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Published byLeslie Strickland Modified over 9 years ago
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What do the brands say about changes in sourcing post-MFA? Based on MSN interviews with 10 major North American companies MFA+3: Labour rights in a changing garment industry San Pedro Sula, Honduras September 30th, 2008
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What changes in countries? Shift from higher cost to lower cost countries globally and within regions Most companies left some higher cost countries entirely Most companies began placing orders in new lower cost countries Overall number of countries didn’t change Less dramatic shifts than anticipated
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Increase/decrease in orders Overall shift from Americas to Asia Less increase to China than anticipated Increases to low-cost countries near China
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Winners & Losers Countries losing orders: Mexico, Canada, Guatemala, El Salvador, Sri Lanka, Philippines Countries gaining orders: China, Vietnam, Cambodia, Bangladesh, India, Egypt, Nicaragua, Haiti
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Surprises? China & Nicaragua didn’t grow as quickly as expected Rapid increase in orders to Vietnam Growth of domestic market in China Some companies returning to Africa
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Changes in suppliers Consolidation: using fewer, larger suppliers Deeper, longer-term relationships Not necessarily using fewer factories Suppliers are multi-nationals themselves, producing in many factories in many countries
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Key factors in sourcing decisions: #1 Issue: Price of production State of US economy & exchange rates affect price Other factors: speed, quality, proximity to market, full- package capacity, lean, flexibility re styles and fabric, reliability
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Issues re sourcing decisions Oil costs/carbon footprint making proximity to market more important Proximity loses advantage without local/regional access to fabric, etc. Ability to meet order deadlines and transparency when unable to do so
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Trade Agreements DR-CAFTA important, but not sufficient Regional agreements (Mercosur) also important, not just for US market New agreements can undercut established ones (CAFTA/NAFTA) Bilateral agreements between US and countries in other regions increasing competition
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Labour and Environment Oil/energy cost linked to carbon footprint issue more important than labour rights However, labour rights most important when considering entering new country General agreement: government must improve labour regulation/enforcement
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Looking Ahead… Mexico & Dominican Republic could face further declines Central America uncertain (disagreement on countries) China less growth than other Asian countries (Vietnam) Africa could rebound
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Key factors for suppliers Invest in fabric supplier relationships Offer multiple services Flexibility: multiple styles, variety of fabric Transport costs & order delivery issues Sustainable: socially and environmentally responsible, and transparent Price/profits still the major factor
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What should governments do? Attract investment in textile production Invest in upgrading and training (workers and management) Improve transport infrastructure, lessen bureaucratic delays More attention to environmental issues all along production chain Better labour and environmental regulations/enforcement
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What does MSN think about what the brands are saying? Not sufficient information on sourcing plans Upgrading could bring higher value processes But, buyer demands could increase: flexibilization, pressure to meet production targets, work overtime, cut labour costs Brands want lower prices and more services -- workers get squeezed Consolidation benefits large manufacturers, but not necessarily workers
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Environment tops labour rights Rising oil costs & consumer concern make environment more important than workers But, carbon footprint concerns also give Americas advantage over Asia Could also favour national/regional production for domestic/regional markets Can we link environmental, health & safety and community health issues?
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Shift of emphasis on labour rights Labour rights still important, but part of a package of demands Cost and failure of auditing shifts emphasis to government regulation Could we enlist brand support for better laws and better enforcement?
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