How is China’s Garment Industry Dealing with Rising Labor Costs?

Please feel free to share your views on the following discussion questions based on the video:

China is no longer one of the cheapest places to produce garments. The minimum monthly wages in China have far exceeded those in Bangladesh, India and Cambodia:

  • How are Chinese garment factories coping with the challenges of rising labor cost?
  • Is adopting Taylor’s “scientific management”, i.e. asking skilled workers to do less skilled jobs in a more specialized production line, a smart idea?
  • What is your view on the growing difficulty of hiring and retaining young skilled workers for the garment industry in China?
  • Any other thoughts on the video?

Appendix: State of China’s Apparel Exports in 2015

According to the UNComtrade, China remains the world’s largest apparel exporter in 2015 (37.4% world share for knitted apparel, HS61 and 34.9% for woven apparel, HS62).

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62From 2011 to 2015, “Made in China” continues to acquire more market shares in some key apparel import markets in the world, including the United States and UK (i.e. China’s apparel exports to these markets grew at a faster rate than these countries’ apparel import growth from the world—bubbles in blue in the figures below). Nevertheless, in some other markets (bubbles in yellow in the figures below), notably Japan and Germany, China is losing market shares to other garment exporters such as Vietnam and Bangladesh.

61 market

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Outsoucing and “Made in USA” An Ongoing Debate

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The following questions are proposed by students enrolled in FASH455 Spring 2016. Please feel free to leave your comment and engage in our online discussion.

L.L Bean: A Business Model for “Made in USA”?

L.L. Bean has been a strong business for hundreds of years, yet recently their sales of Bean Boots have skyrocketed because they are now seen as trendy. Even though L.L. Bean’s orders and demand has gone up, they still somehow manage to have their products being handmade, sourced locally, and all in the US.

#1: Can L.L. Bean become a model for other businesses looking to manufacture in the US? How has L.L. Bean managed to keep this business model up for so many years and why have they not changed or decided to outsource? 

#2: Why doesn’t L.L Bean look into other American cities for manufacturing options so they do not lose productivity by being exclusively made in Maine?

#3: Do you think it would be beneficial for L.L. Bean to outsource to foreign companies for their manufacturing? Would there still be as high of a demand if these boots were manufactured abroad?

Outsourcing v.s. “Made in USA”

#4: It is said that one reason why American brands choose to offshore their manufacturing is because there isn’t as many cutting edge machines readily available in the States as in other countries. Is it realistic for the American manufacturing market to invest in these machines for domestic manufacturing? If so, how can America make sure to stay relevant with these technologies and not fall behind as we have currently?

#5: One aspect commonly mentioned throughout these readings was the lack of skilled labor in the US in the fashion industry. Is the decrease in skilled areas, such as shoemaking and needle trade, due to the increase in skilled labor overseas? Are these professions considered outdated for young Americans to be learning? How can we jumpstart a desire for young people to take up these skills once again?

#6: One major problem the US has been facing regarding keeping production domestic has been the lack of skilled workers to work in factories. Is the cost of providing training to interested workers too high? Should it be required that all fashion majors should take a sewing class? Where does the decision to train apparel workers begin?

#7: Many American manufacturers refrain from manufacturing in the United States because it is too expensive because more people are formally educated and are not willing to work for a low wage, but only 15% of respondents actually are working towards that. Is it realistic to reach out to homeless communities looking to get back onto their feet to see if they would work in factories? Would this help promote American manufacturing and decrease importing?

#8: In today’s fast paced fashion world, trends come and go rather quickly. The striking disadvantage of manufacturing overseas is the slow turnaround time which could be up to 3-5 months. By manufacturing domestically, turnaround can be as quick as 2 weeks. Why do the majority of fashion companies still choose to manufacture overseas when there is a possibility the trend could be over by time they reach store shelves (Thus, a lack in profit)? When will trend pressures become too much for overseas production?

#9: Is it even worth it to bring manufacturing back to America if it is not benefitting the workers and creating jobs? If manufacturing in the US is simply machine based, what is the point of doing so when it could be cheaper elsewhere and benefit countries that need the jobs?

[Discussion is closed for this post].

2014 World Textile Industry Labor Cost Comparison

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According to the latest Werner International Labor Cost Comparison Report, labor cost gaps remained huge among textile industries worldwide in 2014. Within the 40 countries covered by the report, labor cost in Switzerland ($51.36/hour), the highest, was 82 times higher than in Bangladesh and Pakistan ($0.62/hour), the lowest, in 2014. Overall, labor cost in Western European countries (such as Italy, France and Germany)+Japan remained the highest in the world, followed by (from high to low):

  • the United States
  • advanced economies in East Asia (South Korea and Taiwan)
  • Eastern European countries (such as Poland)
  • South American countries (such as Brazil and Peru) 
  • developing countries in East and Southeast Asia (such as Bangladesh and Pakistan).

[Note: The report does not cover African countries].

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On the other hand, consistent with statistics from other sources, Werner’s report also suggests remarkable labor cost increase in China, which is rapidly approaching the $3 per operator hour (up from $2.1 in 2011 and up from only 0.69 US$ in the year 2000). From 2000 to 2014, labor cost in the U.S. textile industry went up about 25 percent. However, in terms of absolute difference, China’s labor cost was still only 15 percent of the level in the United States in 2014. As noted by the publisher, the labor cost comparison report covers all primary textile industry sectors, consisting of spinning, weaving and dyeing & finishing. Cut & sewing operations are not part of these comparisons. Labor cost in the clothing industry is not covered by the report however.

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