The United States entered the peak period of the COVID-19 epidemic in March, which also restricted operations at Honghe and Nianxing factories in Mexico. Although Hongyuan’s fabric factory in North Carolina has not stopped production, it has also launched a plan to streamline its manpower.
The legal person believes that the original purpose of setting up factories in the United States and neighboring countries was to be close to the market, but now this advantage has turned into a disadvantage.
The legal person stated that in recent years, in order to reduce inventory and reduce costs, brands have required suppliers to shorten delivery times; supplier response methods can be divided into three types, one is to adopt Improve the process to achieve rapid production and flexible scheduling. The second type is clustering of nearby industries. For example, a cloth factory sets up a factory near a garment factory to supply downstream products nearby and meet the delivery date. The third type is production in the nearest market. In the early years, the preferential tariffs brought by the North American Free Trade Agreement made textile factories choose to set up factories in Mexico, including Nianxing and Honghe.
Now threatened by the spread of the epidemic in the United States, Mexico launched a one-month soft lockdown policy at the end of March, immediately suspending work and personnel logistics, which also affected the local residents of Nianxing and Honghe. As the factories were shut down, the monthly production capacity of the Nianxing Mexican denim factory was about 1.8 million yards, accounting for 40% of the total Nianxing denim production capacity; the Honghe garment factory accounted for about 41% of the company’s revenue, and both were severely affected.
Hongyuan owns a cloth factory and a small garment production line in North Carolina, USA. The legal person pointed out that although the factory has not stopped working, orders have been sharp due to the impact of the epidemic in the local market. The number of people in the factory was reduced from 200 to 100, a reduction of up to 50%.
The legal person believes that whether it is a factory in the United States or Mexico, the main market is in the United States. When the epidemic in the United States affects consumption momentum, it will be the first wave of brands. Targets for order cuts are expected to be the first to bear the brunt, which is why Hongyuan’s US factory must lay off employees.
It’s just that the epidemic is getting worse, and its impact has extended from the United States and neighboring regions to Asia. Japan recently announced a declaration of emergency, and seven major administrative regions including Tokyo and Osaka will be affected for one month. Control, the legal person pointed out, originally hoped that the Northeast Asian market would recover as soon as possible, but now it seems to be equally severe; Taiwan’s textile factories have not yet laid off layoffs, but there are not many days left to survive.
