Cluttered supply chains force manufacturing exodus to the Balkans, Latin America, Retail News, ET Retail

Large clothing and footwear companies are moving production to countries closer to their US and European stores, following a resurgence of cases of the Delta variant of the coronavirus in Vietnam and China that have slowed or halted production for several weeks earlier this year.

The disclosures come amid a massive shipping stalemate 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 that of Spanish fashion retailer Mango, which said on Friday it had “stepped up” its process of increasing local production in countries like Turkey, Morocco and Portugal. In 2019, the company mainly purchased its products from China and Vietnam. Mango told Reuters it would “dramatically” increase the number of locally manufactured units in Europe in 2022.

Likewise, US shoe retailer Steve Madden said on Wednesday it had cut production in Vietnam and shifted 50% of its shoe production to Brazil and Mexico from China, while rubber clog maker Crocs said last month it was shifting production to countries like Indonesia and Bosnia.

Bulgaria, Ukraine, Romania, Czech Republic, Morocco and Turkey are among the countries that have attracted new interest from clothing and footwear producers, although China continues to produce a large part clothing for American and European clothing chains.

“We are seeing strong growth in freight and trucking business in the former Soviet republics … a big increase in Hungary and Romania,” said Barry Conlon, managing director of Overhaul, a chain risk management company. supply.

Turkey’s clothing exports are expected to reach $ 20 billion this year, a record high, driven by an increase in orders from the European Union, according to data from the Turkish Clothing and Clothing Council of the Union of chambers of commerce. In 2020, exports totaled $ 17 billion.

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

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

In Guatemala, where Nordstrom dramatically shifted its production in terms of private label volume in 2020, apparel exports topped $ 1 billion at the end of August of this year, up 34.2 percent from 2020 and even 8 percent. 8% more than in 2019.

Admittedly, many companies are also still heavily dependent on Vietnam, where recent production shutdowns have caused significant disruption. The Vietnamese government said in October it would fall short of its clothing export target this year, by $ 5 billion in the worst-case scenario, due to the impacts of coronavirus restrictions and a shortage of workers.

Factory inspections in Vietnam – an indicator of retailer manufacturing orders – fell 40% in the third quarter from the second quarter, with production in those months rapidly shifting to Bangladesh, India. and Cambodia. Inspection rates in Vietnam still hovered at lower levels in the fourth quarter, with a slight increase seen in late October, said Mathieu Labasse, vice president of QIMA, a chain quality control and audit firm. supply which represents more than 15,000 brands. Apparel maker VF Corp and outdoor gear maker Columbia Sportswear were among the companies that warned there would be delays in fall and spring collections and, in some cases, size assortments. insufficient.

Handbag maker Michael Kors, Capri Holdings, said Wednesday it won’t have the inventory it wants for the holiday season, while sports equipment maker Under Armor said last Tuesday that ‘he was canceling purchase orders from Vietnam just to help “get the factories up and running.” and caught up. “

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