Bangladeshi apparel makers book only 35% orders of its production capacity for July-Dec of 2020
Since the global retailers are placing fewer work orders due to fall in demand, the Bangladeshi apparel makers have been able only to book 35% orders of its production capacity.
On the other hand, taking advantage of the work order shortage, the global buyers offered fewer prices pushing the average prices down by 14%.
A survey conducted by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) over 100 apparel manufacturers to learn about the actual scenario of work orders in hands amid the COVID-19 pandemic for the second half (July-December) of the year 2020 revealed the data.
This means the manufacturers have to run the factory with capacity incurring losses as they have to bear the operation cost as well as the workers’ wages.
On the other hand, the decline in prices of goods will rub salt to the wound of the manufacturers and they might have to downsize the workers to survive.
As per the findings of the survey, prices of apparel goods booked by the global retailers for the July-December period of 2020 have seen an average 14% fall due to a shortage of enough work orders.
On the other hand, for the consolidated period of July-Dec 2020, only 35% capacity has been booked, leaving the balance 65% capacity empty.
Against the full capacity of 365.78 million pieces, the manufacturers have confirmed 127.50 million pieces for the second half of 2020.
As per the survey findings, for July itself, the percentage of work orders booking is 56% of the total production capacity.
For December, the manufacturers received the lowest work orders, which is only 17% of the total production capacity. Against the capacity of 60.56 million, the manufacturers booked only 10.27 million pieces’ orders.
Also, on average, the price trend has been showing a 14% dip in the second half of 2020 as compared to last year. The huge shortfall in order in the market has also made the price to take a nosedive, it added.
Men’s undergarments have the highest price decline of 43% followed by babies’ garments 35%, denim trousers 10%, jackets and suits 14%, sweater 13%, T-Shirt 21%, Woven Shirts 16% and Woven Trouser 12% decline in prices.
Only knitted bottoms got a price hike of 6% this year, the survey findings showed.
How it will impact the sector
Running factories with less capacity will leave the sector in further crisis including downsizing workers and closure of production, opined factory owners and economists.
On the other hand, shortage of work orders may force small factories to shut their production as they have the lesser financial capacity to survive, they said.
“With the 35% working capacity, manufacturers will not be able to bear the expenses of operational costs. On the other hand, the downswing in prices will create further cash crunch,” Chairman of BGMEA Standing Committee on PR Khan Monirul Alam Shuvo told Textile Today.
We are facing a scenario where market demand is so low compared to supply and the global COVID-19 pandemic situation is not improving in the export destinations, said Monirul.
We are now incurring additional expenses due to running the factories with proper health and safety protocols. On top of it the order situation and price situation have both dropped like this, making our lives extremely difficult, which may deepen the crisis, he added.
Meanwhile, economists think that the situation may improve in the coming month if the COVID-19 situation comes under control.
“The prevailing situation in the garment sector is not favorable as the global demands of products fall. To overcome the situation, the sector people have to fight with the competitors to grab orders by offering reasonable prices,” said Ahsan H Mansur, executive director of Policy Research Institute.
To do this, the factory should try cutting production costs by increasing efficiency, while the government should provide financial support with low cost to tackle the lean period, said the economist.
He also urged the government as well as the sector people to ensure health safety and control the infection of coronavirus so that the buyers get confidence to place orders.
The ultimate turnaround of the economic activities will depend on the COVID-19 controlling as the concern is safe movement of people, he added.