The last two years have shown fashion brands that where you manufacture has a big impact on the rest of your business. Manufacturing in China was disrupted early by the pandemic and continues to be upended by a trade war between the U.S. and China. Plus, virus flareups continue to disrupt manufacturing in areas including Italy and Vietnam. And that’s not to mention geopolitical disruptions, which those who manufacture in Ukraine are contending with now.
In an effort to avoid some of those problems, fashion brands have increasingly embraced the idea of nearshoring, or bringing parts of the supply chain closer to where their business is geographically based. Mexico, in particular, is emerging as a popular destination for brands based in the U.S.
“We’re looking at doing a lot more nearshoring,” said Caroline Levy Limpert, CMO of intimates manufacture Gelmart. “Mexico, but also Colombia, even Brazil. We’re looking at a lot of places close to the U.S.”
According to Raine Mahdi, founder of logistics company Zipfox, shipping from China has become prohibitively expensive for some brands, at up to $18,000 for a single shipping container of product. Meanwhile, getting the same amount of cargo from Mexico to the U.S. is around $5,000, he said. At the same time, shipping times from China to the U.S. has doubled from 30 days to 60. Shipping from Mexico remains at 5-10 days.
“Anyone importing from China is still paying those 25% trade war tariffs, which may even increase in the near future since talks with China are not making progress,” Mahdi said. “On the flip side, there’s a free trade agreement with Mexico, making it a much safer and more cost-effective place to set up your supply chain.”
Exports from Latin America are estimated to have risen by 10% in 2021 as more U.S. companies sought closer manufacturing hubs, according to Women’s Wear Daily. The value of apparel imports from Mexico to the U.S. will likely hit $7 billion this year, and will be heavy in knitwear, T-shirts, polo shirts, lingerie, underwear and socks, according to Raul Garcia of Fashion Outlet Mexico WTC.
The brands that manufacture in Mexico have already felt the positive benefits of having their production close to home.
“Manufacturing in Mexico means our supply chain isn’t as heavily affected by various issues,” said Eugene Furman, CMO of workwear brand Xena. “Our shoes are made in Mexico and we’re going to try and stay as close to North America as possible. We don’t want to be stuck in a situation where everything is we tied up overseas and seeing two-month delays.”
At the same time, there are some benefits of not centering all manufacturing in a single region. If a local region and its neighbors get hit with some sort of crisis with no backups in unaffected areas, the results could be devastating.
“We’re not putting all our eggs in one basket,” Furman said. “We’re also planning on moving some manufacturing in India just to have some variety.”