The Covid-19 pandemic is wreaking havoc throughout the global fashion industry. A recently updated report by McKinsey and Company and the Business of Fashion—"The State of Fashion 2020"—states that the global fashion industry will face a 27 percent to 30 percent contraction in business due to the outbreak of the virus. These stark predictions are borne out by the latest news that UK apparel retail contracted by 34 percent in the month of March alone.
With global lockdowns and social distancing becoming the new norm, consumers are housebound, high street retail stores are closed, and brands and retailers are faced with an ever-mounting level of inventory. Even the upturn in online sales is not enough to dent the shortfall in sales that the Covid-19 pandemic has caused.
As a result, companies are cancelling or delaying orders with their supply chain partners and garment manufacturers and the backward linkage supply chain of the apparel industry are struggling for financial survival. Production and payments have come to a standstill and the apparel manufacturing industry can no longer predict what the future holds.
Now, more than ever, the apparel manufacturing community needs the support from their buying partners and central to this is an open and empathetic system of communication.
Communication between retailers and brands and their apparel supply chain partners is key. Whilst apparel manufacturers globally are aware of the devastating effects of the pandemic upon immediate trade, they need to have an insight into what their business partners are planning going forward. Buyers and their sourcing and purchasing teams need to be engaging with manufacturers.
The only way for the apparel industry to survive this crisis is for all parties to unite to find a sustainable way which would mitigate the financial impact of the pandemic and to ensure that it is distributed amongst all stakeholders, rather than solely impacting apparel manufacturers and their suppliers. Some suggestions that could be considered for a fairer, more equitable course of action are:
Assurance of business and provision of moral support: Many apparel manufacturers have been working and developing relationships with their clients over a number of years. What they are now seeking, during these dark times, are assurances from their customers that they will fight this crisis together and that they will be treated in an ethical, moral manner.
A true partnership can overcome many problems and the panic that ran through the apparel manufacturing community over the last few weeks can be overcome if manufacturers feel that their purchasing partners are not turning their backs on them.
Developing a cohesive plan to restart business: A detailed business plan from all customers is a must. Through open dialogue with apparel supply chain partners, customers can develop a plan for the intake or re-phasing of production, negotiate acceptable revisions to payment plans, discuss ways to mitigate any financial losses and how to use, or pay for, raw materials purchased on their behalf. Lack of, or delay in, any plan or any discourse just adds fuel to the fire, spreading a feeling of uncertainty and fear amongst apparel manufacturers.
Equitable distribution of the financial burden: The financial responsibilities and burden need to be properly distributed across customers, manufacturers, raw material producers and the associated supply chain. As most raw material suppliers used by apparel manufacturers are buyer-nominated, the buyers need to be talking with them to request the re-phasing of their payment terms to relieve the financial burden on garment manufacturers. A plan to utilise raw materials that have been produced for a particular order from a buyer and are now not required, needs to be devised through interaction between customers and their manufacturing partners.
Using corporate social responsibility (CSR) funds for workers' wages: Many brands and retailers have their own CSR fund established. One way of relieving the financial duress suffered by apparel manufacturers could be that customers come forward to help contribute towards the wages of workers at their manufacturing partners' factories. This allocation of support would be proportional on what percentage of any given manufacturer's capacity was allocated to a specific customer.
The effects of Covid-19 will be suffered by the apparel industry for the foreseeable future. The above suggestions show some of the ways that buyers can be proactive about opening discourse with apparel manufacturers. In order to mitigate the effects of the pandemic upon the sector, now is the time for customers to engage with their apparel supply chain partners to ensure that, when the crisis has passed, the industry is in a fit enough state to begin operating as efficiently as possible in the post-Covid-19 environment.
Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). Email: email@example.com