The Outsourcing Evolution - in men's clothing - Statistical Data Included

Bobbin, May, 2001 by Jules Abend

It's also been argued that Canadian producers have had an extra advantage over their U.S. counterparts because they have been able to buy high-quality imported woolen piece goods less expensively. Until this past October, when the Trade and Development Act of 2000 (TDA) was implemented, tariffs on these fabrics for U.S. makers were 30.6 percent greater than the levies Canadian companies paid. As a part of the TDA, which provides preferential U.S. trade access to countries in Africa and the Caribbean Basin Initiative, tariffs on super 100s and better fabrics were lowered to 6 percent. In addition, the tariff on super 80s was lowered to 18 percent, the same duty charged for an imported worsted suit. There currently are quantity limitations on these fabrics, but they will ease over the next three years.

Looking ahead, these tariff reductions will lower costs for U.S. makers. It also will provide them with an opportunity to become more price-competitive with other countries, depending on how much of the cost savings is passed on to the consumer, says William's colleague Curt Clark, a KSA manager. But he emphasizes, "There are still some advantages north of the border, in addition to the two-shell construction."

Clark observes that other factors, such as the current exchange rates, competitive wages and lower fringes, also play into the picture. "When you [compare] construction, wages and fringes, even if material costs are equal [in Canada and the United States], Canada [may have] a slight advantage."

Clark notes that the U.S. tailored clothing industry as a whole seems to be at a crossroads right now and is following the rest of the apparel industry's move offshore, which has taken place over the past decade. The lower-end tailored clothing market is already gone and, in his estimation, mid-range makers are not far behind. "Even in light of the improving duty picture," he says, "no one is going to come back to the United States [to manufacture]. Companies can slow the erosion, but it's still going to happen. It's just a matter of eventual acceptance.

"It has always been our view at KSA that, given the same technical resources, the same working conditions, the same training and the same types of skilled individuals, you can replicate the [U.S. manufacturing] environment, Clark continues. "We have successfully done that in other apparel categories, and [tailored] clothing ultimately should be no different -- whether it is in Mexico, Costa Rica or the Dominican Republic."

Williams adds: "We're not going to see Oxford or Hickey [moving offshore]. They would be afraid of losing control. There is a big concern about [workforce] skills from their point of view. But for mid-range garments, it's really all in the training and the setup, and the commitment to the training. I think you can successfully make these garments [in low-wage countries]."

Outsourcing Abounds

While the upper mid-range makers are facing tough decisions about offshore production, the lower-end makers have been busy developing offshore sourcing programs. For instance, Lanier Clothes has been outsourcing since the early 1970s and is making the majority of its $300 to $400 retail price suits in Mexico, the Caribbean, Eastern Europe, South America and Asia, in about 13 plants.