Delivering a presentation titled, “The Global Neighborhood – Being Global, Delivering Local,” McRaith gave a poignant perspective on what it will take to bring manufacturing back to this hemisphere and the challenges in doing so. A native of Scotland, he has also lived in China as well as the U.S. He described himself as “the biggest champion and advocate for manufacturing,” noting that he has spent much of his life in manufacturing and led a push during a previous career stint at a large retailer to bring manufacturing back to the U.S.

 

McRaith provided an historical perspective on the apparel world during his introductory remarks.

 

“Since 1972, when (President) Nixon visited China, up until about four or five years, if you were in the apparel purchasing space you were in a deflationary environment,” he said. “The price of the product relative to all other products in the U.S. was declining. That lasted for approximately 40 years. And then it hit the bottom. We today live in an inflationary environment.

 

“And I don’t care where you are or where you operate – you can be in the cheapest place in the world – but you are nonetheless living in an inflationary environment, where prices are going up significantly faster than the countries you bring those product into,” he continued. “So the U.S. is faced with this increased cost from overseas. That creates an opportunity here and it’s a question of what do you have to do to unlock that opportunity.”

 

McRaith pointed out that the world is shifting, that China is losing ground in manufacturing areas such as apparel. As such, PVH and other companies are trying to find ways to connect all sources of manufacturing to all sources of retailing, which creates a “very different” environment, he said.

 

“So the challenge we have now is, how do you optimize that?” he asked. “Where exactly is the place that you have to go to get the most efficient, best-priced, best-quality product and the best supply chain flows into the countries you need to distribute in?”

 

Another challenge, he said, is developing a globally compliant product, particularly as it relates to labeling. His company must develop a label that meets the needs of all 90 countries it ships product to, he said. In the near future, more and more companies will begin to face such challenges, wherein they won’t be worried about just one country or one region. But within such challenges lies opportunities, McRaith said.

 

Next big things: Africa, Made in America

 

Related to global shifts, he announced that two things he is a strong believer in are Africa and Made in America.

 

“And I don’t think those two things conflict with each other,” he said. “In fact, we think they directly complement each other because what we are crystal clear on is that for the U.S. and actually for maybe the U.S./North America/Latin America market, China is basically at the end of its lifecycle for us. Southeast Asia is basically on the end of its lifecycle for us. And we new alternatives.”

 

Besides the U.S., the East African Community (EAC) represents the next big opportunity for PVH, he said.

 

“We just spent an inordinate amount of time and effort in Africa trying to watch how it is emerging and, quite frankly, we were stunned by what’s happening there,” he said. “Africa is more poised for growth than China was in 1990. If anyone is wondering where the next China is, I’m telling you, it’s Africa – or at least parts of Africa. They have an amazing infrastructure and efficiencies – they compete with Vietnam on that, in my mind – they have their own cotton supply, and they have the cheapest energy supply in the world, and the U.S. is No. 2.”

 

One of the biggest challenges facing the U.S. in its re-shoring efforts is a lack of verticality, McRaith said. The ability to vertically integrate will only help move manufacturing back here, he said.

 

“If I ask anything of this group, it’s this: Help the retailers of the world see a clear, common face that creates some verticality so they can engage with you in a way that leads to response opportunities they wish they had but don’t have a way to pull together,” he said. “And maybe don’t see each other as competitors. Consider how to bring consortiums together where you actively work together to build this verticality.

 

“We can have great conversations with cotton farmers, and we do,” he said. “We can have great conversations with individual spinners, and we do. But we think there is dearth of knitters and weavers. And there are some manufacturers out there in fiber. About a year ago, we started to make product again in the U.S. for the first time in 15 years. We started to make shirts in North Carolina. But the problem is, it’s fragmented. There’s not a common face or one group that we can talk to and work with and say ‘how do we stand this up?’ because any one part coming up doesn’t solve the problem. We need the whole thing to come up.”

 

Focus on maximizing profitability

 

Among his “asks” is for partners that have smart supply chain teams; customs and trade professionals; logistics and warehousing capabilities; and proper systems. Supply chain teams, he said, should be knowledgeable on social compliance and should shift their focus from, first, cost metrics, to maximizing profitability.

 

“If you’ve been in this industry for less than 40 years, your sole experience, your whole life, has been a life of deflation,” he reiterated. “The only conversation people have is ‘how do I get something cheaper?’ My retort is, ‘why is that even a conversation? Why isn’t the conversation about maximizing the profitability of the organization?’ ”

 

And customs and trade professionals should be more than “trade optimizers,” he said. They should be “global compliance people” who know what works everywhere in the world, not just the U.S., he continued.

 

As a side note, he added: “If you’re a senior player in your organization, one of your No. 1 responsibilities to your organization is to see beyond the horizon,” he said. “Everybody can see to the horizon. You have to be able to see what’s coming. You have to be out in the world talking to people, talking to competitors.”

 

PVH has been working on a made in the USA initiative for two years, McRaith said, although the company and other retail brand owners will still need sourcing capabilities from the ASEAN region.

 

“That will not come back to the U.S.,” he said. “We need a responsive capability built here in the U.S. And we’ve been at it for two years and, quite frankly, it is frustrating to us. We’ve had multiple discussions about that. Most retailers in a basic environment will still need the ‘low and slow’ models. But we also need a responsive model, what we refer to as the ‘high and fast’ model. It’s expensive, but we don’t care because it’s responsive.”

 

McRaith asked attendees to think about working with big manufacturers offshore through joint ventures and partnerships.

 

“I know that thought can sometimes stick in the gut,” he said. “Those are the guys who sort of led to the demise of the (U.S.) industry, but those are the guys who also can help with the regrowth of the industry if we actively engage with them.”

 

In conclusion, he said, “We believe stuff is coming back and coming back fast. And we’re not sure who we engage or how we pull this together in a way that we can get a concerted effort to build it so it works.”

 

More coverage in coming weeks