Second Chance for Western Hemisphere Sourcing-Texglobe

For those who spent time at the recent Sourcing at MAGIC show in Las Vegas, there was a buzz, even an undercurrent of excitement about the increase of sourcing in the Western Hemisphere.

Gary Ross, vice president of the Global Non-Beauty Supply for Avon, summed it up perfectly when he said he felt he had come full circle as a sourcing executive, and that once again the door is open for expanded sourcing in the Western Hemisphere. “It’s very rare you get a second chance,” he stated in a seminar addressing “Sourcing Opportunities in the Americas & The National Export Initiative,” and vendors “should not squander this opportunity.”

Ross, whose firm is already conducting 40 percent of its business in Latin America, bolstered the notion of how the perfect storm (high cotton prices, escalating transportation and energy costs, rising wages in China and volatile global supply chains) is creating the perfect opportunity for the apparel industry to shift more production to this hemisphere in an effort to balance supply chains, shorten lead times and potentially drive savings to the bottom line.

Randy Price, vice president of manufacturing for mega VF Corp., echoed that (like Avon), while his company will continue to make product in Asia, 30 percent of its goods are made in its own factories in this hemisphere, and the goal is to drive the level closer to 40 percent, again to achieve control, speed, flexibility and service.

Price was clear that free trade agreements have kept VF in the Western Hemisphere — indeed the company purchases a whopping 50 percent of the denim produced in the United States. One of the specific issues keeping him up at night is whether the Nicaragua TPL, imperative to VF’s Western Hemisphere strategy, will be extended upon its expiration in 2014.

A company as large as VF needs 12 to 18 months to plan production and raw material input strategies. In short, Price said, “We cannot wait until the next Congress.”

Hopefully, VF’s message will fall on the right ears. After all, if a $7.7 billion firm that generates thousands of jobs doesn’t wield any influence, I don’t know who does.

In a positive, and perhaps even historic move, Francisco Sánchez, Under Secretary for the International Trade Administration, U.S. Department of Commerce, spent two days at Sourcing at MAGIC, as a tie-in to the event’s theme of “Sourcing in the Americas,” which included an Americas Pavilion hosted by MAGIC, the U.S. Department of Commerce and the United States Representatives Office and endorsed by major industry associations.

Addressing a press roundtable including Apparel, Sanchez said among his objectives in attending the show were to “be here and hear from the industry what the challenges are and how we can help” and to help discover “what other opportunities there are to be successful” in this hemisphere.

I thought just the fact that Sanchez showed up was significant. But it wasn’t all talk. In one concrete outcome, Sanchez met with officials from the Port of L.A. and the California Fashion Association and announced that a pilot export project was being launched.

Sanchez also took the opportunity to promote the Administration’s National Export Initiative, which aims to double U.S. exports by 2014. According to Commerce Department statistics, more than 64 percent of U.S. textiles and apparel exports (including both inputs and finished apparel) are to the Western Hemisphere, representing $13 billion in goods in 2010, an increase of nearly 20 percent from 2009.

And the proof is definitely in the numbers in terms of increased production in the region. In the past year, Mexico, Guatemala, Honduras and the Dominican Republic have gained market share in terms of their export of finished apparel to the United States.

A lot of retailers won’t give the Western Hemisphere a second look. They’ll stay in China or pull up stakes to move into Vietnam, Bangladesh or elsewhere. But there are those who are thinking about a “China plus one strategy,” says Julia Hughes, president of USA-ITA, an association that represents importers and retailers of textile and apparel products. “We’re hoping to reintroduce a discussion about the Americas,” she notes.

Obviously those in the region themselves are quite bullish. Javier Chamorro Rubiales, executive director of ProNicaragua, says in the first half of this year, the value of goods produced in Nicaragua was up 27 percent and the volume was up 22 percent.

“We are seeing the shift; we are talking to brands and retailers and they are interested,” says Rubiales. He also noted that capacity “does not happen overnight,” and that he urges that all parties in the region work together to plan and build capacity. As one small, but important step, Nicaragua has begun a pilot program to produce cotton, with a goal of reaching 60,000 acres in the next five years.

If there was ever a time for the Western Hemisphere to grab more of the apparel pie, it appears to be now.

Apparel