The breakdown in the supply chain from China in the aftermath of the Coronavirus pandemic has forced companies around the world to ditch the sinking ship of China and move out to newer pastures. And it looks like companies are indeed doing the same.
According to a report in Economic Times, German leisurewear brand Marc O’Polo has placed a huge order for Jerseys to its Indian vendor Warsaw International. Interestingly, the product was earlier supplied to the German garment firm by a Chinese vendor.
“We have a huge order. It’s a litmus test for us and the country. If we crack it, then gates open for more global brands to increase their India sourcing,” Warsaw International’s Raja Shanmugam was quoted as saying.
With more than half of the year already wasted due to the pandemic, the brands have started to look out for alternatives and new avenues where they can outsource the production. India has the closest possible infrastructure and ecosystem to that of China and naturally, the companies are willing to punt on the country for their manufacturing needs.
“Our buyers have told us that this year sourcing from India will be much higher than last. We will know about the actual size of increased orders in a couple of weeks. We are just opening up after the lockdown,” said P Nataraj, MD of KPR Mills, a leading garment exporter and among the largest yarn exporters from India
Another United States-based apparel company named Carter’s, once the largest babywear brand in the world, also wants to shift its significant portion of its business from China to India. It has asked western Tamil Nadu based SP Apparels to work on developing a new fabric using man-made fibers.
“Beating China is tough as they have the scale, but looks like a beginning has been made this time,” P Sunder Rajan, MD of SP Apparels said, adding that the sector will need a lot of support on labour, financial and infrastructure from the government.
The accession of China to the WTO (2001) and the expiry of the WTO Agreement on Textiles and Clothing on 1st January 2005 contributed to making China an important centre5 of textile and clothing global value chains (GVCs). These two developments led to shift apparel production and sourcing (by globalized retailers and producers) to China. However, the excess reliance on China for the products has backfired tremendously for these companies.
The textile, apparel, and garments industry is considered a time-sensitive industry. Irregularities in making goods reach a particular place at a specified location on time can lead to reduced (or no) profits for the textile owner. Companies like Carter’s and Marc O’Polo understand this and therefore have started testing the waters in countries other than China.
Reported by TFI, a German footwear brand named Von Wellx had also decided to move its factory operations from China to Agra, Uttar Pradesh. The company has more than 10 crore customers in more than 80 countries.
Von Wellx is owned by Casa Everz Gmbh, and the company was approached by Indian government authorities as it was looking to move production out of China. The company collaborated with Latric Industries Pvt Ltd to manufacture shoes. According to Ashish Jain, CEO and Director of Latric Industries Pvt Ltd, the partnership would create more than 10,000 direct and indirect jobs in the city of Agra.
In India, the consumer market is expanding and the labor cost is low, therefore, the manufacturing cost would be low and at the same time, the aforementioned German and American brands could expand its customer base.
After the Coronavirus outbreak in China and its mishandling of the crisis leading to a pandemic, many countries are looking to move manufacturing units away from China. In fact, many countries that are arch-enemies of China but have manufacturing units in China, like Japan, are incentivizing companies to move out, and this presents a golden opportunity to India, especially the industrially backward states like UP, Bihar where labor cost is extremely low.