Effects of COVID-19 - Industry
I wouldn’t even know how to assess the final industry impact of the current coronavirus on global industry. Many industries that rely on “people” will suffer because workers can’t come in to work; some will prosper (e.g. food delivery). One industry that I looked at was the travel and tourism industry. This time, I thought it worth looking at the global garment industry, as clothing is something many take for granted. Both are linked into the global supply chain.
Suppliers to chains worldwide have found the game has changed. Buyers are cancelling orders or asking for significant discounts. According to one producer in India “Brand focus on share price now means some of them don't have money for this rainy day, and are coming to the weakest link in the supply chain, asking us to help them out when they could be applying for a bailout from the US government stimulus package."
Garment manufacturers have been hit hard by two major issues related to coronavirus lockdowns:
- Problems started in February when factories couldn't get the raw materials they needed from China, the world biggest exporter of textiles, which accounted for some $118bn (£67bn) in 2018.
- As China's textile factories reopened in recent weeks - giving garment manufacturers hopes of getting operations back on track - demand collapsed as retailers were forced to shut their doors after governments around the world imposed lockdowns.
Although China may be known as the “factory of the world”, when it comes to clothes, Bangladesh, Indonesia, Cambodia, Vietnam and Myanmar play a growing role. As production costs in China have increased over the past decade, manufacturing has moved away according to Stanley Szeto of Lever Style (suppliers to brands such as Hugo Boss, Theory, Vince, and Coach, Bonobos, Stitch Fix, Everlane).
Bangladesh and Vietnam are amongst the world's four largest exporters of clothing, accounting between them for 12.4% in 2019. Some 90% of Bangladesh’s exports come from garment exports, and the country’s garment industry employs four million workers. Cambodia and Sri Lanka also rely on the garment industry for more than 60% of their exports. The garment industry provides over 50% of manufacturing jobs in Bangladesh, 60% in Cambodia. A little-appreciated fact is that it constitutes an important employer of women, according to the BBC.
Suppliers first couldn’t obtain textiles from China. Now they have orders cancelled. Retail chains can’t sell due to social distancing and lockdown rules.
Now apply this to other industries. The “developed” world will suffer, but poorer countries will be hit the hardest. For their populations, relatively low paid (and, in some cases, dangerous) jobs are all that stands between them and starvation due to fragile healthcare systems and lack of social safety nets in their countries.
We need to be planning for other scenarios that may be just as bad as (if not worse than) the current coronavirus pandemic. Cash reserves and the ability to provide goods/services remotely (i.e. online) will be key to survival.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Leadership, Strategy, Teamwork
posted by William Martin @ 14:04
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