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COVID-19: Devastating impact on global garment supply chains

A new report lists the fashion brands which have reportedly canceled or postponed the most orders from suppliers in Bangladesh where more than a million garment workers have now lost their jobs because of the coronavirus pandemic.

brands-Canceled-apparel-orders-Bangladesh

Primark has canceled or delayed by far the most orders, with a total of US$273 million, followed by C&A (US$166m) and Inditex/Zara (US$109m), according to the report by the Centre for Global Workers’ Rights, part of Penn State University’s College of the Liberal Arts.

Mothercare (with US$62m of canceled or delayed orders), Bestseller (US$59m), Kiabi (US$57m), VF Corp (US$56m), Tesco (US$50m), M&S (US$39m), Kohls (US$39m), Walmart (US$38m), LPP (US$37m), Target (US$24m), and J C Penney (US$23m) are also listed.

Fashion giants H&M and PVH – which both source substantial amounts of clothing from Bangladesh – were not included in the list as they have agreed to pay factories for canceled orders which were already in production.

The figures include both orders which were already being processed, totaling US$1.45 billion, and orders scheduled for later in the year, which are valued at US$1.69 billion, making a total of US$3.14 billion.

A Primark spokesperson said, “Every store in every country in which we operate is now closed. We are losing sales of £650 million a month as a result. We have therefore been left with no option.”

“We have large quantities of existing stock in our stores, our depots and in transit, that is paid for. If we had not taken this action, we would be taking delivery of stock that we simply could not sell. This has been unprecedented action for unprecedented and frankly unimaginable times.”

“We at Primark have worked alongside so many of our suppliers for many years and value our relationships enormously. We recognize and are deeply saddened that this will affect our entire supply chain.”

“We have large quantities of existing stock in our stores, our depots and in transit, that is paid for. If we had not taken this action, we would be taking delivery of stock that we simply could not sell. This has been unprecedented action for unprecedented and frankly unimaginable times.”

said Primark spokesperson

“We are in close and regular contact with our suppliers and very much hope that our normal trading relationships can resume as soon as possible. In the meantime, we are urging, in the strongest possible terms, governments in the countries from which we source our products, to take action in support of their local businesses and workers, in the same way, that the UK and many European governments are doing.”

However, Bestseller CFO Thomas Børglum pledged, “We will do our utmost to live up to our commitments and take delivery of garments already made and those in production. We are aware of our responsibility and we are in close dialogue with each of our suppliers on how to handle the current crisis.”

“We have to get through this situation by collaboration and in partnerships with our suppliers. We want to support our suppliers and we are still placing orders for the coming seasons.”

The Centre for Global Workers’ Rights says it calculated the figures based on data from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) – although the BGMEA denied providing researchers with the information.

The report, entitled Abandoned? The Impact of COVID-19 on Workers and Businesses at the Bottom of Global Garment Supply Chains was written by the center’s director Mark Anner, in association with the Worker Rights Consortium.

“The global COVID-19 pandemic has had a devastating impact on global garment supply chains, and the situation will get far worse before it gets better,” he wrote.

“As clothing outlets have been shut by lockdowns in developed market economies, sinking demand for apparel, brands and retailers have moved quickly to cancel or postpone production orders – refusing, in many cases, to pay for clothing their supplier factories have already produced.

“The result has been the partial or complete shutdown of thousands of factories in producing countries. As a result, millions of factory workers have been sent home, often without legally-mandated pay or severance.”

The report drew on an online survey of 316 factory owners in Bangladesh. The authors say the size of the sample, out of Bangladesh’s 2,000 factory owners, gives them a confidence level of 95% in its findings.

Some 45.8% reported that ‘a lot’ to ‘most’ of their nearly or entirely completed orders had been canceled by buyers, and that 5.9% had had all of these orders canceled.

The report said that buyers had a contractual obligation to pay for these orders but were “making dubious use of general force majeure clauses to justify their violations of the terms of the contract”.

The survey found that 72.1% of buyers had refused to pay for raw materials already purchased to complete their orders and that 91.3 percent had refused to pay for production costs.

And 98.1% of buyers were refusing to contribute to the cost of reduced wages paid to lay off workers, to which they were legally entitled, and 97.3 percent had refused to contribute to severance pay.

As a result of order cancellations and lack of payment, 58 percent of factories surveyed had shut down most or all of their operations. Nearly all have subsequently closed anyway in Bangladesh because of the lockdown imposed by the government.

The report concludes that brands and retailers should find ways to access credit or government support to cover their obligations to supplier factories to avoid millions of workers being sent home with no money to “put food on the table, let alone cover medical expenses”.

“Going forward it is necessary to re-think how the industry does business. Purchasing practices must be reformed for social and environmental sustainability,” it continues.

(The report was published in Ecotextile News. Written by Simon Glover)

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