Though China has the world’s largest population (with 1.3 billion people), it is ironically suffering a labor shortage that is causing production problems for U.S. companies, including footwear makers in the outdoor industry.
“Some of our production partners have lower capacities, and we have experienced some production delays,” Tom Berry, vice president of global sales, marketing and merchandising for Tecnica (www.tecnicausa.com) told SNEWS®.
All types of boots and shoes are arriving late to U.S. dealers this fall because footwear makers are working with factories in China that simply lack the necessary workers to produce footwear in a timely manner.
The labor shortage for Chinese factories has actually been developing for the past several years as the number of high-paying jobs has increased in China, and the middle class has grown dramatically.
“Younger Chinese are no longer willing to work in factories,” Forbes.com reported in March. “They are far too optimistic about their career options and see no need to work for low wages hundreds of miles from their families.” According to the Forbes.com report, the number of university graduates grew from 1 million in 2000 to more than 6 million in 2010, which has depleted the pool of potential factory workers.
Compounding the problem, the Chinese government enacted a stimulus plan to create more factories in rural areas inland. As a result, skilled workers are opting to stick close to home, rather than travel to traditional industrial centers on the coast where much of the footwear has been produced. “Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior,” the New York Times reported in February 2010. “Millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast.”
With China factories scrambling to find workers and altering production schedules, there have been delays in the manufacture and delivery of outdoor footwear.
“It used to take us 90 to 120 days to get production out, from the time you place an order until it gets on a boat. Now it’s taking 180 to 200 days,” said Shelly Robinson, purchasing manager for Hi-Tec Sports (www.hi-tec.com).
Robinson said that due to production delays, Hi-Tec has not been able to ship to all of its dealers on time. “The winter boots they should have received in August will not arrive until the beginning of October,” she said.
To combat the problem, Hi-Tec asked its retailers to place orders earlier than usual this summer. “Our deadlines before were after Outdoor Retailer, but we went to our retailers and said we needed orders before OR,” said Robinson. But she noted that this was difficult because retailers had to assume more risk in projecting how much they would sell. “It’s difficult because customers don’t want to do that with the economy the way it is,” she said.
Dealing with the problem
Manufacturers told SNEWS that the labor shortage in China would probably continue for several years, so they are looking for long-term solutions. Some companies are moving production to new factories in rural areas, while others are spreading production across a greater number of facilities in China, or even moving manufacturing to other countries.
“Our manufacturer has just opened production in a new facility about 600 kilometers from his current site to nestle his business into the hometown of 80 percent of his skilled workforce,” said Steve Bendzak, general manager of Ex Officio (www.exofficio.com). “This is to deliver a higher quality of life to his employees who love their jobs, yet are being squeezed by an increased cost of living near the original plant or put in a position where a visit home is only possible over Chinese New Year.”
To ensure that its products are produced on time, Tecnica has also made shifts in its production in China and Asia. “Over four months ago, based on projected capacity issues, we worked with our production partners and rebalanced our Asian production across our factories to better meet the market needs,” said Berry of Tecnica. He added that the company is fortunate that 75 percent of its shoes are made in Europe, so delays due to issues in China have less of an impact. “In the exceptional cases where we are still experiencing delays, we are expediting the goods with airfreight,” he said.
Robinson said Hi-Tec’s sourcing agent is now searching for long-term solutions to the labor problem, and one idea is to move to larger, more stable factories in China. “We’re looking at going into bigger factories that handle larger manufacturers, such as Nike and adidas,” said Robinson. But she added that those factories might charge Hi-Tec more than smaller factories would, which could lead to higher retail prices.
The company’s other solution has been to move some of its manufacturing out of China and into other countries. “Our purchasing agency in Asia has started moving production to other areas, such as Indonesia,” she said.
In the coming years, it is going to become more important for companies to spread production throughout the world so that they can adjust to the kind of “economic transformations” that China is experiencing, said Berry. “I think that the only way for a global brand to thrive today is to make sure that they are also a global producer.”