In July 2020, Hong Kong-based leading supply chain compliance solutions provider QIMA carried out a survey titled, Evolution of Sourcing in 2020, as per which amongst the western buyers, Bangladesh remained one of the top sourcing destinations after China, thanks to its competitive pricing.
The report analysed the evolution of global sourcing in response to the pandemic, US-China trade tensions and other disruptions to global supply chains even as it maintained although China took the crown for global sourcing, its dominance was noticeably less dramatic compared to previous years, especially in industries such as textile and apparel, where supplier portfolio diversification had been a priority. Nevertheless, 75 per cent of the respondents globally named China among their top three sourcing geographies, with 55 per cent reporting that Chinese suppliers accounted for over half of the buying volumes in the first half of the year even as Vietnam continued its upward trend, luring in Western buyers as an alternative to China.
However, one thing that the QIMA report also hinted at then also was the trend of US and the EU brands exploring sourcing options closer to home even as it added for the US-based companies, sourcing destinations closer to their home country continued to grow steadily, with the popularity of Latin and South America almost doubling compared to the year before even if the EU brands were also increasingly turning to Turkey as a nearshoring destination as the latter was named among the top three sourcing regions by 30 per cent of EU respondents.
A year down the line, the trend of nearsourcing seemed to have grown somewhat stronger as the global buyers continued with their pandemic-induced strategy shift to import apparel from nearest countries even as the pandemic has shed a light on the vulnerability of global supply chains and the so-called lack of preparedness by the offshore outsourcing industry while a recent International Labour Organization (ILO) brief also hinted at nearshoring as the re-emergence of garment production closer to major markets in Europe and North America and, quoting evidence, the brief also said that European Union buyers and the European Commission were looking to facilitate greater nearsourcing through reductions in garment-related trade duties in countries like Bulgaria, Egypt, Morocco and Turkey, all of which already supply European brands.
Meanwhile, another McKinsey survey of 60 senior supply-chain executives in 2020 found 93 per cent of them were planning to increase the level of resilience across their supply chains with a greater focus on nearshoring, dual-sourcing or regionalising supply chains as an integral part of that strategy even as according to media reports, United Colors of Benetton , not so long ago, started to enhance its production focus on Tunisia, Turkey, Croatia and Egypt with the aim of halving production in Asia from the end of 2022, which is reportedly mainly to have more control over the production process and also transport costs even if IKEA, the Swedish furniture giant was also reportedly planning to move more production to Turkey to minimise problems with global supply chains and increased shipping costs.
To understand the implications of the developments, Apparel Resources (AR) spoke to some buying entities to know their perspective on the issue while also try to figure out what the garment makers think of this trend!
Speaking to AR, MD and CEO of buying entity Revive Fashion, Kazi Shafiqul Islam stated nearsourcing will not have any major impact on Bangladesh while sharing very recently his buying house got an order from a UK-based brand, which it shifted from Portugal to Bangladesh.
He further added that big brands and retailers have business projections for their major suppliers for at least 2-3 seasons even if they rely a lot on time-tested suppliers and would not shift orders straight away to other destinations.
“Plus moving orders to destinations that are not as price-competitive as Bangladesh also has business implications, which most retailers try to avoid as much as possible,” underlined Kazi Shafiqul. However, he did not rule out some small retailers resorting to the same as part of contingency plans to deal with some adverse situations but considering Bangladesh’s price-competitiveness and capacities, he does not think nearsourcing should worry Bangladesh as much.
Meanwhile, Roshan Withanage, Managing Director of CJ International (Sourcing and Quality Assurance company for the apparel and home textile industry) speaking to AR maintained nearsourcing is not something new and has been going on for some time now even as he attributed fast fashion for the same.
“Speed to market is a very important aspect in today’s age and, to give an example, a brand or a retailer operating in Europe may pick up inspirations from some fashion events like the Paris Fashion Show based on which they may make some developments and place orders of certain quantities in Portugal to make sure the product hits the market on time,” said Roshan Withanage while underlining nearsourcing is not a very sustainable practice as there are issues related to price as well.
The COVID-19 pandemic did increase the focus on nearsourcing for sure, he feels while adding the so-called artificial crisis created by the shipping lines have pushed up the freight charges exceptionally thereby leading brands and buyers to source from destinations closer to home.
However, as far as Bangladesh is concerned, the impact of nearsourcing will not be very significant, feels the MD of CJ International while adding even if certain amount of orders are moving to other countries, things are getting balanced out as spill over of orders from China to Bangladesh are more than making up for that.
In the long run, Bangladesh is cushioned against any shock that may come from near-sourcing, which however will not be the case for China, the leading apparel exporter globally as it has a significant share in the global market and nearsourcing will adversely affect its prospects, so feels the MD of CJ International.
There’s however apprehensions amongst the garment exporters on this issue!
“Nearshoring has emerged as a new challenge for us,” reportedly maintained BGMEA President Faruque Hassan while interacting with the media while adding buyers were now more keen to develop their business in Turkey, Bulgaria, Morocco and some other East European countries mainly to shorten the lead time and save freight cost even as recent reports suggest container charges have gone up by 200 to 300 per cent of late, which as per industry insiders have pushed the global buyers towards nearshoring even as BGMEA Vice-President Shahidullah Azim, on his part reportedly underlined garment makers should not be complacent over increased flow of work orders from brands and retailers lately even as he cautioned apparel exporters that orders were now shifting to other countries like Turkey and Morocco mainly even as he held Bangladesh’s lengthy lead-time as a major reason for the same.
Going by the latest export fears, there’s apparently not much of an impact of this trend on Bangladesh, at least for now.
As per reports, Bangladesh’s export earnings surged 31 per cent year-on-year to US $ 4 billion in November from a year ago, thanks to the rebound in the apparel shipment in the European and the US markets, its two major apparel export bastions.
Earnings from the exports have been increasing over the last few months mainly because of the sharp rise of apparel items, which contribute more than 84 per cent to overall annual exports receipts even as local garments makers have reportedly received 20 per cent higher work orders from international retailers and brands over the last one year as buyers are coming here moving away from other countries like India, China, Vietnam, Myanmar and Ethiopia because of competitive prices.
So, going by the facts and opinions, Bangladesh does not seem to be impacted much by the nearsourcing trend currently but how things might pan out in the coming days, remains to be seen.