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True partnership between buyer and supplier required for business sustainability

The turnaround by global brands of apparel goods has ushered in hope among local apparel manufacturers. They believe the trend will help recover the economy from the pandemic-induced fallout.

However, exporters are still in a state of anxiety over a possible second wave of the virus in export destination countries, which might lead to further economic lockdowns and order cancellations or delays in getting export bills.

Canada and the United Kingdom are already going through the second wave of the coronavirus, taking every measure to cope with the situation.

Figure: A true partnership among buyers and suppliers for the sustainability of the business is required.

Global apparel retailers and brands canceled work orders amounting to $4 billion during the lockdown caused by the coronavirus in the April-March 2020 period.

While some buyers have taken back canceled orders, a good number of manufacturers are yet to realize the receipts against shipped goods.

To remain in the safe zone, Bangladeshi apparel makers have developed strategies, such as not accepting work orders from buyers who had earlier canceled orders and defaulted in payment.

“We are not taking work orders from those buyers whose approaches were bad and non-cooperative,” SM Khaled, managing director of Snowtex, told Dhaka Tribune.

”In the present context as also amid fears of a second wave, we prefer buyers with good track records and minimal possibility of our landing in fresh trouble due to Covid-19 uncertainty,” he added.

“But I hope there will not be a huge crisis if the second wave of coronavirus hits again as people have already adapted to the coronavirus emergency”, said the exporter.

Besides, manufacturers are also reviewing buyers’ payment track records, ethical standards and purchasing practices before okaying any work order for the next season or the current season.

“After the lessons learned from unprecedented work order cancellations, manufacturers have become cautious and selective in order to avert further financial losses,” Md Fazlul Hoque, Managing Director of Plummy Fashions, said.

”As an exporter, I focus on buyers’ credibility, history, guarantees of payment terms, taking third party guarantees and market reputation in case of a new client,” said Fazlul.

BGMEA favors business resilience

“It’s been nearly a year and we are still struggling with Covid-19 and its impacts. The availability of vaccines is still far in the future and there are clear predictions about more waves of infection being imminent,” stated BGMEA President Rubana Huq.

“Now, what makes us concerned, apart from the matter of health hazards, is the impact on trade and the economy. The first wave was apocalyptic for our industry in terms of cancellations, which has jeopardized our financial management system,” added Rubana Huq.

“It was an opportunity for us to learn about the fault lines in our trading and contractual arrangements between parties.

However, given the fact that it is a buyer’s market and business terms are being set by them, we don’t have much leverage to redesign the business terms with them. But what we are pursuing is building financial resilience within the industry,” said the business leader.

“The immediate focus now is to reconstruct the industry and enhance focus on trade terms and payment protection. It will require some sort of policy interventions, and we have already started stakeholder consultations,” said the BGMEA leader.

Besides, ensuring due diligence in the contractual settings was also a call of the time and there had been ongoing efforts towards that, she added.

“In the highly competitive global market where every second and every penny counts, we will not be able to put caps on those to enforce ‘due diligence’.

Partnering is key to survive

“Our business is driven by importers and we have to carry out their directives. There is no scope to change the landscape of business or terms of conditions within a short span of time,” Mostafiz Uddin, Managing Director of Denim Expert Limited said.

Cancellation of work orders or delaying payment totally depended on the morality and ethical standard of a buyer. If a buyer wanted to do so, there were many ways he could show as reasons, Mostafiz explained.

In the future, doing business will not be possible without a true partnership with buyers. Manufacturers have to build partnerships and find partners who uphold ethical standards and evaluate partnership, said Mostafiz.

”I have faced work order cancellations from my buyers and they have not even paid yet. I have cut off relations with those buyers,” he added.

“However, there were some buyers who maintained relationships during the pandemic and consulted with me about how to deal with ongoing work orders. They treated me as their partner,” added Mostafiz.

The underlying theme, therefore, was a true partnership among buyers and suppliers for the sustainability of the business, he added.

(Source: Dhaka Tribune)

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