Global footwear production patterns are subject to a variety of trends including reshoring as footwear brands look to bring production closer to consumers. Is this viable longer term? Jane Denny reports.
According to Desma’s md Christian Decker, shoe manufacturing is “coming home”. The process – called reshoring – is the opposite of out-sourcing, the cost-cutting strategy that typified late 20th and early 21st century business and industry practice - particularly manufacturing.
Production moved out of high cost countries and regions to low-cost production locations in a number of developing economies. The strategy worked as long as labour costs were sufficiently low and transglobal logistics could be managed.
Desma supplies machinery to US footwear makers including military footwear manufacturers Rocky Brands, Propper International and the Weinbrenner Shoe Company.
It also supplies Forsan and Justin Brands – both of which produce work boots in the US.
Politically, it is a good time for the US mainland to reclaim its manufacturing base. The Berry Amendment – part of the US Defense Federal Acquisition Regulation Supplement, known as DAFARS - requires the US military to give preference to domestically-produced good when it is buying equipment. In particular food, clothing, fabrics and specialty metals, are covered by the regulations and false claims of compliance can lead to significant fines.
Although boots worn by military personnel fall under Berry Amendment regulation, a decision made in 2002 allowed servicemen and women to choose athletic shoes from domestic or imported ranges.
US athletic shoe brand New Balance is campaigning to reverse the decision and ensure supplies of athletic footwear carry the same Made in America requirement as other items.
According to New Balance public affairs vp Matt LeBretton, reshoring not only gives employment to local people, advantages also include a greater degree of quality control than is possible with remote plants, as well as lower distribution costs.
However, footwear is an international business. According to IBISWorld’s April 2015 industry report, Shoe and Footwear Manufacturing in the US, “the Trans-Pacific Partnership (TPP) will bring a flux of imports from Vietnam.”
The TPP is designed to increase free trade between the US and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore as well as Vietnam - IBISWorld’s report said: “If the agreement is enacted, it will put the US’s domestic manufacturers under considerable stress and could encourage significant import penetration.”
The IBISWorld report implies that LeBretton’s vision of a thriving domestic manufacturing base in the US could be overly optimistic. The report said TPP implementation “would make it incredibly difficult for the firm to continue manufacturing domestically if cheap imports from Vietnam flooded the market.”
“The increasing prevalence of imports on the US shoe market will continue to trend upward over the next five years, as imports are expected to satisfy 94.7% of domestic demand by 2020,” said the report.
“Domestic producers will not be able to compete against low-cost imports and are expected to increasingly offshore production or carve out niche segments, such as work-specific or premium, high-end footwear,” the report added.
From 2015 to 2020, IBISWorld forecasts an annualised decrease rate of 0.8% in US domestic footwear manufacturing companies, if that is correct, the number of enterprises in the country will shrink from 919 to around 880.
Nike, which has nearly 700 factories worldwide, began moving its footwear production out of China some years ago, although the company still has a number of equipment and apparel factories in the country. In recent years, Vietnam’s Nike branded shoe exports to the US surpassed China’s, according to IBISWorld research.
The reshoring vision is not just a US phenomenon. In Europe, the reshoring option has inspired the German company Adidas. In March 2015, ceo Herbert Hainer announced the company’s plan to “bring production back to where the main markets are.”
He said Adidas believed the step would increase his company’s annual net income by 15%/year by 2020 thanks to the increased speed to market.
Alfons Tremml, commercial manager for footwear at Huntsman Polyurethanes, agrees. He said: “Europe is once again becoming an attractive footwear manufacturing location – particularly for high-end production projects.”