Retailers lose love for Asia: manufacturers are forced into exodus to the Balkans and Latin America

Large clothing and footwear companies are moving their production to countries closer to their stores in the United States and Europe, given the resurgence of cases of the Delta variant of the coronavirus in Vietnam and China, which slowed or paralyzed production for several weeks at the beginning. of this year.

The decision comes amid a huge shipping jam that is driving up costs and forcing companies to rethink their global supply chains and low-cost manufacturing centers in Asia.

The latest example is Spanish fashion retailer Mango, which told Reuters on Friday that it “accelerated” its process of increasing production in countries such as Turkey, Morocco and Portugal. In 2019, it manufactured a large part of its products in China and Vietnam, but will now “considerably” expand the number of units manufactured in Europe in 2022.

Similarly, the American footwear retailer Steve Madden It said Wednesday that it has withdrawn its production in Vietnam and moved 50% of its shoe manufacturing to Brazil and Mexico from China, while the rubber clog company Crocs announced last month the transfer of its manufacture to countries such as Indonesia and Bosnia. .

Bulgaria, Ukraine, Romania, Czech Republic, Morocco and Turkey are some of the countries that have aroused the interest of clothing and footwear producers, although China continues to produce much of the products for US and European chains.

“We are seeing huge growth in freight and trucking activity in the former Soviet republics, a huge increase in Hungary and Romania,” said Barry Conlon, CEO of Overhaul, a supply chain risk management company.

On Turkey, apparel exports are expected to reach $ 20 billion this year, an all-time high, driven by an increase in orders from the European Union, according to data from the Turkish textile union. In 2020, exports totaled $ 17 billion.

In Bosnia and Herzegovina, exports of textiles, leather and footwear amounted to 739.56 million marks (US $ 436.65 million) in the first half of 2021, higher than that of all of 2020.

“Many companies in the European Unionwhich is our most important trading partner, they are looking for new suppliers and new supply chains in the Balkan market, ”said Muris Pozderac, secretary of the Bosnia and Herzegovina textile, clothing, leather and footwear association.

In Guatemala, where Nordstrom significantly changed its private label production volume in 2020, apparel exports exceeded US $ 1 billion at the end of August this year, 34.2% more than in 2020 and even 8.8% more than in 2019.

Many companies continue to rely heavily on Vietnam, where recent production stoppages have caused major disruptions. The government said it will miss its $ 5 billion apparel export target in the worst case scenario, due to the impacts of coronavirus restrictions and worker shortages.

Factory inspections in Vietnam – a representation of retailers’ manufacturing orders – fell 40% in the third quarter compared to the prior period, and production during those months quickly moved to Bangladesh, India and Cambodia.

Inspection rates in Vietnam were still hovering lower levels in the fourth quarter, with a small rebound seen in late October, said Mathieu Labasse, vice president of QIMA, a supply chain quality assurance and audit firm representing more than 15,000 brands.

Clothing maker VF Corp and outdoor gear brand Columbia Sportswear are among the companies that have warned of delays in their fall and spring collections and, in some cases, undersized assortments.

Capri Holdings, manufacturer of handbags Michael Kors, said it will not have the inventories it wanted for the holiday season, while sports equipment maker Under Armor said last Tuesday that it was canceling purchase orders from Vietnam to help “factories recover and catch up.” .