Nearshoring or ‘Made in Asia’? Supply chains between dreams and reality

More and more clothing companies want to leave Asia and produce in Europe again. How realistic is that? And what will happen to the existing production sites? The German textile association DTB dedicated an information event to this topic and drew quite definite conclusions.

There are numerous reasons why many garment manufacturers are currently looking for ways to relocate at least part of their production from Asia back to Europe: Some are hoping for more stable supply chains, others for shorter delivery times and more flexible logistic chains, and still others for shorter transport distances and thus more sustainability. If so many clothing companies currently have the same goal, does this perhaps make it more realistic that we will produce our clothing in Europe again in the future?

“I don't think so,” said Susanne Pass, managing director of Dialog Textil-Bekleidung e.V. (DTB), which brings together companies from the entire textile chain, educational institutions, institutes and industry-relevant bodies. Just recently, the DTB acknowledged the topic of nearshoring with a one-day information event dedicated to sourcing and drew a clear conclusion: “The amount of clothing that we currently produce in Asia cannot be produced in Europe,” stated Pass.

Albania & Bosnia and Herzegovina: sourcing countries of the future?

However, this does not mean that there are no promising opportunities for garment manufacturing in Europe for individual product groups, volumes and price classes. For example, in Albania. Matthias Fröhling of Fröhling Textilconsulting GmbH describes the EU member state, which is one of the poorest countries in Europe, as an “emerging country for the garment industry”. It is interesting not only because of its short transport routes, but also because of its young population. “The average age of workers in the textile industry is 32; in Romania it is 54,” said Fröhling. A total of 827 companies are currently active in the Albanian leather, textile and garment industry with around 70,000 seamstresses. About 40 percent of the products are exported to Italy, 16 percent to Germany.

The situation is very similar in Bosnia and Herzegovina. Muris Pozderac from the Chamber of Foreign Trade in Bosnia also describes the current situation in the Balkan state's garment industry as promising. The textile sector in Bosnia and Herzegovina has about 40,000 employees in over 400 companies and a long tradition in textile production. However, the country is still suffering from the consequences of the war. “Before the war, 100,000 people were employed in the textile sector, plus we no longer have a preliminary stage, all fabrics and ingredients have to be imported today,” explained Pozderac. The main buyer of the goods here is also Italy, with an export share of 35 percent. Nineteen percent of the products go to Germany.

Turkey: high growth rates in recent years

Even before the pandemic, Turkey was an important sourcing destination that represented the entire supply chain of the textile and clothing industry with high quality standards and great know-how, from cotton cultivation to ready-to-wear clothing. Since the pandemic has shaken production in Asia in many ways, more and more manufacturers are interested in Turkey as a sourcing country.

”We are looking at 15 to 20 percent growth in 2020/21, which is huge for us,” said Deniz Dikmen, vice president of the Turkish Textile Exporters and Employees Association (TIHCAD), which was founded only a few years ago. But the country is also feeling the current recession. The goal of the association and the Turkish garment industry as a whole is to continue to grow and with a high level of quality. TIHCAD and its members are therefore particularly committed to the areas of sustainability, digitalisation, women's rights and education.

Ukraine: A beacon of hope post-war

There are also numerous textile companies in Ukraine, and many of them are still in operation despite the war, such as suppliers of Hinrichs Bekleidungswerk GmbH. The German company has been sourcing in Ukraine for many years and has been able to maintain the business relationship until now. “It's a permanent risk, not only because of the war, but also inflation is now at 50 percent and energy costs are rising,” said technical director Thomas Voss. “But we also keep hearing the vehement plea: stay here, don't pull production.” As things stand today, however, he sees much potential in the country once the war is over. “After the war, Ukraine will certainly be a country that is very attractive for contract manufacturing. It is close to Poland and Slovakia, there is a lot of construction and investment. In addition, the will is there to move closer to the EU,” summed up Voss.

India rises as a sourcing country

But Asia also remains attractive, although a variety of shifts are currently taking place there. The former sourcing superpower China is losing more and more orders to India, which implements a much looser Covid policy and does not impose any lockdowns. Many of the risks of recent years have now been eliminated, for example child labour or poor infrastructure. There is also hope that the legal framework for India will soon improve with regard to tariffs and that no more tariffs will have to be paid - as is the case today with countries such as Bangladesh and Sri Lanka.

Bangladesh: Factories are struggling for their existence again

It is neither realistic to expect Europe to become the most important manufacturing location for the garment industry again, nor would it be socially responsible to abandon long-standing sourcing locations in Asia, according to Pass. Moreover, many Eastern European countries are now also struggling with a shortage of skilled workers. “Some member companies report that they are already bringing skilled workers from Asia to Eastern Europe because they can no longer find enough there,” she explained. Other product categories, such as functional clothing, are now almost exclusively produced in Vietnam, for which there is no longer any manufacturing base in Europe.

Christopher Veit, CEO of Veit GmbH and DTB board member, also appeals to the industry to behave fair in view of the current consumer slump. “The current situation is a disaster for many factories in Bangladesh. Most brands and buyers are not accepting deliveries of their ordered goods now or are delaying delivery. Some factories are already renting external warehouses to store the goods somewhere. And this is while costs are rising there too!”, explained Veit. While there was much public interest in the situation of sourcing countries during the pandemic, one hardly hears anything now. “Yet the situation is just as dramatic, many factories do not know whether they will survive the winter,” said Veit.

At the same time, the garment industry in Bangladesh is showing great development and enormously high standards. Fear of sourcing in Bangladesh is unfounded today, he said, as there are now many good companies. His recommendation: “Now is the perfect time to start in Bangladesh if you want to produce large quantities.”

This article was originally published on FashionUnited.de. Edited and translated by Simone Preuss.