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What Causes Companies To Exit China Manufacturing?

Joe Greco, MSOD who is President of Greco Apparel has manufactured apparel globally, talks about recent trends of companies exiting China for clothing manufacturing.

Our clients often ask us about what causes some companies to exit China manufacturing so we wanted to record a short video to explain why China manufacturing does not always make sense.

It has been a myth that China has been the cheapest country to manufacture for some time. The reality is that of the very low cost labor countries, China was the most convenient. The Chinese Government created a situation where they could exit vertically by itself with all facets in China. This means that all components such as lining, zippers, fabric…. are in China so it made it easy for someone to go into country, everything there in one place.

Countries such as Vietnam and Bangladesh has been cheaper to manufactured for years. This is a result of lower wages in both Vietnam and Bangladesh compared to China. Clothing manufacturing traditionally chases lowest wage prices on planet as long as someone can make investment in equipment.

The length of time in supply chain is also a major reason whey companies will alter their manufacturing in China strategy. Manufacturing overseas such as China pays when full container loads are met as well as 4-6 months lead time is allowed or there will be additional costs such as air freight.

An example to illustrate this situation is for someone to make sweaters for in time for Christmas selling selling, there will not be opportunity to quick turn and refill inventory need. There is no possible way to be 100% perfect on inventory predictions if more blue sweaters need to be made because they are outselling red sweaters.

In a Quick Turn situation, this can be described where a factory sits with raw materials and doesn’t cut until purchase orders are received.

Some clients may be paying more for USA production in the short turn, but all aspects need to be taken into consideration. What is the value to a business if another turn on inventory could be had in a 12 month period? Quick Turn further allows our clients to satisfy their clients faster as a hotel is not going to wait 4-6 months for staff uniforms.

Air freight is another expense to be factored in when manufacturing from Far East as mistakes do happen.

Before you start manufacturing, there is also a continual process of testing and changes that happen all the time. As example, label may not printed correctly, which will have to be fixed before full production runs.

Running a business across different time zones creates additional factors of considerations. The stress factor of people working early in morning or very late at night is very real when producing in countries such as Cambodia, China, Indonesia, and India.

Hours at night or morning communicating is mandated or a delay of 12 hours could take place. This is similar to someone working on night shift, what is the cost in terms of human energy?

Call us at 215-628-2557 if you have questions about apparel manufacturing in China.

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