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Are Companies Really Looking for Cost Savings in the RIGHT Places?

In its Sixth Annual Apparel Research Study & Analysis, “Looking for Cost Savings in All the Right Places,” Apparel Magazine describes challenges brands and retailers face in developing a sourcing strategy which captures cost savings without compromising quality. Respondents were 48% retailers and 52% manufacturers, with 85% working in operations, product development and/or sourcing and procurement. A key trend is that companies are looking for new regions to optimize their vendor portfolios. Reasons given included:

  • Significant increases in transportation costs
  • Cost reduction efforts
  • Need for improved vendor performance

Rising labor costs in China, Cambodia and Vietnam have some companies turning to India and Bangladesh, but the near-shoring trend continues to increase as manufacturers of textile goods attempt to cut costs and reduce cycle times to become more responsive. Colombia was cited as one option due to its skilled labor force, developed infrastructure and proximity to U.S. ports.

But why aren’t those companies looking at Mexico? While Colombia may be closer to the North American market than China, Mexico offers their quickest access. Other factors tipping the scale in Mexico’s favor for cross-border manufacturing and textile assemblies include:

  • An existing skilled labor force for textile assemblies, from basic to highly complex operations.
  • Mexico’s labor force is quickly narrowing the gap with China’s labor costs, and is expected to close it completely within the next few years.
  • Quick and easy cross-border transportation.

When it comes to flexibility on the supply chain side, lowering inventory costs, and faster turnaround times, textile manufacturers in Mexico are the best solution to today’s demanding macro-economic conditions. If you’re not looking at manufacturing in Mexico, you may not be looking in all the right places.
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