Stan Burton wandered into the Guatemalan factory like a prospector investigating buried treasure.
His company, Columbia Sportswear, had long relied on plants in Asia to make its clothing, but this was becoming increasingly unsustainable. A trade war reduced the benefits of using Chinese factories to stock Americans with windbreakers and wool pullovers. The pandemic’s disruptions had exposed the pitfalls of relying on container ships to move products across the Pacific.
As head of Columbia’s apparel manufacturing, Mr. Burton, 52, was responsible for minimizing the risks. So he was looking for factories in Central America to bridge the distance between the brand’s manufacturing operations and customers in the United States.
He visited Zuntex Apparel, a factory in Guatemala City that was already making modest quantities of Colombia’s hooded sweatshirts and button-down fishing shirts. Can it handle orders large enough?
When Mr. Burton reached the back of the cavernous plant, he saw a series of Italian-made machines capable of printing elaborate designs that could be pressed onto clothing.
“It’s a big boy setup,” Mr. Burton said. “There’s nothing we can ask of them that they can’t do.”
Colombia’s reconnaissance trip to Central America reflects the new nature of international trade as geopolitical forces push multinationals to reduce their reliance on distant factories. It also attests to the lesson of the pandemic: After extraordinary product shortages, major brands are eager to make it easier to replenish their stocks.
US tariffs on a wide range of imports from China – President Donald J. The measures — imposed by Trump and continued by President Biden — have prompted major US companies to shift production from Chinese factories. The staggering rise in shipping prices during the pandemic prompted retail brands to move their manufacturing closer to their biggest markets.
Mexico has been a primary beneficiary, attracting investment from companies eager to build near U.S. customers. This year Mexico overtook China largest US trading partner,
Central America appears well positioned to attract apparel manufacturers. Under the terms of the trade agreement, clothing made in factories in the region can be exported duty-free to the United States if the yarn is produced in American mills or within Central America.
Based in Portland, Ore., Columbia has in recent years become dependent on factories in Vietnam and Bangladesh to supply U.S. customers. Central America produces only 7 percent of global production today, a share that could double in the next three to five years.
The previous day, Mr. Burton and another Columbia executive, Jeff Toews – an expert in the nuances of international trade deals – had toured a factory in El Salvador.
“We are making a significant difference in this area,” Mr Burton said. “We’re really being reset from Asia.”
Some within the industry were skeptical that interest from American brands in Central America would evoke memories of traffic jams at container ports.
For decades, clothing manufacturing enterprise has shifted to Asia, and especially China, due to an unbeatable combination: industrial parks built with government money and millions of workers eager for jobs, even at very low wages. Executives running clothing brands might take a momentary interest in “supply chain flexibility,” the thinking went, but their focus would inevitably return to cost.
“People are attracted to the lower prices in Asia,” said Juan A. Sanchez said. “Nobody gets fired for lowering prices.”
How did the model break down?
At 6 feet 5 inches tall, with a bright smile, Mr. Burton is a charming and cheerful man. The beginning of his career is traced to his quest to add low-cost items to American clothing.
With more than three decades in manufacturing, he has supervised Nike factory operations in Thailand and Indonesia and Under Armor production in China. Two years ago, he moved to Portland to join Columbia.
The brand was quick to move production from China to Vietnam. When Mr. Trump took office, launching his trade war against China, the company accelerated that move to avoid new tariffs. But as hundreds of other businesses did the same, Vietnam’s ports and industrial zones became increasingly crowded.
“Everyone came running in,” said Peter Bragdon, Columbia’s general counsel. “Capacity and cost became more challenging very quickly.”
Then Covid 19 turned global shipping upside down. By the summer of 2021, the business model focused on bridging the Pacific Ocean no longer seemed safe.
“This is something the company historically hasn’t really worried about,” Columbia Chief Executive Timothy Boyle said that summer. “Logistics infrastructure was always something that was cheap and available.”
With that perception suddenly threatened, the company prepared to move some production closer to the United States.
Colombia was not abandoning Asia. Rather, it was intended to limit its vulnerability to another shock. That route led to Central America.
The biggest question was whether the region could produce enough cloth to supply local garment factories.
Seeking clarity, Mr. Burton and four other executives began their morning at a mill that made cloth for Zantex.
Alternatives are being explored.
The Texas mill is located in an industrial park 25 miles southwest of Guatemala City, nestled in dense jungle, within view of an active volcano spewing brown dust.
A joint venture between local investors and a North Carolina company, TexasA was conceived to take advantage of the Central America Free Trade Agreement, which Congress enacted in 2005. It supplies clothing to regional garment factories that export to the United States.
Inside a conference room, Columbia executives absorbed a PowerPoint presentation promoting the factory’s plans for expansion. Below, the factory floor housed 180 machines capable of making fabric from yarn, dyeing it, and treating it to achieve the desired texture.
“We are starting to see more and more better types of fabrics and threads in the region, spinning creativity that is similar to what you see in Asia,” said Raul Lopez-Ibanez, the mill’s chief commercial officer. “We’re not there yet, but we’re getting there.”
He and other Texas officials emphasized the benefits of access to cotton growers in the United States – an alternative to suppliers in Asia.
Most of Asia’s cotton is harvested in Xinjiang, a region in western China where the ethnic minority Uighurs suffer systemic persecution, leading to genocide accusations by the United States. Congress banned products made with forced labor in China, increasing legal and reputational risks for apparel companies.
Mr Burton was impressed by the detail, but was keen to speed up the pace.
“You may have to accelerate your timeline,” he told his Texas counterparts.
The rattle of machinery.
During a visit to apparel factory Zuntex, Mr. Burton considered the implications of moving production to Central America.
He estimated that the cost of making clothes in the region is typically 5 to 10 percent higher than in Vietnam, but that was before taking into account the cost of shipping, to say nothing of the time required for delivery. I went.
It usually takes about a month to move a container of goods from Vietnam to the Port of Seattle. The same goods could be shipped there from Guatemala in a week. And that shorter period will allow Colombia to keep less inventory in its U.S. warehouses.
The pandemic shortage partly reflected how many companies had gone too far with so-called just in time production — essentially, making enough product to meet demand. They cut inventory, reducing warehouse space, while using the savings to satisfy investors with cash dividends.
Moving production closer to customers reduced the risk of holding low inventory, as orders could be delivered faster. Here was the element that could make Just in Time viable.
Inside the Zantex factory, hundreds of workers – three-quarters of whom were women – were working at sewing machines, sewing clothes into sweatshirts and T-shirts. Others folded clothes into piles ready for packaging. The plant began to vibrate due to the hum of machinery.
Abel Navarrete walked slowly through the building. Colombia’s vice president of sustainability and community impact, she was concerned about working conditions, a sensitive area for apparel brands that rely on labor in low-income countries.
The auditors’ reports seemed solid, Mr. Navarrete said, but they used more nuanced measurements.
“Do people make eye contact with foreign visitors?” He asked. “They do.” Workers talked and joked together, he added – another positive sign.
Mr Burton was impressed by the scope for development. The existing factory occupied about three acres of land, but Zantex officials were formulating plans to more than double that space.
“I see some of the best machines in the world here,” he said. “He has a lot of potential.”