Cancellation Crisis in the Apparel and Textile Industries

As of March 30, 2020, the chart below indicates the current state of the battle against the CoronaVirus (COVID-19).  It is important to remember that daily statistics change, sometimes dramatically. 

In Asia, the apparel and textile industry is declining rapidly because of the shut down of factories.? The orders are drying up in China, Bangladesh, Vietnam, India, Myanmar, and Cambodia.?? As stores around the world are closing, billions of dollars in order cancellations are occurring.?

In February, there was a shortage of imported raw material from China, forcing several manufacturing plants in Cambodia and Myanmar to close down.  In March as the virus spread globally, large numbers of retailers were forced to close.  

China

China starts to recuperate from being locked down in January and February.  By March they are slowly starting to relax the restrictions and beginning to reopen businesses.  Meanwhile, the rest of the world is suffering from the effects of the global pandemic.  

China was forced to retool their factories to produce medical supplies to coup with the shortage.  As conditions eased they continued to produce mostly medical supplies because of the global pandemic there was no market for the traditional manufacturing of apparel and footwear.  

Bangladesh

Nearly 4.1 million individuals work in clothing industries in Bangladesh, the world’s No. 2 exporter after China.

More than one million garment workers in Bangladesh have already lost their jobs (or have been furloughed) because of order cancellations and the failure of buyers to pay for canceled shipments.  

Bangladesh declared a 10-day shutdown, effective from March 26 to April 4 that could be extended if virus numbers do not decline.   But, clothing manufacturers are “encouraged” to work through this shutdown.

As of March 29, 1,025 factories reported cancellations of 864 million units of work orders worth $2.81 billion, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Canceled/delayed orders, in US$ millions, according to the Centre for Global Workers’ Rights.

Vietnam

There are more than 6,800 apparel factories in Vietnam. In 2019, Vietnam’s export revenue was $39 billion, up 8 percent.  Their main customers were the E.U., the United States, and Japan.

The coronavirus pandemic could cost Vietnam’s textile industry $473 million in revenue, with millions losing their jobs.  Da Nang-based Hoa Tho Textile and Garment reported 500,000 items canceled or delayed.

Le Tien Truong, CEO of Hanoi-based Vietnam National Textile and Garment Group (Vinatex)  said that the canceled contracts will result in job cuts for 30-50 percent of 2.8 million textile workers.

Vietnam is currently struggling to expand trade with other nations.

India

The Indian fashion market was already struggling when the government announced a 21-day lockdown of the whole country.  Many big and small manufacturing industries had to cancel the pending orders and many new orders. Low wage workers are suffering the most, as the lockdown has deprived them of availing any money for essentials.

Aqeel Ahmed Panaruna, Council for Leather Exports Chairman reported,  “Export orders worth $1 billion were canceled in the past 10 days and many customers have stopped payments.

Customers are not paying invoices and all new orders are canceled. Our American clients are not accepting products that were made for them.”

The scenario isn’t looking good for the Indian economy. Most of the factories were operational before the government announced the lockdown; but as of now, the whole country is in quarantine, and this is probably going to last many more weeks or months.

Myanmar

In Myanmar, more than 20 manufacturing plants have closed, mostly from lack of raw materials. More than 10,000 laborers have been left with no income.  As the factories closed, production orders were left partially completed.    

U Myint Soe, chair of Myanmar Garment Manufacturers Association (MGMA) explained that the EU market accounts for 70 percent of the country’s garment export.

“All operations of the factories that have accepted orders from the EU have stopped. I don’t know how we will deal with this issue.

We began to receive raw materials from China. We have no more raw materials problem. Now the EU no longer accepts our garment exports. All this happened since last week.”

The supply chain has been paused and will remain so until further notice.

Cambodia

Conditions are no different in Cambodia.  A vast number of laborers in the clothing industry have also lost their jobs.  Some local campaigners are claiming that workers were fired without pay.  Social unrest is a possibility. 

As of March 27, more than 10,000 garment workers have already been laid off and it is feared as many as 200,000 could temporarily lose their jobs.

“We have zero cash flow and buyers are not upholding their end of the contractual obligations,” said Ken Loo, secretary-general of the Garment Manufacturing Association in Cambodia.

“How many companies do you think can survive long with zero cash flow? Even the most successful airlines in the world have announced they may go bankrupt without government assistance. That’s what we are facing.”

Conclusion

The story is not over.  We are going through an unprecedented worldwide crisis that will have a profound effect on the apparel and fashion industries. 

How will all this change the world Economically? Socially? Psychologically?  Politically? 


Author: Jeffrey Clark

A management professional with 25 years global experience working with fortune 500 and speciality brands, specializing in lean manufacturing, product, supply chain management, procurement, sourcing, and operations. Proven proactive leadership, vision, creative, and successful strategic business skills to drive revenue and profit growth in highly competitive domestic and global markets. A strong relationship builder, functions effectively as an integral member of a cohesive senior executive team. Proven ability to source, identify and capitalize on emerging trends and niche market opportunities.