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What ‘Friendshoring’ Means for Fashion

Western brands shifting supply chains away from China hope to reduce disruptions caused by geopolitical tensions but ‘friendlier’ sourcing hubs aren’t always feasible.
Two silhouettes of men stand on the outline of the world with a crack forming down the middle.
Western brands shifting supply chains away from China hope to reduce disruptions caused by geopolitical tensions but ‘friendlier’ sourcing hubs aren’t always feasible. (Getty Images)

Key insights

  • The deterioration of relations between China and the West is increasingly motivating Western brands to reduce their exposure to Chinese suppliers.
  • Sourcing from so-called ‘friendlier’ countries requires a trade-off between stability and other factors like cost, speed, worker’s rights and environmental impact.
  • Although finishing can be moved more easily, some raw materials and inputs for fashion production still overwhelmingly originate from China

Leaders from the G7 nations came out of a three-day meeting this weekend with a proposal to form a new supply chain partnership by the end of this year. They stopped short of naming any country but the subtext of the Resilient and Inclusive Supply-Chain Enhancement agreement was clear. Analysts say the pact between countries in North America, Western Europe and their close ally Japan was designed to strengthen the collective blockade against Russia and reduce economic reliance on China.

Though officials used discreet language to describe their objectives to avoid antagonising China, their move to “diversify supply chains” is seen by some as an endorsement of so-called ‘friendshoring’ policies which prioritise geopolitical allies. The World Economic Forum defines friendshoring as “the rerouting of supply chains to countries perceived as politically and economically safe or low-risk, to avoid disruption to the flow of business.”

For the fashion industry, the pact is significant because it shows there is support at the highest levels of government for multinational companies headquartered in Western countries as they look to reduce their exposure to China. Many of the largest global fashion conglomerates and brands are based in Western Europe or the US and China is a lynchpin of many global supply chains.

In the past, it was lower costs or speed — achieved by offshoring to regions like Southeast Asia or nearshoring to Turkey and Mexico — that influenced the fashion industry’s supply chain decisions. Now that friendshoring has entered mainstream conversations, sourcing executives are wondering how realistic it is to achieve. After all, China remains the world’s largest exporter of apparel and the crucial role of Chinese companies across countless complex global supply chains spanning everything from raw materials to cut-and-sew manufacturing still stands.


Some companies started reducing their reliance on China earlier than most. Levi’s reduced its manufacturing there from 16 percent in 2017 to between 1 percent and 2 percent in 2019. In an interview with The Sourcing Journal earlier this year, chief executive Chip Bergh said that the figure was even lower (less than 1 percent) for those products arriving in the US.

“We’ve really derisked our source dependence on China going all the way back to when the tariffs started,” he said.

At the height of US-China trade wars and pandemic-era supply chain bottlenecks, executives were hedging risk through a different prism. Joseph Phi, chief executive of Hong Kong-based supply chain management giant Li & Fung, predicted in a 2021 BoF interview that “the export share of China will gradually reduce by design” albeit in a measured way that acknowledges “it’s very important to diversify our sourcing base, but [that] it should not be blind diversification.”

Shaped by disputes over Taiwan and Uighur forced labour allegations in the Xinjiang cotton sector among other issues, poor relations between China and the US and its Western allies have further deteriorated. New incidents like the spy balloon controversy, and security flashpoints in technology over microchips and TikTok’s Chinese-owned parent Bytedance have emerged. Meanwhile, China has taken to raiding the offices of Western consulting firms and refused to distance itself from Russia over the war in Ukraine, causing relations with the US-led coalition to become even more strained.

Beyond specific tensions between individual countries, businesses now have to navigate a global market characterised by “VUCA,” situations of volatility, uncertainty, complexity and ambiguity. In the 2023 BoF-McKinsey State of Fashion report, more than half of fashion executives believe supply chain disruptions will be one of the top factors impacting growth of the global economy in 2023, and nearly two-thirds of fashion executives are considering creating specific manufacturing hubs dedicated to serving US and European demand.

German brand Hugo Boss, which has upped production in Turkey and Poland, is one recent example. US-based VF Corp has gone a step further. The parent of Supreme, The North Face and other brands, said last September that it was aiming to produce more in-region, with around 29 percent of what would go to the North American market being produced within that territory, and a similar proportion of local Europe, Middle East and Africa region production — 24 percent — going there.

The company produced around 500,000 pairs of Timberland with a producer in Portugal which it plans to double this year, while Vans partnered with two suppliers in Mexico which manufactured 300,000 pairs. “This year, we plan to do about 750,000 pairs [of Vans] and moving into more than two million pairs over the next two years,” said Cameron Bailey, VF’s executive vice president of global supply chain.

Like many other fashion firms, the calculus for VF’s supply chain diversification strategy is not singular but a combination of both nearshoring and friendshoring.


For other companies based in the US and Europe, growing geopolitical tensions with China (and other countries deemed to be high-risk) could mean a subtle but significant shift in priorities as they assess the trade-off between stability and other factors like cost, speed, worker’s rights protections and environmental impacts.

