Opinion: How technology shapes apparel sector supply chains: Shifting to nearshoring and reshoring
Nipuni Perera
Advances in technology have made nearshoring – the practice of shifting production operations to a
nearby country closer to the end market – and reshoring – bringing back offshore production back to the home
country – more viable for apparel manufacturers, compared to offshoring
production to far-away, developing countries. For instance, ‘SewBots’ – robots that are capable of sewing
– in a planned factory in Little Rock, Arkansas, are expected to produce t-shirts
at USD 0.33 each, which is lower than the current cost of production in
low-cost countries.
While such technologies are likely to have
significant implications for supply chains, whether their application leads to
relocation of production depends on the product and factors like the importance
of speed to market for product competitiveness and production and trade costs
in offshore markets. This blog examines the implications of tech-led supply
chain changes on Sri Lanka’s apparel industry and argues that it is important
to prepare early for forthcoming changes through a holistic approach, engaging
a spectrum of stakeholders to improve the competitiveness of the industry.
Prioritising investment in innovation and skills and improving the efficiency
of business processes is critical for Sri Lanka’s apparel industry to remain
competitive in the changing tech-landscape.
Near or Far?
Traditional
apparel supply chains were characterised by offshoring, or
the relocation of production processes abroad, particularly to developing
countries, to capitalise on low labour costs. However, rising wages in these countries,
combined with technological advancements such as Artificial Intelligence (AI),
robotics, and machine learning, are paving the way for automation of manufacturing
processes, reducing the cost of apparel production.
Moreover, the global
demand for apparel, which was previously led by advertising and marketing
campaigns of leading retailers/brands, is now shifting to a more
customer-driven model. Today, demand is determined by exposure to fashion
trends and customer insights through social media. Consumers demand products seen
on social media, and the industry has to quickly respond, through shorter
production cycles. Consequently, the six-month long
fashion cycle is now reduced to six weeks or less. Automation of the
apparel production process has helped to shorten turnaround cycles. For
instance, technology has cut the finishing time of a pair of Levi’s jeans from
20 minutes to just 90 seconds. Another example is Amazon’s newly patented “on-demand”
apparel manufacturing system, which can
quickly produce ready-made garments to fulfill online orders, covering all
stages of production, including designing, manufacturing, and packaging. Thus, nearshoring
and reshoring are becoming more viable with advances in technology.
Key Drivers of Technology-led Nearshoring and
Reshoring
The use of advanced technology to nearshore or
reshore production does not make sense for every apparel product. Demand for
some apparel, such as custom-made, and trendy items are volatile, making it
necessary to quickly respond to emerging trends through automation. However,
response time is less sensitive for basic garments, for which demand is more
stable. Thus, it would make more sense to automate the production of apparel
items with highly volatile demand, so that manufacturers can respond more
quickly to changes in demand.
Other factors such as ease of doing business, lower
costs in terms of tariffs and duties, labour costs and transportation costs,
and the availability of skilled labour in offshore markets are some of the key
drivers of nearshoring. Thus, it is important to estimate a detailed
cost baseline for producing in different countries,
and identify by how much such costs can be reduced through automation. A better understanding of such costs will help
to determine the extent of reshoring or relocating to nearshore markets.
Implications for Sri Lanka: Near Enough?
Changes in the
global industry in terms of technology-led nearshoring and reshoring can impact
Sri Lanka’s apparel manufacturing sector, since the country’s major buyers are
located mostly in the West, where technology is changing apparel production
processes. Currently, the USA and EU alone account for around 87% of garment
exports of Sri Lanka (Figure 1).
| Code | Product label | Share of garment exports |
| ‘6212 | Brassieres, girdles, corsets, braces, suspenders, garters and similar articles and parts thereof, … | 13.4 |
| ‘6108 | Women’s or girls’ slips, petticoats, briefs, panties, nightdresses, pyjamas, négligés, bathrobes, … | 10.2 |
| ‘6104 | Women’s or girls’ suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, … | 9.0 |
| ‘6204 | Women’s or girls’ suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, … | 8.7 |
| ‘6203 | Men’s or boys’ suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches … | 7.6 |
| ‘6109 | T-shirts, singlets and other vests, knitted or crocheted | 7.4 |
| ‘6116 | Gloves, mittens and mitts, knitted or crocheted (excluding for babies) | 6.9 |
| ‘6110 | Jerseys, pullovers, cardigans, waistcoats and similar articles, knitted or crocheted (excluding … | 5.6 |
| ‘6107 | Men’s or boys’ underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar … | 4.6 |
| ‘6205 | Men’s or boys’ shirts (excluding knitted or crocheted, nightshirts, singlets and other vests) | 3.9 |
Source: Compiled based on ITC trade map, https://www.trademap.org/
Recognising the
importance of these imminent changes, local apparel manufacturers have begun to
prepare themselves. For instance, MAS Holdings has
set up operations in the USA, closer to
buyers, while experimenting with innovative products and production processes.
However,
equipping the industry for potential changes in global apparel supply chains
requires a holistic approach. Efforts from both state and non-state actors are
important to improve the industry’s competitiveness. In addition to industry
efforts in investing in Research and Development (R&D) and innovation,
efforts by state actors aimed at improving the efficiency of business
procedures and reducing trade costs (such as cost of duties and transportation
costs), should be prioritised, as such costs will ultimately determine if it
makes more sense to relocate production to closer to markets or not. Moreover,
as seen by national policies on industry 4.0 adopted by countries such as
Malaysia, systematic
government efforts to create the right ecosystem that can support and prepare
local manufacturers in facing forthcoming technological changes by developing
digital infrastructure, innovation capacity and skills, remain vital even for
Sri Lanka. Thus, concentrated efforts aimed at pushing the envelope further in boosting
overall industry competitiveness remains more important today for the apparel
industry in preparing for forthcoming tech-led global supply chain changes.