“We want to come together as associations and manufacturers in Asia, to agree on common positions regarding payment and delivery terms so that we have a stronger voice in individual and in collective discussions with brands and buyers on improving purchasing practices”, said spokesperson Miran Ali, representing the STAR Network.
The unique aspect about this initiative is: It is raising questions around purchasing practices, such as payment and delivery terms, from the perspective of manufacturers and the associations representing them, making it a true bottom-up initiative, that all nine member organisations, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), CNTAC, PTMA, PHMA, TMA, MGMA, GMAC, and VITAS support.
So are things going to change for the garment makers now… let’s find out?
Manufacturing destinations and apparel makers have long been at the receiving end of the buyers’ so-called lopsided buying practices and Bangladesh, which holds the proud position of being the second largest apparel exporter globally, has not been any exception.
The Coronavirus pandemic, if at all, has brought to fore the complicacies and criticality of buyer-supplier relationship, which at best weighs in favour of the buyers. Order cancellations, extended payment terms, discount demands and payments defaults – you name it and chances are majority of the manufacturers, if not all, would have faced one or the other, and in some cases perhaps all, with devastating implications.
As per a joint study carried out by the Center for Policy Dialogue (CPD) and the Mapped in Bangladesh (MiB), that tracks export-oriented garment factories digitally, majority or 86 per cent of the surveyed 610 factories said that brands/buyers did not take supportive measures for caring about workers’ health and financial peril of factories during the pandemic even as it also found the discontinuation of normal business ties with the buyers/brands immediately after the pandemic, as a ‘major challenge’ for suppliers.
Buyers and brands are supposed to maintain normal business contact particularly during the crisis period, discuss the issues and challenges confronted by the suppliers and try to provide predictability to the suppliers with regard to orders, prices and market situation, underlined the study, while adding that around one-third of the factories alleged that at least some of their orders were cancelled and necessary payment was not made.
Around 30 per cent factories reported that a section of buyers deferred shipment with timely payment while 20.5 per cent factories said buyers settled with deferred payment whilst around 16 per cent factories claimed that buyers settled part of their orders at a reduced price and 1.8 per cent factories complained that buyers cancelled orders but agreed to pay the cost of raw materials.
The application of ‘force majeure’ clause in such incidences was widely discussed, the report said.
It’s not that everyone let things lying down with a set of suppliers even deciding to take legal action against an errant buyer. However, majority of the suppliers, going by the recent reports, it seems felt it wise to not get into any confrontation as such.
However, now things seem all set to change after garment makers across various manufacturing destinations, have decided to join hands. Representatives of the STAR Network, the first inter-Asian Network of Producer Associations of the textile and garment industry, came together on 12 January 2021 to start a new initiative calling for better purchasing practices in the textile and garment industry.
It may be mentioned here that the nine textile and garment business associations of the STAR network have asked the global brands and buyers to honour the terms of readymade garment purchasing contracts and not re-negotiate price or payment terms during this unprecedented global pandemic even as it issued a joint statement, requesting brands, retailers and global buyers to consider potential impacts on workers and small businesses in the supply chain when taking significant purchasing decisions.
The Sustainable Textile of Asian Region reportedly had also called on their buyers to take delivery or shipment, and proceed with payment as agreed upon for goods already produced and currently in production with materials ready, and not cancel orders which are already in production.
Further, the platform of manufacturing countries called on buyers for offering fair compensation to suppliers if production or delivery has to be suspended or stopped.
The manufacturers’ associations also asked global buyers for putting no responsibility on suppliers for delay of delivery or shipment and claim no compensation for such delays and no further improper pressure on suppliers by additional costs, rush orders or unnecessary visits and audits.
“This common position will be powerful,” Miran Ali stated, according to whom, the network represents over 60 per cent of all global apparel exports by manufacturers.
It may be mentioned here that the textile and garment industry has been characterised by a power imbalance between the brands and buyers on the one end and the textile and garment producers on the other. This imbalance has been increased and made even more visible during the COVID-19 pandemic, in which order cancellations, especially from European and US-brands and buyers, left many Asian producers with their backs against the wall.
“The situation had been difficult before”, Miran Ali explained, “but COVID-19 changed everything. However, it does not end with COVID-19!”
It may be mentioned here that as per reports, until March 2021, the associations will work together in five working groups, defining their ‘red lines’, requests and recommendations on topics such as payment and delivery practices, planning and information exchange and third-party negotiations. Based on the output of the working groups, the second phase of the initiative will drive the roll-out in the industry.
Many industry organisations and networks have already pledged support to the initiative. They will be involved as experts, supporting the working groups or as part of an industry advisory board. However, before brands, buyers and other stakeholders are joining the discussion table, manufacturers and associations will use the ‘safe space’ of their new initiative to develop joint requirements and recommendations, to then communicate them with one voice.
For information, the STAR Network serves as a platform for dialogue and trust-building to exchange on good practices to make textile and garment production more sustainable. It has been established in 2016 with the support of the German Development Cooperation Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, which implements a project called FABRIC Asia that aims to foster sustainability in the Asian textile and garment industry on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).
Meanwhile, in what is seen as a development that would give a further boost to the same, four more apparel associations from three more countries have reportedly joined the STAR Network.
The apparel manufacturing associations in Turkey, Indonesia and Morocco recently joined the Sustainable Textile of the Asian Region (STAR) