Many of the trends that led manufacturers to move most of their production facilities to various locations around the world are changing, meaning that the structures of their supply chains are undergoing notable shifts as well. There are three main trends emerging in the modern, global, political and economic arena that are leading some analysts to suggest that especially in the apparel industry, we might be entering an era of nearshoring, with far more factories in the United States than there have been in the past.
First, production cycle times have gotten much shorter, meaning that consumers and retailers want to have the latest clothing in stock within just a few weeks, rather than waiting months for a new fashion season. For companies that produce their garments in Asia for example, the transportation constraints make it more difficult to get items where they need to be at a nearly immediate pace. If a clothing company can respond promptly to the latest Instagram influencer’s recommendation about a hot fashion trend, because it has nearshored its factory and located it close to where that influencer’s followers live, it can better meet their needs.
Second, a prime reason for locating factories in various countries has long been the low labor costs. In less developed economies, companies could produce their products with vast numbers of workers, whose wages were substantially lower than what they would have had to pay in more developed nations. But in the modern global economy, that long-standing assumption is changing, especially in quickly developing countries such as China. Chinese workers’ wages are rising quickly, reducing the cost benefits of moving manufacturing capacities there. Relatedly, some of the cost benefits of outsourcing such projects also might diminish with the new and shifting tariffs imposed by the United States on imported goods, further diminishing the cost advantages.
Third, whereas many countries have developed strong manufacturing capabilities, with substantial factory capacity, technological advances promise to
make such capabilities less important. For example, if an apparel manufacturer can rely on a farm of 3D printers to churn out hair accessories or fashion jewelry quickly, it has little need for the extensive manufacturing infrastructure that places like China have built.
These trends do not apply to every industry sector of course; it is unlikely that the United States will ever depend strongly on manufacturing as a basis for its economy. But as broader societal and economic changes come to bear, consumers might find far more of their favorite clothing items bearing a “Made in USA” label.

Discussion Questions:

1. What is nearshoring, and why is it expected to increase in the apparel industry?
2. What is the relationship between nearshoring and just-in-time (quick response) inventory systems?

Source: Tom Ryan, Retail Wire, October 19, 2018.