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Why reshoring the textile supply chain is easier said than done

U.S. textile production, and the apparel manufacturing that depends on it, cannot return to its former glory without multi-million dollar infusions into the industry.
Kendall Davis/Supply Chain Dive

On a Friday afternoon in 1996, Eric Henry received a fax from Nike canceling 80% of the brand's orders with his apparel manufacturing company, TS Designs, and changing the course of his business for good. It took roughly two years for TS Designs to unravel and fade.

In 1996, approximately 51% of the Nike apparel intended for the U.S. market was produced in the U.S. By 2019 "virtually all" of the apparel sold anywhere by the company was produced outside the U.S. Four years after the North American Free Trade Agreement (NAFTA) went into effect, Henry’s business, located in Burlington, North Carolina, 100 miles from Charlotte, North Carolina, where Nike had its primary apparel buying office, was coming apart at the seams.

TS laid off 80 of more than 100 employees between 1996 and 1998, the year Henry refused the last purchase order he would receive from Nike after competition from abroad drove down prices to the point where one misstep — a late delivery, for example — would cause Henry to lose money on the entire order after penalty charges. The risk was too great for too little reward.

"The brands could not get out of this country quick enough," Henry told Supply Chain Dive. The brands aren’t entirely to blame — consumers were drawn to the lowest prices and didn’t seem to notice or mind the sourcing shift at the time, he said.

As calls for nearshoring supply chains increase in the wake of COVID-19, apparel industry stakeholders are balking at the prospect. Not out of a lack of desire, but without multi-million dollar infusions into the industry, U.S. textile production, and the apparel manufacturing that depends on it, cannot return to its former scale.

US textile production did not rebound after NAFTA, international policy changes and the recession took the air out of the industry

U.S. production of textiles and textile products from Q1 1972 to Q1 2020

"We want to source 'Made in the USA.' We do source 'Made in the USA,'" United States Fashion Industry Association President Julia Hughes told Supply Chain Dive. But Hughes has a strong message for anyone who calls for wholesale shifts back to the U.S. "I say shame on them, because that's not something that's going to happen overnight."

The lack of an alternative

After Henry’s business flirted with bankruptcy in the wake of NAFTA and the great textile exodus from the American South, Henry and his partners focused on keeping textile supply chains local. TS Designs now produces T-shirts from cotton grown, milled and sewn in the U.S. His next project is 2,021 T-shirts made from 100% hemp with an all-American value chain behind them.

"We’ve got to start showing some success by product or we’re going to lose the interest — the industry is going to go into the next shiny object," Henry said. One designer sold on hemp for the long haul is Mary Alice Duff.

Eric Henry and Ronnie Burleson, a supplier and North Carolina cotton farmer.
Courtesy of Eric Henry

"I would give my right arm to source domestic hemp, but it's not like I'm choosing Chinese hemp. I don't have an alternative," Duff said, lamenting 2019’s tariff hike. "My hemp prices went up 25%."

The Philadelphia-based designer fell in love with hemp-based fabric for its durability and vibrant color uptake, and she began researching how to source it domestically in the U.S. for her fashion line Alice Alexander. Duff buys a few hundred yards of premium fabrics at a time, which isn't enough to hold sway with mills. The point of origin for her materials is just one factor on a list of priorities.

"I have lines in the sand," she said. "Our products will be made in a diversity of sizes, full stop. Our products will be made with responsible production, which we own, which is the people who do the cutting and sewing. And our products will be made with sustainably-sourced material."

Domestic sourcing of raw materials is by default a nice-to-have. Duff sources fabric from Japan, China, Europe, Pennsylvania and California. If she were to add domestic sourcing to her list of must-haves, just based on availability and leaving out price, Duff estimates she wouldn’t be able to offer 90% of the products she currently offers.

I would give my right arm to source domestic hemp, but it's not like I'm choosing Chinese hemp. I don't have an alternative.

Mary Alice Duff, Founder of Alice Alexander

Hemp is a small market — almost invisible compared to global cotton production. But China excels at making high-quality hemp blends. Even for Duff, who runs an independent brand with a semi-made-to-order model, cut and sewn in the U.S. — U.S. hemp fabric is not scaled, nor skilled enough.

Levi’s debuted a hemp-infused collection in 2019. And Levi’s head of global product innovation has said he’s committed to using the fiber more. Patagonia has a hemp collection too and H&M has started experimenting with hemp blends. But the market for hemp hasn’t brought the investment needed to build processing capacity to make American hemp fabric a reality at scale. Most of the U.S. acreage goes toward CBD oil production, which requires simpler processing and less expertise.

"It's got to go through decortication and then some type of de-gumming process. None of that technology existed to scale in the U.S., and it would take major investment to do that," Henry said. Some hemp fiber processing capacity does exist in the U.S. Bastcore is a Nebraska-based processor. Texas has one on the way. And in March a group of cannabis industry leaders raised $150 million with the purpose of building up hemp processing capacity in the U.S.

Philadelphia-based Designer Mary Alice Duff said she sources a hemp-cotton blend from China since domestic production has yet to mature enough to meet her needs.
Courtesy of Alice Alexander

Just as technology is essential to bringing hemp textile production to scale in the U.S., it has also been hailed as a force that could bring apparel manufacturing back.

Fatima Anwar, CEO of Ethical and Sustainable Apparel Sourcing, told Supply Chain Dive, the convenience of co-locating the various steps to produce a finished garment should not be discounted. And the cut-and-sew portion of the process often drives the location for the whole process from raw materials sourcing to sewing on finishing touches. The U.S. is unlikely to see a resurgence of raw materials production without more scaling of cut-and-sew capability.

Textile imports from China double those of the next largest US import country

US cotton textile and apparel imports by origin in raw-fiber equivalent pounds

Automation could fix the geographic constraints here, but it hasn’t yet, according to the consultant. "The cut-and-sew process is incredibly labor-intensive," she said. "We don't have the technology as yet for us to step back and say we have a fully-automated facility."

Anwar keeps one foot in New York and one in Bangladesh. Her clients are in the U.S., but the manufacturers she connects them with are in Bangladesh. U.S. sourcing of textiles doesn't make business sense for most of her large-scale clients.

Buyers are drawn to three factors, according to Anwar: convenience, price and experience. Experience translates to high quality and high productivity rates. For small quantities, 100 pieces of 15 styles totaling 20,000 units, Anwar spitballed, U.S. production resources might make sense — at a luxury price point.

Luxury fabrication skills are more distributed around the globe, but the skill to produce en-masse at low cost per unit is concentrated — and therefore so is production of the textiles that fuel it.

"We have had a generation, or two really, of folks who have now just purely focused on fashion design, on overseas sourcing," Anwar said of the U.S. apparel industry. "You don't have a lot of people who have really specialized in textiles and textile formulation."

What we make now

A plentiful textile resource available at moment’s notice is one plenty of brands overlook.

"In theory you still could make this stuff here," Stephanie Benedetto, the founder of Queen of Raw, told Supply Chain Dive. "You’d just have to use deadstock." Deadstock, or fabric that has been ordered by and delivered to brands and designers, but will not be used and cannot be returned to the vendor is a virtually never-ending resource in the apparel industry.

Queen of Raw is an online marketplace for deadstock founded in 2014. Benedetto estimates the U.S. produces more deadstock than it does virgin fabric.

In addition to luxury materials like leather and silk, Queen of Raw is rich in the popular synthetic textiles that are produced in Asia in quantities and at prices the U.S. is unlikely to ever compete with, even after the hypothetical development sought by people like Henry and Duff.

It's naive to think that we can just flip a switch, and suddenly everybody can just buy all American-made products.

Mary Alice Duff, Founder of Alice Alexander

Since the coronavirus pandemic began, Queen of Raw’s user base has grown exponentially. Many, if not most, U.S.-based brands canceled orders from their suppliers in February and March to hold onto cash and they are tentatively and carefully deciding what their next collections will look like.

"People are trying to fill holes in their supply chain," Benedetto said. "Deadstock fills the gap. They can find it where they need it."

The tone of Benedetto's industry conversations has changed in the wake of the coronavirus pandemic, she said. Designers and production staff have free time right now — many have been furloughed or cut to half-time work. And some are using the time to dream up a different, less wasteful system that takes advantage of resources closer to home.

"It's a little bit early to know for sure whether they're going to act on what they're talking about now," she said. "But this is what we're hearing talked about with the innovation departments of these brands and retailers. Can we create more localized on-demand, sustainable, efficient supply chains?"

An Asia-based supply chain for Asian markets, a U.S. supply chain for U.S. markets, a European supply chain for European markets — "full localization is the dream," but it’s very far from the reality, Benedetto said.

Reality makes the conversation surrounding reshoring or localizing textile production bittersweet for those who know the industry intimately. If U.S. hemp is any proof, markets can’t do it alone — at least they haven’t yet. And even designers and manufacturers who want to source domestically find it difficult.

"It's naive to think that we can just flip a switch, and suddenly everybody can just buy all American-made products," Duff said. "That's asinine."

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