For some decades, fashion retailers and brands have moved their production overseas to countries that have lower costs and high production capacities in a drive to compete in the fast fashion era.
Increasing manufacturing costs in some countries, for example, China, and the need for quicker and quicker lead-times makes the nearshoring strategy a high-value solution for apparel.
This has become of greater relevance as the impact of Covid-19 on supply chains has been seen across the world. Indeed, we are in a time of great change, moving from an offer-based solution to a more demand-driven one. This may help to protect the operating income of retailers and brands as well as increase the opportunities in other areas, such as the environment and social issues.
What are the advantages of nearshoring for fashion retailers and brands?
Responsiveness to fashion trends
Fashion is a highly demanding business where trends in colors, styles, and fits are key points. The nearshoring strategy allows retailers to supply products in weeks rather than months. This demand-driven model reduces the risk in anticipating fashion trends well in advance, as production can be made closer to the season.
Retailers and fashion brands need as much flexibility as possible to run their operations in the value chain and maximize full value sales. Nearshoring operations allow them to arrange their production with a better understanding of consumer wants and needs.
Shorter delivery time & lower transport costs
Nearshoring offers quicker delivery lead times and reduced cost of transportation compared to offshoring.
The offshoring solution requires large production commitments from brands and retailers. For trend-lead lines, it is difficult to accurately predict styles & volumes accurately well ahead of initial customer reaction. This can lead to stock shortages on fast-selling lines, as well as markdowns or clearances on slow-selling lines.
With nearshoring, shorter production runs enable more styles to be supplied faster. It reduces the need for high inventory levels, minimizing retailers’ and brands’ risk considerably. It also allows a wider product portfolio and availability at the point of sale to test consumer demand. This is a highly flexible solution, in which ramp-up and ramp-down is easily handled and achieved.
By reducing the time lag between production cost and sales realization, there is an advantage to cash flow management and a reduction of money tied up in inventory. Less working capital is needed to run the overall operation under a nearshoring strategy.
By having the production closer to the consumption point, the carbon footprint is very much reduced. Nearshoring may bring important benefits from a sustainability point of view.
Under this nearshoring scenario, labels and accessories availability in-country is a key point for retailers. If these are not available in the countries where they move their production, it would be difficult for them to run their operations and maximize the benefits. Shorter production lead-times only work if all the components are available quickly. The reduction in carbon footprint of nearshoring is impacted if the accessories needed must be sourced from across the world first.
How Checkpoint can help
Checkpoint Systems has a global footprint for label manufacturing and operates production facilities in more than 20 countries. Checkpoint is supporting the nearshoring needs of retailers, and is investing in label production in geographic areas that are becoming increasingly important for nearshoring:
- Checkpoint Systems has been established in Turkey for more than 13 years.
- In early 2020, Checkpoint acquired ETI – TEXTIL, with production plants in Spain and Morocco.
- A new label factory is being built in Mexico, which is expected to be fully operational in Q3 2021.
- Integrated IT and development systems, such as CheckProof, that allow us to seamlessly migrate production to new locations whilst maintaining product consistency.
With these new acquisitions, systems, and expansion plans, Checkpoint is fully committed to an active presence and production in countries where most of the nearshoring opportunities are being seen by retailers.
Contact our sales team to explore the benefits of letting us run your label supply programs for you.