For many years, U.S. clothes manufacturers have sourced textiles and apparel from China, traditionally the world’s shop floor. But as costs have risen in China, work is increasingly shifting to countries such as India, Pakistan, Bangladesh and Sri Lanka.
“The American economy is booming again and we are seeing an increase in demand for garments from South Asia,” says David Gault, SDV’s U.S.-based route manager for South Asia. He cites the example of Li & Fung, a Hong Kong-based company handling sourcing and apparel manufacturing for U.S. retailers, that saw production in Bangladesh jump 20 percent last year, while China, its biggest supplier, slipped 5 percent.
U.S. clothes manufacturer Levi Strauss, meanwhile, reported that Bangladesh will be its number one sourcing country in 2014, overtaking China, while Pakistan, India and Sri Lanka will rank number two, three and six respectively.
In total, U.S. companies bought $20 billion worth of garments from Bangladesh in 2012, making it the leading producer of low-cost garments for mass-market retailers such as Wal-Mart, Target and Kmart, Gault says.
Each South Asian country is developing its own specialty. Pakistan, for example, enjoys a low-cost domestic supply of cotton along with cheap labor. The country dominates the supply of bed linen thanks to the world’s largest printing factories. Bangladesh, meanwhile, is used as a source of basic cotton garments because of its low labor costs and cotton prices. The country is also working to improve working conditions after international concerns about safety in its garment factories, Gault notes, helping it attract overseas buyers.
Sri Lanka has similar cost advantages to Pakistan and Bangladesh but the operating and capital costs are higher there. “As a result, Sri Lanka is a sourcing target for certain niche products such as women’s underwear,” Gault says.
Finally, India enjoys lower labor costs and cheaper cotton prices than China and so “will likely gain a competitive edge over China in the future,” Gault notes. India is a source of fabrics and textiles across almost all product ranges.
In another shift that could benefit the South Asian markets, U.S. clothing retailers are increasingly looking to shorten the supply chain, says Gault. One SDV client, for example, last year reduced its entire supply chain cycle from design to delivery to 45 weeks from 60 weeks by switching to air freight instead of ocean freight for garments from Bangladesh.
“Speed is once again becoming more important than costs,” Gault says. This is to the advantage of countries such as Bangladesh because they can be more reactive in terms of production than China thanks to newer machinery and a highly flexible labor market, he adds.
In addition, companies are increasingly turning to sophisticated trace and track systems such as iD by SDV that use radio-frequency identification or RFID tags. This system allows companies to save time and improve inventory management, he says.
To be sure, the textile and clothing sector is becoming increasingly competitive, meaning that supplying countries must take steps to boost their appeal to foreign buyers. For example, Bangladesh, India, Pakistan and Sri Lanka, could collaborate more on a regional level to improve logistics. “More effective supply chains could contribute to enhancing these countries’ competitiveness resulting in greater world market shares,” Gault notes.