Change is inevitable according to discussions at this years Prime Source Forum in Hong Kong

Change is inevitable according to discussions at this year's Prime Source Forum in Hong Kong

Even though China continues to play a pivotal role as an apparel supplier, interest in alternative sources continues to dominate industry discussions. And the picture they paint is of strategies that take account of shifts in domestic demand, investment in Southeast Asia, and outside opportunities like Africa.

There are two certainties when it comes to apparel sourcing today. The first is that China continues to dominate due to the maturity of its supply chain, the skill of its labour force, and growth in domestic consumption. The second is that change is inevitable.

At least that's the word from sourcing executives at the recent Prime Source Forum in Hong Kong.

"The reality is that the world will continue to change, and China will continue to change. Cost will continue to rise. The needle will continue to migrate," explains Bob McKee, global fashion industry strategy director at Infor.

The shift is epitomised by retailer M&S, which until two decades ago bought around 80% of its general merchandise from manufacturers in the UK.

Sourcing then moved rapidly to North Africa, Eastern Europe and India in the early part of the century and has continued to Indonesia, Vietnam, Bangladesh, Cambodia - with new frontiers like Burma/Myanmar and sub-Saharan Africa currently being assessed, according to Richard Thomas, head of Far East region, sourcing, at Marks & Spencer (Asia Pacific).

However, he warns, "too much migration can mean you miss out on efficiencies. It needs to be focused and managed, so if you put in all that effort and cost, you later go on and reap the benefits.

"Our focus now at M&S is making what we have more efficient and you only get this by working with a factory and a country for a long period of time, making sure at the same time that there's healthy competition in your supply chain."

China's leading role
When it comes to the role played by China, Thomas is adamant that the country "will be the most important location for M&S for a long time to come" thanks to its strong fabric base.

While China accounts for 25% of M&S production, and is "by far the biggest country we source from," this is down from a peak of 40% a few years ago.

But while the needlepoint has moved around the world, 40% of M&S fabric still comes from China (and 55% from the Far East overall) compared with 50% 20 years ago.  

"Watch what happens with textiles; that's the capital-intensive element of our industry," agrees McKee. "That will signal the next big paradigm, the next big shift. If we see the textile industry start moving to Africa then the deal is sealed, and that's where we're going next for almost all of our value chain activity."

While other executives agree there is unlikely to be a mass migration away from China, they suggest future growth for Chinese manufacturers will take place elsewhere.

Mutual growth in Africa
Even Zhang Xi'an, secretary general of the China Chamber of Commerce for Import and Export of Textile and Apparel, believes that while most companies will maintain their high value-added manufacturing operations in the country, the main areas for expansion, especially for mid-low end producers, will be in Africa and Southeast Asia.

"China can continue to make use of its advantages in production while other countries like Africa can make use of resources like labour in order to achieve mutual growth," he says.

And Jaswinder Bedi, president of the African Cotton & Textile Industries Federation (ACTIF), sees a future where China's traditional export markets of the US and EU will eventually be serviced by Chinese investment in Africa.

Tesco, H&M and PVH are already looking at potential of the African continent, whose land mass is bigger than the whole of Europe, the US, China, India and Japan combined, with a population that is set to double to 2bn by 2050.

"70% of the population is under the age of 30 and we need to nurture this," he says. "Going forward, Africa will become more and more strategic. We grow 6% of the world's cotton, all we need to do is add value."

Complex mix
Executives see sourcing in the future morphing into an increasingly complex mix shaped by customers' needs for diversification, to take advantage of trade agreements, and demand for a shorter, flexible and more responsive supply chain.

The traditional supply chain model of low-cost developing countries producing and supplying to mature markets such as the US, EU and Japan is also changing as the distinction between the two becomes less clear.

"Global brands are looking for global sourcing solutions that require multi-country of origin, and enable them to take advantage of different trade policies between supply countries and destination markets," explains Jason Tan, EVP at manufacturing giant Luen Thai Holdings.

"In the past few years there has been a clear shift in ASEAN, with major growth trends specifically in Vietnam and Cambodia driven by trade policy and lower operating costs.

"And I believe that growth will be fuelled by a shift in the upstream supply chain [spinning, weaving and dyeing] to the region, making this a real alternative to China for apparel sourcing."

In China, he explains, Luen Thai's focus is on improving productivity and opportunities in the domestic market and some of the growing emerging regions in Southeast Asia.

Indeed, this potential for multi-national manufacturers to transfer their infrastructure and expertise - especially in factory engineering and process automation - to lower labour cost countries is seen as an opportunity for "big gains for the future," according to Veit Geise, vice president, VF Asia.

He also believes manufacturers and buyers should work together on forging a much closer and more integrated supply chain, and warns against jumping from one new supplier to another "because you have so many things to deal with rather than just the price of the garment."

These include product safety, restricted substances, conflict minerals, responsible sourcing, sustainability, energy efficiency, structural safety, and corporate social responsibility.

And in all of this there is still room for smaller suppliers to shine - particularly if they "reinvent by creating small clusters of factories closer to the markets themselves," offering instant replenishment of popular items or to "chase" fashions their customers may have missed, explains Stephen Forte of Bixby Creek Investments.