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Onshoring. Noun or verb? Ask experts on the topic and you will hear both answers. Regardless, onshoring is bringing manufacturing of goods back from low cost-of-labor countries to the United States. A steadily growing trend, onshoring is spurred by a combination of factors. To understand and benefit from it, you need to have a grasp on all the different contributing causes and to stay up-to-date on these causes as they change and evolve. A large-scale apparel operation is not a simple business, but a challenging environment that can be maximized for profit.

Where?
They say the best place to make something is in the market in which you sell, but there is a caveat. The local option needs to be automated enough to be efficient and price competitive versus other options from other places.

This onshoring trend started about 20 years ago in some industries. Consider the car industry. In 1994, BMW launched a manufacturing facility in Spartanburg, South Carolina for their X3 and X5 SUVs. The brand knew that the SUV was going to have a higher level of sales in the United States over Europe. The size of the market and the national affinity for larger cars made it obvious. Manufacturing the vehicles in the United States bore many cost benefits versus making them in Germany.

According to a recent study conducted by the Boston Consulting Group (BCG), more than a third of US-based manufacturing executives at companies with more than $1 billion in sales are planning to bring production back to the US from China. In addition, it found that, by 2015, the US would have a cost advantage of five to 25 percent over manufacturing goods exported when compared to countries such as Germany, Japan and the United Kingdom.

Labor costs in China have skyrocketed, shooting up 500 percent since 2000, and are expected to continue to climb an average of 18 percent each year. Added to that is the price of natural gas, which has fallen so far in the US, that gas in Asia now costs four times as much.

Other compelling reasons behind onshoring include higher US worker productivity, more flexible unions, the lack of intellectual property (IP) protection in China, less supply chain disruptions, and the desire of companies to be closer to their customers. According to the BCG study, the companies involved cited top factors driving future decisions on production locations that include: Labor costs (57 percent), product quality (41 percent), ease of doing business (29 percent), and proximity to customers (28 percent).

How can you grow your business as a result of this trend?
So what does this mean for the American apparel decorator? Are we about to witness all of the large brands bringing production back to the United States? Probably not. Fast fashion retailers like H&M and Zara will likely never manufacture anything in the US, unless to simply say they did.

But there are American apparel manufacturers and decorators who are already bringing business back, and even more who will be able to gain ground with this trend. Your business model and how you position yourself as the trend continues to build momentum will have a huge impact on your opportunity to gain customers.

One of the largest factors in the success of onshoring is the demand for “short-run” production, which is driven in part by the need for fill-in stock and the demand for limited edition designs. The other factor driving much of the opportunity is customization. As customization continues to grow, so does the market opening to bring more things back to the US for production.

Product Mix & Expertise
What you do and what makes your operation unique will have a big impact on how you maximize the onshoring trend. Large-scale production houses can pull customers back to the US if they maximize the opportunity to provide high-level customer service. Many buyers looking for a way to bring things back to the US need the same capabilities that they had offshore. Sometimes that means capital investment in secondary platforms, but still more than that is needed to justify the slight increase in costs. Quicker turnaround times, Web-based ordering systems and special decorating applications can all lead customers back onshore. You need to be able to offer the same output as the foreign competitors.

Customer Base
There are two types of customers: Those who like value and a good price, and those who care about price, price and price. More often than not, the trend will lean toward one or the other. Sure, you have both types of customers, but one group probably dominates the other. Both types of customers will be affected by this trend, but at different times. Automation may interest customers seeking value-added services. Customers who are totally price conscious are more likely to be driven by changes in price due to currency value.

Supply Chain
Where you buy materials will also impact your competitiveness. In the last 24 months, several free trade agreements have taken effect — Colombia, Panama and South Korea among them. This has removed duty on most products, and created a more competitive environment for Asian goods. For domestic apparel manufacturers, some of these countries also offer a faster turnaround time when compared to that from Asian countries. Having a weekly airfreight come out of South America is much more nimble than, say, a 40-inch container out of Asia. A more deft supply chain means lower capital risk for your customers.

Currency
As we speak, a currency war is raging. Japan appeared in the news recently, reporting a dramatic decline in the value of the Yen. Similarly, much information suggests that the Chinese Yuan is undervalued against the dollar by as much as 40 percent.

As the global recession took hold, the US quickly made a move to devalue the dollar as part of a strategy to reinvigorate the economy. Now, the US Dollar is slowly increasing in value against other currencies. If the US continues to grow and improve its economic performance versus other countries, the value of the dollar will continue to increase. When compared against the US dollar, currency values in Brazil, Mexico and Colombia are declining, making them more competitive versus Asian goods that also carry a duty.

Technology & Automation
The more you automate, the lower your labor costs per item. The lower your labor costs as a total of your cost structure, the better chance you have competing against countries where cost of labor is low. One thing that buyers continue to be frustrated by is the lack of cohesive communication with offshore suppliers. Making yourself “easy to do business with” is where automation can be the winning ticket. The importance of information technology is only increasing in the garment business. Getting ahead of the curve can mean a major investment. But it can also save employee time, by 40, 50 or even 60 percent. This time can be used to find more revenue or can be consolidated to reduce costs further.

Words to Action
Everyone reading this article has a different set of conditions to consider. No two businesses are the same. But taking action to move your business forward is essential for all of us to succeed. Information and trends are only powerful if they cause thoughtful action. As you move forward, keep tabs on the areas mentioned. You may find more and more large customers listening.

If you can position your business to maximize a shorter supply chain, mass customized output and digital print technologies — you are poised to take full advantage of this moment in the marketplace. Automation is a huge part of how this type of business becomes profitable. With digital files come the need for an information system that is easy to access and eliminates opportunities for error.

Christopher Bernat is chief revenue officer at Vapor Apparel, and an SGIA Board Member. He focuses on sublimation and domestic cut and sew programs.