Report on the Current Situation of the Global Garment Industry in Terms of the Coronavirus Disaster

Below is an excerpt from the July issue of J.S.N. International.

JSN recently heard the following from a prominent figure involved in the global garment industry regarding the current situation of the industry (both within Indonesia and globally) in terms of the coronavirus disaster as well as the industry's outlook.

Ms. Anne Patricia Sutanto, Vice Chairman of Foreign Trade of the Indonesian Textile Association (API)
At present, global brands and retailers are adjusting to world markets under post-lockdown relaxations. In April 2020, orders were suspended and there were even cancellations; however, in May and June 2020, brands and retailers started to request pending deliveries to be shipped urgently and also for orders that had been suspended to be shipped as scheduled. In the second half of 2020, clothing demand will remain soft, but the outlook should be better compared to the first half of 2020. Our forecast for the second half of 2020 is demand for more functional, performance and practical clothing.

Regarding Indonesia’s garment industry, few of us have the privilege to work with sustainable brands and retailers, and some of us are having to endure brands and retailers that are not performing well, which affects both cash flows as well as future production.

Transparency from the government, brands, and the entire supply chain is needed, so that everyone can manage expectations and perceptions well, thus lowering the negative side effects of Covid-19. There are also intensive and constant communications between all of the ministries and our industry, so the policy during the Covid-19 pandemic is exactly right.

The garment industry should start to focus on its internal strengths and synchronize with what is needed by the market under the current situation, so a willingness to learn, adapt, and be more agile is required of the textile and garment ecosystem.

Mr. Han Bekke, President of International Apparel Federation (IAF)
We are in the middle of a crisis, caused by Covid-19, that is unprecedented and that will have a lasting impact on our economy and society. Also, our textile apparel supply chain is highly affected. Many countries were or still are in a lock down in various gradations with many fashion shops closed for a long time. In some countries we now see a careful step by step return to what is called the new normal. Others call it a 1 meter fifty- or 2-meters economy with social distancing. Health and safety are rightly top priorities, but on the other hand economy should come back to live.

On the short term our supply chain is lacking liquidity. But this should never lead to one-sided cancellation of orders and one-sided changes in payment conditions from 30 to 60 or from 60 to 90 even 120 days. IAF, from the beginning of this crisis, has taken a firm stand on this and have via the press send out an appeal to companies in our supply chain to show solidarity and to cooperate, rather than putting the problems on the table elsewhere upstream or downstream. Fortunately, we now see some changes in attitude by big retailers and brands.

Cancellations of orders have already led to factory closures, growing stocks and redundancies in certain countries. According to reports from McKinsey 80% of the clothing companies will face financial difficulties this year. Drops in sales of 50% or more are expected, especially on retail level which will work negatively throughout the supply chain. It is therefore that IAF has reached out to international bodies like OECD, ILO and to World Bank’s IFC to generate extra funds or loans to the most vulnerable clothing producing countries. We need:

  • effective short-term access to liquidity to improve the solvability
  • extra funds for the most vulnerable countries and
  • governments that refrain from imposing export and import restrictions or other barriers that will disrupt our supply chain. Protectionism is the last thing we need. Free but fair trade should be the leading principle.

Digitization is clearly gaining wings under Covid-19. Social distancing, as one of the measures to control the virus, is leading to many digital meetings, webinars and digital trade fairs. It is efficient and it safes a lot of costs. One of the reasons for IAF to launch the 1st digital Global Apparel Sourcing Expo 2020 for the ready-made garment industry together with Sourcing Journal as media partner. The Global Apparel Sourcing Expo is powered by our partner Foursource, who is providing the technological platform for the event with a specific focus on B2B matchmaking. The show will run from the 15th of July until the 14th of August 2020.

Before Covid-19 our sector was suffering, hardly healed from the earlier financial crisis from 2008 onwards. It was already clear that our supply chain needed a reset, something that is now accelerated by the crisis we are in. Next to the financial needs I just mentioned, the buyer-supplier relationship should be rebalanced. One could think of a certain internationally accepted fair practice code. We should create a pull market rather than keeping the push market we are in now with heavy pressure on prices. We should look into changes in the order rhythm, reconsider our sourcing strategies, consider how smart factories could improve productivity and cost-competitiveness, develop an omni-channel distribution plan including e-commerce based on data and finally increase our contribution to a cleaner and more sustainable planet.

In order to achieve all this, we need more collaboration in our supply chain, more than ever.

Mr. Chalumpon Lotharukpong, Managing Director of VT Garment, Thailand
In this unprecedented global emergency, the Covid-19 pandemic has had an adverse impact on almost every industry and resulted in unprecedented pressure on health services. Adding insult to injury, the production order in the fashion industry is projected to reduce by over 60% this year thereby creating a strain in the global economy, not to mention the furloughing or unemployment status of millions of factory workers worldwide.

In March 2020, the World Health Organisation issued a call for industries to increase personal protective equipment (PPE) production to help healthcare workers, our unsung heroes, who are the frontline of the war against the impending virus.

VT Garment, a world class outerwear and sportswear manufacturer based in Thailand, realised that pivoting to PPE would not only support healthcare workers but also stabilised the workforce. Consequently, VT Garment and Sawbwa VT (affiliated company in Myanmar), quickly retooled the factories to meet the needs of the moment, and registered with the US Food and Drug Administration (FDA) to produce gowns and coveralls from the highest specification (US AAMI PB70 Level 4) down to the lowest specification (US AAMI PB70 Level 1). Moreover, VT Garment expects to receive the European Union’s CE Marks for their products by the end of July.

Mr. Michael McDonald, President of SPESA, U.S.A.
Like so many across the globe, the COVID-19 pandemic was detrimental to the U.S. economy and U.S. businesses. It presented challenges many had never experienced before, resulting in mass job losses and major changes to many U.S. industries. The sewn products industry was hit just as hard, but saw an opportunity to quickly pivot to the production of personal protective equipment (PPE). New opportunities for domestic manufacturing have emerged and alliances between different organizations have formed to support the industry and equip frontline workers in the fight against Covid-19.

SPESA has seen its partnerships grow stronger with the united goal to equip members with the tools and resources needed to transition production. This process has included taskforce calls with different groups, webinars for members and nonmembers, and the development of technical resources for the construction and manufacturing of complex PPE equipment. The process has played a significant role in connecting people from across the industry to develop more vertical supply chains in the Americas. It has also been a reminder to SPESA that this industry is more than just a workforce, but an entire community dedicated to the fight against Covid-19.

Covid-19 has had a devastating effect on health, economy, and community around the world and the sewn products industry in the United States has suffered significant harm. However, this industry has taken the opportunity to come together and develop new and lasting partnerships that we have not seen in decades. The future has a lot of unknowns right now. We are hopeful though that the partnerships established and the reenergized focus on domestic manufacturing will help the sewn products industry in the U.S. prevail during these volatile times and beyond.