Asian countries such as Bangladesh, Vietnam, Indonesia, Malaysia, South Korea, Japan and Latin American markets like Mexico and certain Central American nations may be among those considered to be “friendlier” sourcing hubs, but compared to China, most are either less developed as high-value apparel and footwear clusters or less affordable because they are so advanced. Emerging manufacturing hubs on the African continent are either proving more politically unstable than anticipated, like Ethiopia, or slow to scale, like Kenya.

To complicate matters, these days it can be difficult to determine who is a friend. Although India is seen by some as a potential long-term alternative to China, its non-aligned stance on Russia over the Ukraine War has recently strained diplomatic relations with the US. Brazil and South Africa find themselves in a similar position. Nevertheless, most fashion firms are looking at the Indian subcontinent and Southeast Asia as primary alternatives.

Aside from the initial upfront investment of launching operations in a new country, the labour forces in many other contender markets — although large and lower cost — often struggle to keep up with the productivity levels of Chinese workers without decades of experience and advanced manufacturing technologies. Even harder to resolve is that some countries lack suitable raw materials.

“India is a little different,” said Brian Ehrig, Kearney partner and co-author of the report: “Fashion Perspective: The Counterweights of Traceability.” “They have a pretty decent amount of their own cotton compared to China, something like… a quarter of the [quantity] that China has. That’s a lot, and the major factory groups in India tend to be more vertically integrated.”

However, logistics and infrastructure in India are still lag behind China, he suggested. “What they don’t have is the super highways that China has. In addition to that, Indian ports are still kind of tertiary for shipping companies, they frequently are bypassing India to get to China.”

When apparel and footwear companies consider friendshoring, or reducing their exposure to Chinese manufacturing for any other reason, the biggest “elephant in the room” is the sheer scale and complexity of the task at hand, he added.

“It is a reality that even if you take all the finished manufacturing of these products out of China, still something like half the fabrics… in the fashion world are coming from China even though they’re only making maybe a little bit more than 20 percent of the finished product,” Ehrig said. “So that means it’s still the most important country for raw materials in fashion by far. So yeah… there will always be some kind of tie to China, for sure.”


While efforts to move production away from China tend to create more trade between the West and countries like Vietnam, it also means that Vietnam starts importing even more in textiles, materials or components from China than it did before. Instead of countering China’s influence, it has a way of linking those two countries tighter together.

For many companies, it is a “China plus one” model that seems most feasible. Looking beyond fashion to the smartphone sector, for example, Apple is ramping up iPhone production in India to complement its mainstay in China, and is on track to produce up to 25 percent of its flagship product by 2025 in India, up from 7 percent now. While it makes sense to hedge against China, it doesn’t necessarily mean completely exiting.

Fear exists among fashion companies that moving supply chains away from China could reignite a consumer boycott in the all-important market as it did in 2021 over the Uighur forced labour issue. An emerging trend that came out of that dispute and others is that major companies like Adidas and L’Oréal are starting to grow their Chinese manufacturing footprint in an effort to cater specifically to the local market.

Analysts suggest that the number of brands creating one supply chain for China and a separate parallel chain for Western markets may grow in the years ahead.

A more extreme ‘decoupling’ scenario, however, is a worrying one for political and business leaders alike. In a major speech last month, US Treasury Secretary Janet Yellen underscored how the American and Chinese economies are “deeply integrated” and that a full separation of the two would be “disastrous for both countries” and “destabilising for the rest of the world.”

For its part, China maintains that it supports a healthy and mutually beneficial relationship with the United States. A spokesman for the Chinese Embassy in the US, Liu Pengyu, responded to Yellen saying that “China does not shy away or flinch from competition” but opposes a broadening of national security concerns in trade and any potential threats to global supply chains.

A World Trade Organization report on the trade implications of the war in Ukraine predicted that if the world split into Eastern and Western trading blocs, global GDP would drop by 5 percent, with emerging economies shouldering most of the cost.

Therefore, fashion industry groups say that for the US and Europe to decrease their reliance on China in a major way, they need to do more to open up new trade pacts with other nations and better maintain existing agreements.

But a lean towards protectionism, which came to the forefront during the Trump era, has slowed such dealmaking down. The US backed out of the forerunner of the CPTPP (the TPP) and is not a member of RCEP — and is unlikely to join either agreement soon. Last year, the Biden administration formed the Indo-Pacific Economic Framework for Prosperity with 14 nations in the region to present “an alternative to China’s approach,” the US commerce secretary said at the time. But critics say the framework lacks teeth as it does not abolish tariffs and is seen more of a precursor to a deal.

The American Apparel and Footwear Association, while applauding the passage of the Uyghur Forced Labour Act, criticises the US government for not doing more to facilitate trade agreements, after placing such heavy restrictions on goods from China.

“AAFA is very concerned that the US has yet to even renew key trade programmes like the Generalized System of Preferences (GSP) and the African Growth and Opportunity Act (AGOA),” said Beth Hughes, vice president of trade and customs policy at the group. Also pointing to the US/Central America — Dominican Republic Free Trade Agreement (CAFTA-DR), “[The United States Trade Representative] has also failed to pursue new free trade agreements or improve existing free trade agreements.”




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