US.
Vietnam, the second-largest supplier of apparel to the US, saw year-on-year shipment volume growth of 137% to 383 MM2.
China, the largest supplier of apparel to the US saw shipment growth of 79% to 705 MM2, nearly twice as large as Vietnam’s.
Of the remaining ten, Mexico saw shipment volumes increase 75% to 71 MM2 while Cambodia booked growth of 64% to 76MM2. Indonesia booked a 103% increase in shipment growth to 92 MM2.
Combined textile and apparel imports from all sources, meanwhile, rose 112% year-on-year in May to 7,490 MM2. In value terms, imports were 116% higher at $8.88bn.
Textiles alone saw a 101% increase in shipment volumes year on year to 5,209 MM2, and a 87% jump in value terms to $2.7bn.
Facts Behind The Figures
Comparing the month through a year-over-year lens for 2020/21 is difficult as 2020 brought challenges the industry had never seen before, including global factory shutdowns, store closures and dampened consumer demand.
An early shutdown of China saw massive delays in key inputs reaching producer countries like India and Cambodia leading to further production delays.
What it did fuel was growing conversations around nearshoring and onshoring as the level of exposure of supply chains in and around Asia became evident.
Experts have said Latin American production could benefit post-pandemic.
Nicole Bivens Collinson from international trade law firm Sandler, Travis and Rosenberg (ST&R), says: “Most companies are reassessing and restructuring their global supply chains. The economic costs to retailers are resulting in physical presence reductions and closures of stores. The reduction of stores means a reduction in inventory.”
As such, Collinson says brands are looking at rebalancing their sourcing to ensure they are not “overexposed” in one geographical area; are considering a “hub and spoke” sourcing model to manufacture in geographical proximity to the target market; are looking at vertical manufacturing locations either as an individual country or as a close geographical region of countries; are looking at sustainable production to meet growing consumer demands; and are looking at nearshoring suppliers as it helps to meet several of the sourcing restructuring objectives.
Meanwhile, a study by Capgemini found 72% of consumer product organisations and 58% of retailers say they are actively investing in regionalising or localising their manufacturing base or nearshoring production.
“CPGs and retailers recognise the great risk of future disruption, and they have an opportunity to be in front of creating agility and resilience to adapt their supply chain networks,” says Lindsey Mazza, global retail supply chain leader at Capgemini. “The pandemic was an accelerated learning event. Organisations realise that new technologies can enable much-needed agility – from improving demand predictions to boosting fulfilment to quicker, cost-effective last-mile deliveries. By investing now, organisations put themselves in good stead to safely support consumers in their time of need – whenever the next industry disruption may be.”
It could go some way to explaining why Latin America saw a spike in shipments to the US during May 2021, particularly as many retailers and brands looked to make up the shortfall with products held up in China and the rest of Asia.
But realistically, Honduras, Mexico, and El Salvador combined still cannot match the volumes coming out of China alone. Moreover, Asia is still a strategic production location due to its scale of operations, proximity to raw materials, developed infrastructure and supply chain linkages, and productive skills and know-how. It is difficult to immediately replicate this in other sourcing destinations such as Africa or Latin America while remaining cost-competitive.
After all, sourcing from all destinations, including China, Cambodia, and Vietnam was up, suggesting brands and retailers are not at a point where they are immediately ready to sever ties with makers in Asia.