Report: Safeguarding Supply Chains With Diversified Sourcing Maps and Shipping Strategies

Sarah Jones
·4 min read

Four years after the pandemic upended apparel supply chains and forced companies to pivot, the industry remains focused on disruption-proofing as it faces continued challenges.

Sourcing Journal’s “Sourcing State of the Industry Report,” which dives into the global situations shaping the soft goods market, indicates that fashion’s primary risk mitigation move is diversification. Transportation bottlenecks—including drought-related traffic restrictions in the Panama Canal and Houthi attacks in the Red Sea—are causing shippers to adopt contingency plans such as rerouting or using costlier air freight. Meanwhile, difficulties tied to sourcing from China have ushered in a “China plus one” strategy that shifts some manufacturing away from the production power.

More from Sourcing Journal

“Recent years have taught the U.S. that an over-reliance on individual manufacturers, ports or really any part of the supply chain comes with risks that need to be weighed against alternatives that might look less appealing on paper but [are more palatable] in reality,” said Simeon Siegel, managing director and senior analyst at BMO Capital Markets, in the report.

Among the most notable movements happening in the apparel industry is the evolution of the sourcing map. China had long been the U.S.’s top export partner across categories, but this streak ended in 2023 as Mexico moved up to the top spot. For years, U.S. companies have been diversifying away from China in response to the trade war that raised tariffs on imports from the nation. But the added potential for goods to be detained by Customs and Border Protection under the Uyghur Forced Labor Prevention Act has furthered the decline in China sourcing. Where the industry remains reliant on China is for raw materials, with Chinese mills supplying international finished garment manufacturers with fabrics.

Meanwhile, amid the industry’s ongoing quest for shorter supply chains, Mexico is looking to boost its position in apparel manufacturing. The country has a number of advantages as a nearshoring destination including quality production and economical pricing, according to Julia Hughes, president of the United States Fashion Industry Association (USFIA). Although nearshoring is mentioned frequently, there is still room to grow. “Everyone keeps talking about it,” Hughes said. “It’s just not as big as we want it to be.”

The U.S. government initiative Prosper Africa is also encouraging American buyers to look toward Africa. Thirty-two of Africa’s nations are eligible for preferential trade under the African Growth and Opportunity Act (AGOA), and the continent also boasts a large, young population that is still growing. “There’s so much untapped potential and so much more opportunity that exists across the continent,” said Gregory Poole, special advisor for U.S. Agency for International Development’s (USAID) Africa Trade and Investment, which supports Prosper Africa.

Along with ready-made garments, cotton production is a focus for Africa’s textile development. A plan in Kenya to import textiles duty free has been opposed by legislators from the country’s cotton-producing counties, who say it will negatively impact farmers, and local textile mills are also concerned.

Worker livelihoods are also top-of-mind in Bangladesh and India, where workers and unions are pushing back and protesting against minimum wage policy. In India’s Tamil Nadu state, the minimum wage has only grown the equivalent of $8 per month since 2014, despite nationwide mandates that wages rise every five years. Bangladesh has revised its minimum wage, however the new amount is lower than the figure that workers advocated for. And with the new wage in place, manufacturers are waiting to see if their brand customers support their added labor costs with higher priced orders.

Beyond impacting factories’ bottom lines, purchasing practices also have an effect on workers’ well-being. Traditionally, contracts have often skewed power toward brands, such as the force majeure clauses that enabled companies to cancel orders mid pandemic. To help balance the weight of responsibility, the Responsible Contracting Project has developed model contract clauses for the apparel industry that support the United Nations Guiding Principles and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.

As due diligence legislation ramps up, Sarah Dadush, founding director of RCP and a professor of law at Rutgers Law School, noted, “You cannot use your contracts to shift responsibility onto your suppliers for human rights and environmental due diligence, and you cannot use your contracts to shift the financial costs associated with carrying out due diligence onto your suppliers.”

Read the report to learn more about:

  • Which factors put companies at the greatest risk for supply chain disruption

  • How the industry’s “China plus one” strategy is playing out

  • How countries and continents are making themselves more competitive as sourcing destinations

  • The legislative efforts aimed at supporting American manufacturing

  • What is happening in freight rates and capacity

Download the report here.