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From SCDigest's On-Target E-Magazine

- Sept. 23, 2013 -

Supply Chain News: More than 20 Years Later, Is Quick Response Going to Revive US Apparel and Textile Sector?

Automation, Greater Responsiveness, Coaxing Some Manufacturers Back to the Apparel Belt; SCDigest Cited in New York Times Article; It will a Long Climb Back

SCDigest Editorial Staff

The US textile and apparel sectors have been in the doldrums from years, with a river of outsourcing to low cost countries starting in earnest in the mid-1990s, turning into a flood at the turn of the century, especially when China entered the World Trade Organization in 2001.

Companies such as Levi's, Sara Lee and others made the decision to become "brand companies" and get out of the production business altogether, with the work at shuttered US operations going offshore as well to third-party suppliers.

SCDigest Says:

"Those supply chain velocity advantages can only count so much against a significant unit cost delta, as the apparel belt knows so very well. Now, however, the unit costs aren't that much different"

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The late Roger Milliken, CEO for many years of his family's textile business, Milliken & Company, saw this emerging offshore threat earlier than most. Throughout the 1980s and beyond, he was the leader of the "Quick Response" movement, which sought to counter the lure of cheap labor offshore through real-time information sharing that would make supply chain responsiveness a powerful weapon that would prove more powerful than lower unit manufacturing costs.

The reality: Quick Response never quite worked out as planned. Despite a lot of interest in the concept, including its own trade show and conference for a number of years, the paradigm faded. Lower costs offshore won out. The conference closed, and the term fell almost completely out of use not long after.

And US apparel and textile operations closed in droves. Manufacturing jobs in the apparel sector in the US are down an astounding 85% since 1990, and capacity is down 81%.

"It's never coming back," has been the general consensus ever since. Even as there has been some evidence of a "reshoring" trend in some more complex goods such as appliances and machinery, the traditionally labor-intensive apparel and textile industries seemed unlike to ever gain hold in the US again.

But, surprisingly, apparel and textile manufacturng is coming back. But the work looks vastly different - and the principles of Quick Response are in fact now part of the calculus.

A recent article in the New York Times tells the story of a couple of companies that are part of the apparel reshoring effort.

Parkdale Mills, the country's largest buyers of raw cotton, reopened a long-shuttered factory in South Carolina in 2010.

One user of Parkdale yarn is apparel maker American Giant. Not long ago, it was sourcing the special textiles it needs from India. But the lower cost was offset by the challenges of a long and not very responsive supply chain. Now it buys the yarn here and has its spun into fabric at another Gaffney area plant.

American Giant CEO Bayard Winthrop told the New York Times that US manufacturing has several advantages over outsourcing: "Transportation costs are a fraction of what they are overseas. Turnaround time is quicker. Most striking, labor costs - the reason all these companies fled in the first place - aren't that much higher than overseas because the factories that survived the outsourcing wave have largely turned to automation and are employing far fewer workers," the Times writes.

Concerns about worker safety and the types of disasters that have hit apparel factories in Bangladesh, Pakistan and elsewhere were also an issue in the company's decision to source and make at home.

By sourcing locally, "We just avoid so many big and small stumbles that invariably happen when you try to do things from far away," Winthrop says. "We would never be where we are today if we were overseas. Nowhere close."

The Indian mill required too much time to perfect its designs, send samples, schedule production, ship the fabric to the United States and get it through customs - as long as 3-5 months. American Giant did not want to have to forecast that far in advance.

With local sourcing, the company can now go from concept to product in as little as 30 days.

(Manufacturing Article Continued Below)

CATEGORY SPONSOR: SOFTEON

But those supply chain velocity advantages can only count so much against a significant unit cost delta, as the apparel belt knows so very well. Now, however, the unit costs aren't that much different, as the new age apparel makers here make broad use of automation.

As shown in the graphic below, the unit cost of an American Giant hoodie is down to less than $7.00 more in the US versus offshore, Wilson says. But that is before the costs of extra inventory and/or lost sales from a slow supply chain are considered, factors that might completely close that cost gap on the bottom line.

Source: New York Times

The Parkdale mill near Gaffney produces 2.5 million pounds of yarn a week with about 140 workers. In 1980, that production level would have required more than 2,000 people, the company says.

In fact, many companies that want to make goods in the US now often have trouble finding qualified workers for specialized jobs and American-made components for their products, as the supply bases have also been lost with the closing of finished product factories.

It also means that any sort of reshoring trend, while clearly good for the overall economy, will not generate anywhere near the number of manufacturing jobs that such production would have created in the past.

The Times article says US exports textile and apparel exports were $22.7 billion in 2012, up 37% from just three years earlier. That's much less than volumes coming out of say China, but is above the $19 billion or so in apparel exports that Bangladesh had last year. Little known, apparel manufacturing centers in New York City and Los Angeles continue to produce a lot of goods.

But the big picture, despite some progress, is still not good. As shown in the web chart below, US apparel production reached its all-time high in December 1994, at an index value of 288.54 versus the base year of 2007. It is now hovering around a level of 58, meaning production is down more than 40% just since that base year, though it has seemingly hit a floor and stabilized since around 2010.

The Times article also references a 2012, study on US manufacturing jointly conducted by the MIT Forum for Supply Chain Innovation and Supply Chain Digest, based on a survey of 340 of manufacturers.

"The survey found that one-third of American companies with manufacturing overseas said they were considering moving some production to the United States, and about 15% of the respondents said they had already decided to do so," the Times notes.

"This is a completely different manufacturing paradigm than what we saw 10 years ago," said David Simchi-Levi, a professor at MIT. who partnered with SCDigest on the study.

Is it possible for the US apparel industry to really make a come back? Why or why not? Let us know your thoughts at the Feedback section below.

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