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Boston Consulting Group: Stop Chasing Low-Cost Country Sourcing

It’s time for apparel companies to stop chasing cheap labor, according to Bharat Khandelwal, a partner and global topic expert at Boston Consulting Group (BCG), who spoke at a Magic seminar on Tuesday titled, “Apparel at a Crossroads: The End of Low-Cost-Country Sourcing.”

“For years, brands have been moving their production from country to country, chasing the human being who’s the cheapest,” Khandelwal said. Even Chinese factories, he said, are moving production to cheaper countries like Myanmar as their own economy continues to grow, labor cost index goes up and overheads increase. “This game is going to end at some point. And if not end, it cannot be what we chase.”

Rather than pursue low-cost labor or try to beat down prices, Khandelwal suggested that companies work with their current manufacturers to try to increase efficiency instead. How can they do that? By innovating and thinking outside the box, he said.

Using The North Face’s Fuse Uno jacket as an example, he explained that a shift in basic technique could significantly decrease the density of labor. By constructing the garment from a single piece of HyVent Alpha waterproof-breathable fabric (the only stitching required was on the zipper), the company eliminated cut-and-sew from the manufacturing process.

Likewise, Calvin Klein’s Concept Micro underwear features a 360-degree seamless technology construction. “If you look at normal underwear, there’s a lot of stitching that goes on. By figuring out how to create something without using any stitching, Calvin Klein reduced the density of labor.

“We cannot keep thinking about the slightly better sewing machine or the slightly better positioning of the machine on the table so that the guy operating it can increase his output by half a percent,” Khandelwal said. By innovating and fostering new technology and techniques, however, factories could see as much as a 200 percent reduction in labor density and a massive increase in output and speed to market, thereby negating the need to migrate from one country to the next.