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Manufacturing migration?

With Mary Portas’ Bottom Line TV show highlighting the plight of UK manufacturing broadcasting across the country over the last few weeks there’s no doubt that the issues facing our home-grown textiles industry are at the forefront of people’s minds.

Rising labour and transportation costs, capacity shortages, and volatile raw material costs, are making traditional manufacturing countries such as China less attractive to buyers, and there is a renewed focus on UK manufacturing where retailers have the benefit of a close working relationship with suppliers, are able to react to trends far more quickly, repeat into popular styles and therefore improve their sell-throughs, all of which is difficult to monetise, but will make a significant  difference to their bottom line.

However, for most the truth is that by and large they do still manufacture overseas, and it’s important to take a look at the other countries benefiting from China’s rising costs. The siren call of lower labour prices in countries such as Vietnam and Bangladesh have been difficult to resist for many, and even Chinese manufacturers such as Dishang Cherry have and are opening factories in those regions in recognition of their growing importance.

However, those markets still face challenges. Poor infrastructure resulting in logistical nightmares and delays in delivery of goods to the UK, a lack of raw materials meaning that that they need to be imported from China or India anyway, all adds cost into the supply chain, while those countries often lack some of the skills that have been well-honed in China, and the high level of demand means that there are capacity shortages to contend with.

Despite the fact that they are more expensive to manufacture in than India and the Far East, countries such as Turkey, Morocco and Romania are benefitting from buyers willing to pay higher prices in pursuit of shorter lead times. Romania, for example, is cited as a growing manufacturing hot-spot by consultancy Kurt Salmon, with buyers heading to the country for formalwear, which it specialises in, and attracted by the quick shipping it offers, which then improves sell-throughs and off-sets the higher production costs.

China may remain the number one textiles manufacturing nation, but the fact that a raft of Chinese manufacturers are now moving in a more premium direction in order that their margins are able to absorb much of the spike in labour costs, and as retailers exit the country in search of cheaper producers, indicates that we are likely to see this manufacturing migration to continue.

James Knowles, Features writer, Drapers
james.knowles@emap.com

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