David Solomon International sourcing and manufacturing consultant, Permanser recruitment.
It still makes sense to source out of China for now as it is closer for transport, infrastructure is already set up and the Chinese have a good understanding of our quality needs and what we expect regarding on-time deliveries. There has been a huge shift with the Chinese government moving textile/apparel manufacture away from main cities and moving them west and now they are also being out priced for rentals and it seems the IT, car and plane industries are where the money is for growth. Places like Ningbo and Dongguan, which in the past have been apparel manufacturing areas, are losing that industry as new high rise housing goes up all over and rentals and wages keep going up at alarming rates. Garments are now being made for the Australian market in newer areas including Xiamen, Nanchang and Hebei. The next five years are going to be very interesting as we see from retail results that business is not looking good. With international retailers hitting our shores and the emergence of online shopping becoming a major player, there will be more pressure for manufacturing to move west in China, chasing lower costs whilst sacrificing delivery times (it will take more time to get to ports). With the RMB going up this year by nine per cent and still increasing, the west is looking good. Learning the Chinese market is an ongoing process: knowing your product, how it’s produced, all the shortcuts that can be taken - you must be aware of all that so you are able to have full understanding of what the finished garment looks like and what you can expect. It’s all about preparation - the more you are prepared, the better the finished product and all the boxes can be ticked: colour, print, price, delivery and, most important, quality.
Andy Powell Andy Powell is a director at Deloitte Consulting.
We have seen a shift to Bangladesh, Cambodia, India and Vietnam with continued interest in Thailand and, closer to home, Indonesia and South Asia in general. Each has different points of attraction, although a lower cost labour pool is common. In addition to the lower cost labour, they are rapidly improving their logistics by watching and learning from China. This is true of all, though perhaps less successfully in India, which is typically less agile in delivering large road, rail and port infrastructure projects. However, China’s relative manufacturing scale still works in its favour. Although the US is in the doldrums, its scale volume still exerts a strong pull on manufacturing capacity. Some Aussie retailers have moved their production to other countries only to find that US or European competitors have also moved. This makes things worse for them, as, in countries with smaller production capacity, the large US orders are more likely to soak up all available manufacturing slots and Aussie retailers and smaller orders are more likely to get bumped. The same risks are present in China, but it also offers more capacity and more options. There are also increased logistics lead times from some countries, less well-established consolidation and freight services, monsoonal disruption and fewer options for local support services such as agents and buyers. The last point is important, as local presence in the newer manufacturing countries is required to ensure retailers stay top of mind when local production scheduling is done as well as maintaining a sharp eye for quality of process and finished goods. Also, each country has different and distinctive ways of doing business. It’s not enough for local agents to speak the language, they have to “speak the culture” in representing the needs of Australian retailers to the global factory.
