Spring 2019 - Inside Outdoor Magazine

Inside Outdoor | SPRING 2019 33 based on nearshore production in order to facilitate on-demand, in-season re- plenishment. It’s not hard to imagine, in the not-so-distant future, Gen Z apparel business entrepreneurs laughing at the idea that their biggest competitors still take orders, ramp up production and fill crates on boats months before anything is even shown or offered to consumers. “By reducing time to market, apparel companies can act on nascent trends, scale up their winners and eliminate their losers – all within a single season,” said McKinsey. Changes in Asia In addition to the strategy crossroads of “speed versus marginal costs,” the cost efficiencies that drove production to the Far East is no longer as signifi- cant as they once were. Labor costs in China in 2005, for instance, were one-tenth of those in the U.S., while today, they are about one-third the cost, said McKinsey analysts. In some nearshore markets, such as in Central America, “the gap to offshore labor costs has even disappeared,” they continued, with the lack of capa- bility and capacity preventing any quick shifts in production footprint. Mexico, as an example of a near- shore market for the U.S., in some cases, offers lower manufacturing costs than China. “Today, even from a mere landed cost price perspective, nearshoring can be economically viable in certain cases, mostly due to savings in freight and duties. A U.S. apparel company that moves production of basic jeans from either Bangladesh or China to Mexico can maintain or even slightly increase its margin,” according to McKinsey analysis, even without higher full-price sell-through. As a nearshore example for Europe, labor costs in Turkey were more than five times higher than those in China in 2005, the factor diminished to only a factor of 1.6 times by 2017. The offshoring sourcing strategy of U.S. and European mass-market players is under further pressure from changes in consumer behavior in Asia. Historically, the strongest demand for clothing came from the West’s devel- oped markets, but demand growth Made inAmericas Savings on Freight/Duties Make Nearshoring Alternatives Competitive with China (2016/1017 prices and import duties, jeans example) Shoring Location Freight Mode/Days Landed Cost Price (Per pair of jeans) Change vs China Bangladesh (off) Boat/30 $10.68 -11% China (off) Boat/30 $12.04 0% Mexico (near) Truck/2 $10.57 -12% USA (on) n.a. $14.05 +17% Source: McKinsey & Co The Evolution of Inflatable Kayaks TM Explore Anywhere In the Advanced Frame Convertible Designed to perform. Built for your next adventure. AdvancedElements.com See our complete line of products and nd a dealer near you.