Eclat Enterprise joins forces with five major clients to address the new US tariffs, with short-term and urgent order strategies helping to maintain stable gross margins.

Taiwanese garment giant Makalot Industrial Co., Ltd. (1477), in response to the new U.S. tariff policy, announced during the April 16 earnings conference that it has reached an agreement with its top five clients to jointly bear potential cost pressures. Makalot is adopting a "quick response" strategy to reduce lead times, thereby maintaining stable prices and profit margins, ensuring its gross margin remains unaffected. This strategy showcases its adaptability and reflects the global supply chain's trend towards greater flexibility and diversification.

Negotiation Consensus Under Tariff Pressure

Amid the backdrop of the U.S. imposing a new round of additional tariffs on products from China and other regions, the global apparel supply chain is facing a reshuffle. As one of the world's major garment manufacturers, Makalot has swiftly initiated negotiations with its top five international brand clients. According to the company, both parties have reached a preliminary consensus on a cost-sharing mechanism and agreed to maintain the existing cooperation model and price stability until the policy is fully clarified.

Makalot emphasizes that the core of this consensus is "sharing the cost pressure," avoiding the unilateral transfer of tariff costs to suppliers. With brand companies unwilling to raise retail prices, they choose to absorb part of the costs with supply chain partners, demonstrating stability and flexibility in long-term cooperation.

"Short-Term and Urgent Orders" Strategy: Exchanging Speed for Profit

To address cost changes and delivery uncertainties brought by tariff policies, Makalot has launched a "short-term and urgent orders" strategy, becoming a key means to cope with the new situation. "Short-term and urgent orders" refer to small batch orders with significantly shortened delivery times and rapid response. Makalot points out that clients currently generally require delivery times to be shortened by at least a week, which not only helps brand companies adjust inventory amid policy changes but also allows Makalot to maintain profit margins in the context of higher prices for short orders.

Compared to traditional long orders, short orders, although more tightly scheduled in production, have higher unit prices, helping suppliers balance the cost pressure brought by tariffs. Makalot states that this "exchanging speed for profit" model has become one of the mainstream trends in current supply chain adjustments.

Gross Profit Margin Remains Stable, Operations Unaffected

Despite the turbulent external environment, Makalot's current gross profit margin has not been affected. The company notes that through the short-term and urgent orders strategy and negotiation results with clients, it has successfully stabilized prices and order mix. Brand companies, unwilling to raise retail prices, choose to exchange shorter delivery times for price stability, allowing Makalot to maintain shipping rhythm without sacrificing profits.

Additionally, Makalot has adjusted its order mix for the second half of the year, prioritizing high-margin and core client orders, while selectively eliminating non-core client orders to enhance overall operational efficiency. The company states that this strategy helps focus resources on the most valuable partnerships amid limited capacity.

Supply Chain Transformation and Production Location Adjustment

In the trend of global supply chain restructuring, Makalot observes three major changes: first, a decrease in long orders and an increase in short-term and urgent orders; second, localized procurement of raw materials becoming mainstream, with the local procurement ratio in Vietnam expected to increase from 60% to over 80%; third, regional integration or using U.S.-sourced materials to reduce raw material origin disputes and tax risks.

Makalot points out that these changes are not only responses to current policies but also reflect the global apparel supply chain's development towards greater flexibility and diversification. Although the company is not inclined to immediately expand capacity significantly, it will continue to review order mix and production location to ensure competitiveness amid policy changes.

Balancing Customer Demand and Capacity Scheduling

With tariff policies not yet fully clear, some clients have requested early shipments to be completed before July to avoid potential tariff adjustments. Makalot states that it will evaluate based on factory scheduling and delivery arrangements, especially as capacity enters peak season starting in June, making delivery schedules tight, and whether compliance is possible will depend on actual circumstances.

The company emphasizes that despite facing capacity pressure, precise order selection and scheduling management can still maintain overall operational efficiency and delivery flexibility.

References

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