Cost has played a major role in textile and garment manufacturing shift over the years
Textile and garment manufacturing has always been associated with low-cost manufacturing. Over the years, high-cost destinations such as USA, European countries (incl. Italy, Germany, Belgium, France, and UK), Turkey, Japan, and South Korea have dropped their combined share in the global textile & garment trade from 45% (1995) to 20% (2018). While low-cost destinations such as China, India, Bangladesh & Vietnam have increased their share from 26% to 49% during the same period. These countries have further added key competitive advantages over other countries to maintain their share.
Over the last two decades, global textile and garment trade has doubled in its value to reach USD 790 Bn. in 2018 (E) (growing at a CAGR of 4%). Anticipating a similar growth (CAGR 3.5%) over the next decade, the textile and garment global trade is estimated to reach USD 1,200 Bn. by 2030. That is a trade addition of US$ 410 Bn. in the next 12 years. While global trade will continue to grow, the shift in manufacturing will be driven by other parameters besides cost in textile and garment factory. Factors like competitiveness and closeness to markets will also influence the shift in the manufacturing bases in the future.
Countries will need competitive advantage to sustain their shareWhile all countries would like to increase the share of manufacturing, the top textile and garment manufacturing hubs i.e. China, India, Bangladesh, & Vietnam have developed themselves over the years to become competitive in their respective segments. These countries will be looking to further consolidate on their competitive advantage and other countries will need to build some of these advantages in their manufacturing ecosystem to become competitive and attract investments.
These countries have established strong manufacturing ecosystem, large scale, and complete value chain presence to fulfil the demand of international buyers and provide them with one-stop solutions for their textile and garment needs. They have also developed segmental expertise which has become their USPs in the global industry. China has established dominance in synthetics, India in value-added garments (especially womenswear), Bangladesh has become the go-to garment manufacturing destination (especially in cotton knits) while Vietnam is known for its expertise in value-added synthetic garments.
Bangladesh has leveraged its market access arrangement (FTA with EU) to boost its garment industry while countries like India & China have supported their garment industry through unprecedented government support in terms of incentives and subsidies. However, these manufacturing nations have to prepare themselves to face stiff competition in the coming years. They will need to further add to their existing competitiveness in order to sustain and grow their share. Textile companies will also have to focus on developing manufacturing and service excellence, to gain competitive advantage.
Countries will need competitive advantage to sustain their share
Near-shoring: European brands adopted this trend of near-shoring for its fast fashion sourcing requirement from countries such as Turkey, Tunisia, etc. while sourcing its bulk orders from established suppliers such as Bangladesh, China & India. With growing fast fashion and need for reduced supply chain lead times, this trend will further grow. Similarly, brands in the United States will look to take advantage of trade agreements with neighboring regions such as Mexico, Central American countries to cater to its demand for fast fashion.
Re-shoring: This trend is particularly visible in the US as spinning has come back in a major way in the US. Between 2013 and 2017, the US saw an investment of more than US$ 2.3 Bn. in textiles within which spinning had a 52% share. Other areas of investment included fibres and technical textiles. One of the big attributes of this change has been increasing automation in manufacturing of these products. High automation in spinning, fibre, and technical textiles have led to a significant reduction in manpower requirement. Given the low cost of power, an abundance of natural resources and government increasing interest in bringing manufacturing back to the US, these segments are expected to flourish in the near future. With more automation, other segments can also get attracted to the US in future and further downstream segments will need to be developed in nearby regions as well to cater to the growing requirement.
While earlier manufacturing shift occurred on the basis of low cost, the next shift will also be driven by the competitive advantage of countries and their closeness to major markets. The 3Cs thus will dictate which products to make in which places.