Benetton, a famous Italian fashion company known for its colorful and creative clothing, has shifted more than 10% of its production from China, Vietnam, India, and Bangladesh to European production facilities this year. This is part of a larger plan by Benetton to focus on Europe and make it the sole center for their global operations.
The Italian fashion company is aiming to cut down its production by half in Asia by the end of 2022 and instead focus on markets like Tunisia, Serbia, Croatia, Egypt, and Turkey for manufacturing. Benetton believes this move will provide more control over production and transportation costs which have skyrocketed over the past year.
In an interview with Reuters, CEO Massimo Renon said that even though countries like Vietnam and Bangladesh provides 20% lower production costs, the shorter lead times and less supply chain disruptions in the Mediterranean region would more than make up for the cost. Due to supply chain disruptions, the average lead times from Asia to Europe have increased from four to five months to seven to eight months.
In addition, Hugo Boss is also considering the possibility of shifting production centers from Asia to locations closer to final markets, hence allowing it to react faster to emerging markets trends. This move will provide Hugo Boss more flexibility in coping with supply chain bottlenecks.
The recent Covid-19 outbreaks in Asia have stung production for brands that mainly rely on production facilities in the region. Nike had to cut down its sales projection in September due to factory closures in Vietnam.
Inditex, which owns the fashion brand Zara, is now manufacturing 53% of its products in Turkey, Spain, Morocco, and Portugal, according to its 2020 annual report.
In Mexico and Latin America, logistics operators have reported growing interest from global brands in shifting their production facilities closer to the North American market as labor costs in Mexico and South America are comparable to Southeast Asia.
