China Plus One is the practice where brands diversify their sourcing strategies by including partners from at least another country other than China in their networks of producers and suppliers. They can then counterbalance a heavily weighted supply chain. Fashion brands can avoid major disruptions.
No one can deny that the past two years have seen a significant disruption in international trade, supply chain, and foreign relations among the world’s most important industrial hubs. It is an understatement to say that the world will never be back to its pre-COVID state.
Even before the first COVID-19 case made headlines, however, a rapid succession of major events had a profound impact on long-standing global trade structures. Take a look at this:
* The wages of Chinese manufacturing workers have nearly tripled between 2010 and 2020.
* The United States launched its trade war against China in 2018, which was characterized by the imposition of billions of dollars of tariffs on Chinese imports from a variety of materials and product categories.
* In 2014, China launched the Strike Hard Campaign Against Violence Terrorism. This campaign focused on the surveillance of Uyghur Muslims and their movement restrictions. In 2017, China expanded this policy to include the construction of labor camps, as well as a sweeping of forced sterilizations. Many in the international community condemned these actions as genocide. In 2021, the US, UK, Canada, and European Union will sanction China for continuing to carry out this policy.
Even before the COVID-19 epidemic, fashion brands began to look beyond China to meet their raw material and garment manufacturing needs.
What is China Plus One?
China Plus One emerged as a response to changes in perceptions of China’s openness to trade.
China Plus One is a practice where brands diversify their sourcing strategies by bringing in partners from other countries to their networks. They can then counterbalance a supply chain that is too heavily weighted.
China Plus One helps fashion brands avoid major disruptions in their supply chains that may negatively impact their bottom line or customers. They do not pull all production and sourcing from China, which is assumed to be the only or primary vendor in this case. Instead, they make gradual progress towards a more multinational, balanced supply chain. It not only helps brands transition but also prevents a worsening of political turmoil if European and American fashion brands completely withdraw from the region.
A Shift in Supply Chain Diversification
Fashion is one of the industries that can benefit from shifting sourcing strategies to China Plus One. It is not hard to understand why.
David Benichout explains that “there are certain categories where it’s very interesting to source from Europe, because the price difference is very small and it’s so convenient. You don’t have to travel long distances, there are no custom taxes, and you can react much faster.”
The ability to build infrastructure quickly enough to support more companies moving abroad is a key factor in determining how sustainable this trend will be. Companies that choose to diversify to Southeast Asian nations can continue to benefit from the diverse and easily accessible suppliers ….”
Brands are already shifting their focus, even though China continues to invest in its manufacturing region in order for it to remain competitive. Moncler and Saint Laurent, among others, are opening new factories in countries other than China. They prefer to build nearshore in Europe, Mexico, or Central America or restore into India or the “Tiger Club regions” of Vietnam, Malaysia, or Thailand. Nearly half of businesses that have redirected their supply chain investment prefer to focus on Europe or Southeast Asia.
As the graph above shows, regardless of whether brands choose to restore in China or nearshore, other manufacturing regions are already benefiting from China Plus One’s global adoption.
Five Advantages of Fashion Brands from China Plus One
The growing trend of reshoring and nearshoring in the fashion industry that is characterized by China Plus One, as well as global pandemic aftermath, as well as recent changes to international tariff policies and shifts towards the cost of Chinese labor and persistent concerns about human rights, cannot be stressed enough. Both established and emerging brands are reluctant to build new factory networks in China despite its impressive supply chain infrastructure.
Brands can benefit in many ways from diversifying their sourcing and production. China Plus One has led them to a model of a modern, multinational, diverse, and multicultural supply chain that offers at least four advantages.
1. Keep Sourcing costs Competitive
Diversifying your factory network is especially beneficial for brands who previously only worked with a limited number of manufacturing partners. This gives them more vendor leverage. The brand can shift production to another factory if one starts to overcharge.
The more diverse a brand’s network of factories and suppliers is, the better it can keep its sourcing cost competitive.
2. Crisis Management
COVID-19, in particular, exposed long-ignored flaws in the supply chain’s dependability and cohesiveness. Supply chain diversification will not prevent the same fallout as another global crisis, but it can mitigate smaller, slower, and isolated concerns in health, geopolitics, or the environment.
Apart from the large-scale supply chain disruptions caused by COVID-19 and Russia’s recent invasion of Ukraine, factories or material suppliers may also experience operating issues. The issues may lead to a factory closing, a decrease in capacity, or the failure of the factory to adhere to the contractual terms, deadlines, or quality standards. A more diverse and spread-out supply chain can help brands recover without their customers noticing any dips in quality or delivery times.
3. Raw Material Access
Different international manufacturing hubs may have additional expertise in product, fabric, or artistry. Fashion brands can match product features with the best experts to ensure top-quality production at reasonable costs.
Most manufacturers also trust fabric and trim suppliers. Fashion brands could use these networks to source the best cotton from India or the finest leathers from Italy. It can help brands save time and money by locating specialty, organic, or custom fabrics, trims, and trimmings.
4. Transparency in the Supply Chain
Brands can onboard new fashion manufacturers with high levels of transparency. It is easier to implement transparency strategies and workflows at the beginning of a new relationship between a brand and a supplier than after years of an established partnership.
Transparency is something fashion customers are demanding more of in recent years. According to the Honest Product Guide of the Consumer Goods Forum, a majority feel that brands don’t provide enough information on how their products affect various social, health, safety, and environmental issues. Ninety percent of corporate members believe their customers are more interested in transparency issues today than five years ago.
Brands looking to work with new producers are presented with a unique opportunity: they can implement transparent procedures from the beginning regarding materials sourcing and artistry. Adopt strategies and technology, such as the newly launched fashion tool Orma, to communicate this to customers to help you stand out in the market.
Fashion Brands have more options and control in the new era
Fashion brands were not immune to frustration when they entered the China Plus One age. What they stand to gain now is a supply chain that’s more resilient, adaptable, and focused on opportunities.
It remains to be determined which manufacturing hubs will rise to the China Plus One challenge. Brands now have the opportunity to create a structure for their supply chains that meets the practical needs of today while also establishing proactive measures that meet the internal and external expectations of tomorrow’s fashion. They should take advantage of this opportunity.