In our recent blog, BAMKO broke down the anticipated impact of potential tariffs on the promo industry. The pending second Trump administration has created the potential for industry-changing tariffs that could increase the cost of all promo products, especially those sourced or containing material sourced from China.
This same impact also extends to the custom uniform industry. With the proposed 10% or 20% tariff on everything that comes into the United States and a 60% or 100% tariff on everything entering from China, the cost of uniforms could significantly increase.
At HPI Powered by BAMKO, we’ve been preparing for this potential shift by diversifying our supply chain, and ensuring our global operations are positioned to absorb some of the impact of price hikes.
Tariffs and the Custom Uniform Industry
The challenges that potential tariffs pose to the promo industry are the same for the custom uniform industry – but the cost breakdown is a bit more complex. In the uniform industry, the final cost of a product is determined by three factors. First, there’s the fabric itself. Second is CMT (cut, make, trim), which covers the labor and manufacturing processes. Finally, transportation, duty, and logistics account for the costs of moving the goods from the factory to the end consumer, including shipping, import duties, and warehousing. 
The threat of tariffs on Chinese imports could disrupt each of these areas, potentially increasing costs across the board. This poses a challenge for smaller uniform providers relying on Chinese manufacturing, as they may struggle to absorb these increased costs and maintain competitive pricing.
While shifting production back to the US might seem like a solution, the reality is more complex. Even with a 50% (or higher) tariff on imports, domestic manufacturing often struggles to compete on cost. Several factors contribute to this:
- Higher labor costs: US labor costs are significantly higher than many overseas manufacturing hubs.
- Limited manufacturing capacity: The US textile industry has shrunk considerably over the years, resulting in limited domestic manufacturing capacity. This lack of capacity can lead to production bottlenecks and longer lead times.
- Skill shortages: The decline in US textile manufacturing has also created a shortage of skilled labor in the industry.
Recent events highlight these challenges. Even the US government and military have faced backorders on uniforms due to bottlenecks in the limited number of US factories and a scarcity of skilled textile workers.
Diversifying our Supply Chain
At HPI, we’ve been proactively addressing this challenge.
While we source much of our fabrics from China due to the high quality and consistency of the route, we’ve been proactively diversifying our manufacturing efforts. We’ve expanded our production network to include other Far East countries like Bangladesh, Vietnam, India, and Pakistan. This strategic move allows us to mitigate tariff risks, maintain competitive pricing, and enhance our supply chain resilience.
We have also implemented a dual-sourcing strategy for many of our products. This means that even if we’ve historically used a production facility in China for a particular item, we simultaneously source it through an alternative route. This proactive approach offers us agility in the event of disruptions or price increases, minimizes our reliance on any single manufacturing location, and allows us to leverage competition among suppliers to secure the best possible prices for our clients.
Beyond our efforts in the Far East, HPI has been proactively expanding our manufacturing network even before the current tariff discussions. This expansion includes:
- Near-shoring in Central and South America: We’ve established production partnerships in countries like Haiti and others in Central and South America. This near-shoring strategy offers several advantages, including:
- Reduced lead times: Shorter distances translate to faster shipping and quicker turnaround times for your orders.
- Lower transportation costs: Proximity reduces shipping expenses, contributing to more competitive pricing.
- Enhanced agility: Near-shoring allows us to respond more rapidly to changes in demand and market trends.
- Duty-free routes in Africa and the Middle East: We’re actively building partnerships in regions with duty-free agreements, such as certain countries in Africa and the Middle East. This strategic move allows us to:
- Minimize import costs: Duty-free imports eliminate significant costs associated with tariffs.
- Offer more competitive pricing: These cost savings are passed on to our clients, making our uniforms even more affordable.
- A Risk To This Strategy: African manufacturing often involves significantly longer lead times. This means that while the product itself may be cheaper due to reduced or eliminated import duties, we would need to maintain higher inventory levels and place larger orders further in advance. This increased inventory carrying cost ultimately impacts our customers’ total cost of ownership.
By strategically diversifying our operations across continents, we’re not just reacting to potential tariffs; we’re building a stronger, more agile, and more cost-effective supply chain for the future.
Managing Price Pressures: Our Proactive Approach
While we’re proactively mitigating the potential impact of tariffs, it’s important to acknowledge that some price adjustments may be unavoidable. Here’s a transparent look at the factors that could influence pricing:
Increased Demand in Alternative Manufacturing Hubs: As more companies shift production away from China, demand will inevitably rise in alternative manufacturing hubs like Bangladesh, Vietnam, and India. This increased demand could lead to price increases based on simple supply and demand economics.
Potential Lead Time Impacts: The influx of new business in these alternative manufacturing hubs could also impact lead times. As factories reach capacity, production schedules may extend, potentially affecting order fulfillment speed.
Rising Costs for Domestic Wholesalers: Rising costs will also impact domestic wholesalers. Companies like Sanmar, which manufacture overseas and hold significant “blank” inventory in the US, face similar challenges and are likely to increase prices.
Rising Costs for Domestic Production: Even domestic manufacturing could experience price increases. Many US manufacturers rely on imported materials and components, which may be subject to tariffs. These increased costs will likely be passed along to clients.
Challenges with Smaller Production Runs: China often remains the most cost-effective and quality-driven option for smaller production runs and highly specialized items. Tariffs on these goods could lead to price adjustments for these specific items.
HPI is proactively investing in increased inventory for key and core styles to minimize the impact on our clients.
By securing inventory now, we:
- Lock in current pricing: We acquire products at pre-tariff duty rates, shielding our clients from immediate price hikes.
- Maintain price stability: Our robust inventory offers consistent pricing, even if market fluctuations occur.
- Ensure product availability: Increased stock levels help us meet client demand promptly, even with potential supply chain disruptions.
While some degree of price adjustment may be unavoidable, we’re committed to transparency and providing our clients with the best possible value. Our strategies aim to minimize the impact of tariffs and maintain competitive pricing while ensuring a reliable supply of high-quality uniforms.
Your Uniform Industry Solution, Our Top Priority
Navigating the complexities of tariffs and supply chain disruptions can be challenging. But at HPI and BAMKO, you’re not alone. Our teams have been working diligently behind the scenes to implement proactive solutions that mitigate risks and protect our clients’ interests.
If you’re an existing client, your dedicated account management team is ready to discuss your specific needs and ensure a smooth transition through these evolving market dynamics. Reach out to them today to explore customized solutions and address any concerns.
And if you’re a business looking for a reliable and proactive uniform provider who can navigate these challenges effectively, we’re here to help. Contact us today for a consultation and discover how we can optimize your uniform program for success.
Together, we can weather this storm and emerge stronger. Don’t hesitate to reach out – we’re here to support you every step of the way.
