Factors affecting the textile industry

Written by vivienne lydamore
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Factors affecting the textile industry
Non-traditional business factors affect the textile industry. (textiles image by Skeboo from Fotolia.com)

The U.S. textile industry includes the manufacture of textiles and textile products for apparel, home and industrial uses. A 2005 report from the Harvard Center for Textile and Apparel Research suggests that several non-traditional factors affect the textile and apparel industry in the United States.

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China's entry into the World Trade Organization in 2005 led to dissolution of many quotas for Chinese imports and an initial surge of Chinese clothing into the United States. Mutual operating agreements between the U.S. and China have maintained some quotas and continue to provide quota protections for some categories of American-made clothing as of 2011.

Factors affecting the textile industry
Chinese imports impact the U.S. textile industry. (china image by António Duarte from Fotolia.com)

Globalisation and Policy

Global textile trading networks involve complex agreements and tariffs that vary by country, time frame, fibre source and type of apparel. The North American Free Trade Agreement (NAFTA) provides advantages to U.S. trading partners such as Mexico. As a result, some Mexican apparel goods cost within 1 per cent of Chinese goods that have duty costs as high as 30 per cent.

Factors affecting the textile industry
Mexico competes strongly in the textile market. (made in Mexico image by Sergio Hayashi from Fotolia.com)

Lean Retailing and Proximity

Large retailers no longer keep inventories of stock on hand. Instead, they rely on weekly delivery of priced, labelled, shelf-ready inventory from suppliers that own the inventory and warehouses. Suppliers face significant financial risk if a major retailer suddenly cancels a weekly £6,500 jeans order. To mitigate risk, suppliers order merchandise from manufacturers with closer proximity and shorter lead times. The loss from cancelling an order for Mexican-made jeans with a three-week lead time would total about £422,500 while the loss from cancellation of an order for Chinese-made jeans with an 11-week lead time would total twice as much at £0.9 million.

Factors affecting the textile industry
Retailers no longer maintain large inventories. (jeans... image by Saskia Massink from Fotolia.com)

Production Costs

For garment manufacturing, production costs include labour, the complexity of the garments, cost of fabric and freight. With shorter distances from U.S. textile mills to Mexican garment assembly plants, lower freight costs in the Western Hemisphere can help offset lower labour costs in Asia; therefore jeans manufactured in Mexico from American denim may cost less than Chinese-made jeans using the same denim.

Factors affecting the textile industry
Freight costs affect the textile industry. (freight shipping image by FotoWorx from Fotolia.com)

The Rise of Asian Sourcing Agents

With the increasing volume of textile goods coming into the United States, American companies have sought Asian "full package providers" that can supply completed goods. In order to minimise the intricacies, such as language barriers, analysis of production, transportation, tariff costs and quota issues, many U.S. companies contract with Asian sourcing agents that provide links between the international supply chain and purchasers. Some Asian sourcing agents have branched out to gain greater influence over the entire manufacturing process.

Factors affecting the textile industry
Asian agents can simplify textile trading for American retailers. (Asian business people image by huaxiadragon from Fotolia.com)

Outsourcing American Production

Over the long term, American textile mills may relocate to Mexico. Unlike garment construction, which requires minimal capital investment, contemporary textile mill construction requires large capital investments for infrastructure, looms, electricity and water supplies. In 2005, the Bureau of Labor Statistics predicted that the existing 1.3 million U.S. textile mill jobs would remain in the United States for an indeterminate period.

Factors affecting the textile industry
Construction costs may delay outsourcing of U.S. textile manufacturing. (Factory image by m.m from Fotolia.com)

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