Dive Brief:

• Nearshoring and automation, taken in tandem, will be a driving force for apparel companies that want to remain competitive in adding value to their supply chain, according to a report from McKinsey&Company.
• With consumer demand becoming increasingly difficult to predict — in part due to emerging fashion trends predicated on social influencers and consumers rather than the historical mode through marketing departments — legacy retailers and mass-market apparel brands are on more equal footing with pure-play online startups that can manufacture those styles and deliver to customers quickly. 
• Speed to market and in-season reactivity, leveraged by proximity of sourcing and manufacturing, supersedes the historical marginal cost advantage previously favored.

Dive Insight:

The fashion cycle, once embracing a six-month turnaround, today faces a time to market that is capped by approximately six weeks, according to McKinsey's report.

To accomplish this feat, companies now face the challenge of compressing those lead times. Transitioning from offshoring to countries such as China to near- and onshoring offers the opportunity to eliminate significant blocks of that time.

The efficiencies once associated with Asian countries is on the decline as well, with comparative offshore labor costs moving closer to the cost of labor found in the U.S.

Cost of freight and duties also compresses the prior advantage offshoring offered. With the additional savings available through closer proximity, companies are able to pursue speed and market reactivity in a way not available otherwise. 

That said, tradeoffs are inevitable, and moving production from one country to another means availability of certain raw materials and other sourcing requirements will either have to be substituted, or the supply chain would have to be co-located to protect the primary goal of shorter lead times. 

Another emerging trend that may factor into nearshoring is automation. The report asserts the apparel industry is lagging behind other sectors, such as the automotive industry, but automating processes like the sewing process could significantly reduce labor cost moving forward. 

Automating the sewing process, however, may be a slow transition due to technical difficulties with different fabrics, and the already-low costs of labor. Still, other steps higher in the supply chain are ready for transformation. Gluing/bonding tech, 3D knitting and automated finishing processes present opportunities for manufacturers to accelerate production while reducing those same production costs, the report found.