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Covid 19: Suppliers getting lower order, less price and deferred payment

Bangladesh Readymade Garments (RMG) sector has suffered in various ways because of the pandemic, which accounts for about 80% of Bangladesh’s total exports. More than 50% of RMG manufacturers have had to require orders at much lower prices than before just in case of emergency. Also they are facing delayed payment.

A study on “Weakest Link in Global Supply Chain: How the Pandemic is Effecting Bangladesh Garment Workers”, was conducted by the Institute for Human Rights and Business (IHRB) and the Subir and Malini Chowdhury Center for Bangladesh Studies at the University of California Berkeley. UNDP Bangladesh and the Government of Sweden supported conducting the study.

The study said that buyers demanded price cuts on new orders has been increased dramatically and it is bigger than the year-over-year reductions buyers usually claimed.

According to several manufacturers, when the pandemic disruptions first hit earlier in March 2020, 77% had at least some of their orders canceled without payment from buyers. Presently, only 27% of these same suppliers say that all or most of their orders have been paid in full.

figure: 1 More than 50% of RMG manufacturers have had to require orders at much lower prices than before just in case of emergency.

According to the survey, on, average, manufacturers surveyed will have to wait 77 days after they complete and ship customers’ new orders, to receive payment, however, the average lead-time was 43 days before the pandemic.

According to the survey, a majority of suppliers said they have less than half the order volume now relative to the same period last year.

On the other hand, 57% reported that, if current patterns continue, it is extremely likely or somewhat likely that they will be forced out of business.

Some manufacturers are saying the crisis in the RMG sector began since the increment of the salary for the second time. After the outbreak of COVID-19 pandemic, it has worsened.

Manufacturers are not in any position to talk about price until the situation returns to normal. If this situation continues, many factories will not be able to cope up with and they will be forced to leave the business.

The term of the loan given by the government is 5 years, it should be extended to at least 14-15 years. Otherwise, the industry will be forced to close, according to manufacturers.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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