Question 2

Read the following article (4 minute read):

Retailers lose love for Asia:

Snarled supply chains force manufacturing exodus to Balkans, LatAm

By Siddharth Cavale and Corina Pons

Nov 9 (Reuters) - Major clothing and shoe companies are moving production to countries

closer to their U.S. and European stores, smarting from a resurgence in cases of the Delta

variant of the coronavirus in Vietnam and China that slowed or shut down production for

several weeks earlier this year.

The disclosures come amid a massive shipping logjam that is driving up costs and forcing

companies to rethink their globe-spanning supply chains and low-cost manufacturing hubs in

Asia.

The latest example is Spanish fashion retailer Mango, which told Reuters on Friday it has

"accelerated" its process of increasing local production in countries such as Turkey, Morocco

and Portugal. In 2019, the company largely sourced its products from China and Vietnam.

Mango told Reuters that it would "considerably" expand the number of units manufactured

locally in Europe in 2022.

Similarly, U.S. shoe retailer Steve Madden (SHOO.O) on Wednesday said it had pulled back

production in Vietnam and had shifted 50% of its footwear production to Brazil and Mexico

from China, while Rubber clogs maker Crocs (CROX.O) said last month it was moving

production to countries including Indonesia and Bosnia.

Bulgaria, Ukraine, Romania, the Czech Republic, Morocco, and Turkey were some of the

countries drawing new interest from clothing and shoe producers, though China continues to

produce a large share of the apparel for U.S. and European clothing chains.

"We are seeing a lot of growth in freight and trucking activity in the former Soviet Republics

... a big rise in Hungary and Romania," said Barry Conlon, chief executive of Overhaul, a

supply chain risk management firm.

In Turkey, apparel exports are expected to reach $20 billion this year, an all-time high, driven

by a spike in orders from the European Union, Turkey's Union of Chambers Clothing and

Garment Council data showed. In 2020, exports totalled $17 billion.

In Bosnia & Herzegovina, exports of textiles, leather and footwear amounted to 739.56 million

marka ($436.65 million) in the first half of 2021, higher than the same period in 2020.

"Many companies from the European Union, which is our most important trading partner, are

looking for new suppliers and new supply chains in the Balkan market," said Professor Muris

Pozderac, secretary of the association of textile, clothing, leather, and footwear in Bosnia &

Herzegovina.

In Guatemala, where Nordstrom (JWN.N) significantly shifted its private-label volume

production in 2020, clothing exports were a touch over $1 billion as of the end of August this

year, up 34.2% from 2020 and even 8.8% higher than in 2019.

To be sure, many companies are also still heavily reliant on Vietnam, where recent production

stoppages have caused significant disruptions. Vietnam's government said in October that it

will fall short of its garment exports target this year, by $5 billion in a worst-case scenario, due

to the impacts of coronavirus restrictions and a shortage of workers.

Factory inspections in Vietnam - a proxy for retailer manufacturing orders - fell 40% in the

third quarter versus the second quarter, with production during those months quickly moving

to Bangladesh, India, and Cambodia. Inspection rates in Vietnam were still hovering at lower

levels in the fourth quarter, with a small uptick seen in late October, said Mathieu Labasse,

vice president of QIMA, a supply-chain quality control and auditing firm that represents more

than 15,000 brands.

Apparel maker VF Corp (VFC.N) and outdoor gear maker Columbia Sportswear (COLM.O)

were among companies that warned that there would be delays in fall and spring collections

and in some cases, insufficient size assortments.

Michael Kors handbags maker Capri Holdings (CPRI.N) said on Wednesday that it would not

have the inventories it wanted for the holiday season, while athletic gear maker Under

Armour (UAA.N) said on last Tuesday it was cancelling purchase orders from Vietnam just to

help get "the factories get back up and caught up."

https://www.reuters.com/business/retail-consumer/retailers-lose-love-asia-snarled-supply-chains-force-manufacturing-exodus-2021-11-09/

(a) Based on the article, analyse the possible sourcing strategy/strategies the major consumer clothing and shoe companies is/are pursuing to manage global supply risks

and costs. Please elaborate with examples related to the article.