Feedback Here

fbook  tweeter  linkin YouTube
Global contents also translated in Chinese

Turkey emerges the new global production hub

"Preferred by major consumer markets due to their cheaper costs, the Asia-based supply system is undergoing a major change. As a recent McKinsey Global Institute’s report indicates, large consumer markets are turning towards new and closer manufacturers."

 

Turkey emerges the new global productionPreferred by major consumer markets due to their cheaper costs, the Asia-based supply system is undergoing a major change. As a recent McKinsey Global Institute’s report indicates, large consumer markets are turning towards new and closer manufacturers.

US and European apparel companies had earlier shifted most of their production to China and other Asian countries to benefit from the low labor costs that these countries offer. However, these countries cannot satisfy the requirements for quick product delivery as it takes at least 30 days for a product to be shipped from Asia to the Western markets. Geopolitical tensions that increase trade restrictions and uncertainty in exchange rates also reduce the benefits of this model.

Geographical proximity gains importance

Assessing this situation, McKinsey Turkey Country Director Can Kendi states the textile and apparel sector,Turkey emerges the new global production hub earlier based on raw materials and labor-intensive production, has changed significantly due to globalisation, new technologies, brand and designs. Geographical proximity and technology are some of the other factors that have gained importance in the market. Taking these factors in account South East Asian markets like Turkey are emerging as a favorite production destination for these manufacturers.

Automation reduces delivery time

Products manufactured in the Asian countries for the European market can be delivered in 30 days by ship, whereas those manufactured in Turkey can be delivered between 3 and 6 days. Advanced automation in Turkey makes it possible to reduce apparel production by 40-70 per cent. Labour costs in Turkey were five times higher than in China in 2005; this difference decreased to 1.6 times as of 2017. Geographical proximity also brings significant savings in transportation, bringing production costs to lower levels.

Labour wages and production costs are increasing across Asia. For example, in 2005, the cost of labour in China was one-tenth of the cost in the US; but today it is one-third. Mexico, which is close to the gigantic US market, now offers lower labour costs than China. Although the costs of manufacturers close to the European market are still higher than China, this difference is decreasing. On the other hand labor costs in Turkey, which were five times higher than in China in 2005; decreased to 1.6 times as of 2017. Its geographical proximity also brings significant savings in transportation, bringing production costs to lower levels.

European companies can reduce their production costs by 3 per cent if they manufacture their apparels from Turkey instead of China. Automated production in Turkey is expected to provide between $1:30 to $2 cost savings per piece. It can also provide a margin improvement of between 3 per cent-4 per cent.

 
Advertisement
 
 
LATEST TOP NEWS
 
 
MOST POPULAR NEWS