New consultancy to help navigate Americas sourcing
RegionaLink aims to provide sourcing services for companies seeking new production capabilities
As US and European apparel firms scramble to move some of their Asian production to Central and South America in a bid to offset rising production prices, help is needed to link them to the growing number of factories courting business from these brands.
Enter RegionaLink LLC, a new sourcing consultancy launched by three industry veterans - Carlos Arias, Kurt Cavano and Walter Wilhelm - that opened in Guatemala City last week.
Carlos Arias is CEO of Guatemalan jeans wear maker Denimatrix, while Kurt Cavano is CEO of Tradecard, a supply chain financing firm in New York. Walter Wilhelm is the owner of Walter Wilhelm Associates, a global apparel industry consultancy.
"We hope to act as a buying office and agent that will select the best factories here, those that we can ensure can deliver the highest quality garments on timely schedules," Wilhelm told just-style, adding that the firm will also help buyers understand the region's sourcing apparatus and labour/regulatory obligations.
RegionaLink will target US and European apparel firms with sales ranging from $50m-$500m, Wilhelm added.
It will aim to connect them with suppliers in Central America and the Dominican Republic that can benefit from the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) which enables them to sell textiles and garments duty-free to the US.
Guatemala, Costa Rica, El Salvador, Honduras, Nicaragua and Dominican Republic are DR-CAFTA members.
Wilhelm said five other industry veterans have invested in the fledgling consultancy but wouldn't reveal their names.
"Many companies are looking to bring production back to the Americas but need help," explained RegionaLink's managing director Alejandro Arias in a statement on the rationale behind its establishment
"RegionaLink will help potential buyers identify factories that have the skills, particular product experience, production capacity, technology and financial strength to deliver reliably and consistently."
Arias, who is Carlos Arias' brother, added: "We will assist with the early process to establish the relationship and with necessary local project management (on both ends of the supply chain) to guarantee success of the new relationships and reliable delivery of sourced goods."
Carlos Arias told just-style recently that Central America expects to receive huge investment flows from US and European manufacturers eager to move production from China where rising production costs, labour woes and local demand are making it difficult to source cheaply and reliably from the region.
While Central American costs are not much lower than China's, the region's proximity has become a clear advantage for US producers seeking new sourcing partners, observers said. For this reason, they expect the region to attract some $500m from apparel firms in the next five years.
Adidas, JC Penney, Walmart eye market
Senior local apparel executives say several big US brands including JCPenney, Walmart and Aeropostale, as well as European labels such as Adidas, Hugo Boss, Escada, Inditex (Zara) and Mango are considering investing in Central America to meet growing demand for their products and expanding Latin American store networks in the case of the European firms.
According to one unnamed source, Adidas is looking to increase its regional activewear sourcing by 700% as it moves some of its manufacturing out of China.
Central America is working to implement a free trade deal with the European Union (EU) that could double its export market in 2013 when observers expect the treaty will come into full effect. The EU, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama signed an initial agreement last May.
Other large Hong Kong-based producers TAL Apparel and Wing Tai are also mulling entering the market.
Selling to Europe can command premiums of up to 15%, says one leading industry observer, adding that this opportunity will force Central American suppliers to streamline production to cater to "more sophisticated European fashion tastes and styles."
And that's where RegionaLink is also expected to come in, helping the different supply chain actors strike more profitable relationships.
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