The Post-China 16 emerging economies for apparel sourcing, identified by Stratfor

The Post-China 16 emerging economies for apparel sourcing, identified by Stratfor

In its constant search for cheaper and cheaper production bases around the world, there are few places the apparel and textile industry has left untouched. But still the search goes on. From Africa to the Americas, Burma to Bangladesh, there seems to be a never-ending debate as to the next sourcing hotspot.

Indeed, the huge response from just-style readers to recent research that identifies the 16 countries best suited to succeed China as the world's low-cost, export-oriented hub shows the hunt is far from over.

The research on 'The PC16: Identifying China's Successors', published by Stratfor Global Intelligence, makes the point that the Post-China 16 or PC16 countries is not a forecast - but is instead a list of countries where garment and footwear manufacturing growth is already underway.

"The new activity is focused on Africa, Asia and to a lesser extent, Latin America," explains Stratfor chairman George Friedman.

"When you look at the map, much of this new activity is focused in the Indian Ocean Basin. The most interesting pattern is in the eastern edge of Sub-Saharan Africa: Tanzania, Kenya, Uganda and Ethiopia. Sri Lanka, Indonesia, Burma/Myanmar and Bangladesh are directly on the Indian Ocean.

"The Indochinese countries and the Philippines are not on the Indian Ocean, and even though I don't want to overstate the centrality of the Indian Ocean, they are nearby. At the very least we can say that there are two ocean basins, the Indian Ocean and the South China Sea.

"There are some countries in Latin America: Peru, the Dominican Republic, Nicaragua and Mexico.

"We normally would not include Mexico but the area in central-southern Mexico is large, populous and still relatively underdeveloped. It is in this area, which includes the states of Campeche, Veracruz, Chiapas and Yucatan, where we see the type of low-end development that fits our criteria. Mexico's ability to develop its low-wage regions does not face the multitude of challenges China faces in doing the same with its interior."

Change in China
The discussions are, of course, driven by changes in China, where several decades of apparel price deflation has come to an end and worries continue to escalate about rising material and labour costs, capacity issues, and the country's overall competitiveness.

Pressure to improve the sustainability of China's textile sector in line with goals set by the new administration also has potential to damage its powerhouse clothing and textile sector, a conference hosted by leading apparel group Esquel was told this week.

But time and time again we've heard that no single country can replace China, the world's biggest clothing maker with a 38% share of the garment export market.

Even Bruce Rockowitz, president and CEO at Li & Fung, told analysts on Tuesday (13 August) that: "China continues to be number one. A lot of people talk about the end of China, it's not true. China is the key country for any company that's an importer, or a retailer."

He said the sourcing giant is working to mitigate China's rising labour costs by moving to other parts of the country, and by working with more efficient factories that use less manpower.

Complex equation
When it comes to deciding on a manufacturing location, issues that are all part of the complex equation include cost (not just raw materials and labour, but factory costs, utilities, financing, transport, import duties and warehousing); reliability; local infrastructure (including political stability, ports, road access and power supplies); the availability of local yarn, fabric, dyeing and accessories; and, of course, ethical and environmental compliance.

Not only does China have all this, but more besides.

Its apparel output has doubled since 2005 thanks to productivity programmes, and the country accounts for 60-75% of the world's investment in spinning, knitting and weaving capacity.

It also has an infrastructure that allows every aspects of a garment's production to be carried out efficiently, from sourcing accessories and raw materials, through to efficient transportation for finished goods and fast, efficient customs control. 

David Birnbaum, the founder of garment/textile consultancy Third Horizon Ltd, has also been looking at the issue, writing on just-style today (15 August) that: "Garment sourcing is a lot more than finding the place with the lowest labour rates."

A benchmark study carried out by his team compared garment exporting industries in Bangladesh and China - with the scores achieved by individual sourcing criteria illustrating why China wins every time in every category except FOB cost.

He also agrees with Friedman's point that: "There is no single country that can replace China. Its size is staggering. That means that its successors will not be one country but several countries."

"The answer to the new China question is not a country but rather a region, such as NAFTA/CAFTA, South Asia, or ASEAN," Birnbaum explains.

While nowhere else comes close to China as a single supply base, buyers can - and are - creating opportunities elsewhere. Quick response, speed to market, and more rapid replenishment, for instance, favour sourcing countries located close to consuming markets.

And of course sourcing decisions depend on a whole range of different parameters, with the options available to buyers also varying by market, whether they're in the US or EU, duties, currency, requirements and so on.

There is also room for huge improvements in efficiency in everything from product development, to merchandising and buying processes, as well as working more strategically and collaboratively across the supply chain.

So while China is currently still the best-placed garment making centre - it is clearly not the only place to source from.

And with around 130 countries worldwide having some apparel manufacturing capability, sourcing will always have the next opportunity. The question is whether it's the right opportunity for you.