Nearshoring Takes Center Stage at Apparel Conference

The ever-growing trend of nearshoring took center stage during the Americas Apparel Producers’ Network’s (AAPN) recent pro:Americas Annual Conference in Miami, particularly during the “Producers Panel” session featuring moderator Paul Magel, president, Application Solutions division, CGS.

However, bringing production back to the Western Hemisphere is impossible without sustainable practices, innovation and the latest technologies, according to the panelists: Roberto Bequillard, president of Nicaragua-based Confexsa; Juan Zighelboim, president of Textiles at El Salvador-based TexOps; and Jesus “Chuy” Canahuati, CEO of Honduras-based Elcatex.

Magel’s asked the esteemed Central American panel to review their journeys through the COVID-19 pandemic, lessons learned and challenges, as well as opportunities as the world returns to some sense of normalcy. And they all agreed that issues exposed since the pandemic began – supply chain shortages, delays and a heavy reliance on Asian goods being the most glaring – helped accentuate the notion of nearshoring as a real “thing,” while also revealing the gaps that need to be filled to build a robust hemispheric supply chain. And labor deficits, raw material shortages, turbulence in energy markets, immigration issues, geopolitical matters, etc., have created more potholes on the path forward.

“One thing we’ve learned is that nearshoring is an incredible opportunity for Central America, as well as the United States,” Canahuati said. “The other thing we learned is that we're not close to being ready to take full advantage of that.”

He added that it will be up to the textile and apparel industry in this hemisphere to figure out how to bring more production westward. “One thing we know is that our governments will never have a plan for our industry,” he said. “Actually, all of the government plans disrupt our industry. We are the ones who need to lead, to have a plan for how we’re going to take advantage of the opportunities to bring production from Asia to this hemisphere.”

As such, he announced that the HUGE (Honduras, USA, Guatemala, El Salvador) Business and Investment Council has been launched to promote inbound investment projects that capitalize on the competitive advantages of the Northern Triangle region.

“The investments that we're talking about are not aimed to close down capacity in the United States; they’re intended to complement the capacity in the United States, so we can be competitive and at the same time find a nearshore/onshore solution.”

Bequillard called today’s environment a “different world” from two years ago, noting that everything that has transpired is bringing Central America back to the forefront in a “very powerful way.” And “chasing the needle” to lower-cost countries is becoming passé for many brands and retailers that are over-reliant on Asian-made goods, he added.

“Central America today represents only about 10 percent of total market share of textile products to the U.S., according to OTEXA,” he said. “You have China at 27 percent and Vietnam at 17 percent. So, just those two countries alone are 44 percent of the U.S. market. If you take 1 percent of those 44 percent, which is really a very small number, it will mean a flood of activity for CAFTA countries, and that is happening. It is happening because proximity is a value, and the cost structure for our countries is holding. There is unpredictability and a realization on the part of American buyers that the first cost of the product is not necessarily going to lead to more profits. We must take into account the entire cost and other considerations and variables.”

Eyeing the tools needed to spur the movement, Zighelboim pointed out that the pandemic accelerated the need for digital technology, which he said is going to shape the industry’s future.

“We're in a perfect place to take full advantage of that, and, and we see a tremendous avenue of opportunity,” he said. “For example, eCommerce is driving sales in a completely different way. People are learning not only how to order but also design their own clothes online, and personalization is pushing digital expansion that is growing at a fast pace.”

Canahuati noted that if innovation and high-tech mechanisms aren’t used for the purpose of being more efficient through digital technology, companies won’t be able to scale competitively or sustainably.

“To be more sustainable, you need to use technology and processes that use less water and energy, for instance, that improve your material utilization, workflow and transparency,” he said. “And you have to do this without forgetting about the most important element: How am I going to train people to venture with us, the industry, to take on this opportunity?”

He added that the plan must include everything: “because if you miss one of the links in the supply chain, you're not going to make it. You have to think about everything that needs to happen for you to take advantage of the opportunities.”

Spurred by Magel’s question on challenges, such as sustainability, labor compliance, visibility down to the factory level and building capacity to meet customer needs, Bequillard indicated that companies must be efficient on the shopfloor to meet rising demand in the region.

“Optimizing the performance in factories will be key because it will give you more capacity and lower your cost,” he said. “Think about the concept of the smart factory. Think about cutting systems that will allow you to save materials. Look at shopfloor control systems that will allow you to improve efficiency. Look at business systems. Look at shipping systems. And the issue of training is very important, but it's not that easy. We need to set up centers to train sewing operators, mill managers, etc.”

Canahuati agreed that manufacturing needs to embrace digitization. “We can’t rely solely on the operator to advise us of what’s going well and what’s going wrong. We need to have accurate information about what’s moving and running at our fingertips. We need to be connected. We're in a digital world, so EDI [electronic data interchange] needs to be in the mix of how we do business. We have to put everything on the table, so we can do a better job.”

In addition to consumers, retailers/brands must also be convinced that more textile and apparel production in the U.S. and the Western Hemisphere is the right move, making transparency and collaboration crucial, he added.

“The exciting part is we’re seeing much bigger engagement between U.S. companies and Central American companies working together to expand the supply chain and looking at numbers together to learn how we're going do it. And now we see retailers and brands coming to us, giving us their forecasts. They're willing to go into longer-term arrangements, which is something we have never seen before. And that is a good opportunity because that long-term plan needs to be provided to the supply chain, to the logistics providers, to the producers, to everybody, so we can really have an impact in this venture, bringing more production to this hemisphere.”

He continued: “One of the questions we've asked brands and retailers is ‘Are you willing to commit?’ And the magic answer has been ‘yes.’ And I'm going to take their word for it.”

Looking for more intelligence around apparel and consumer goods production? Download your copy of CGS’s 2022: Fortune Favors the Bold report for insights into supply chain and technology investment trends.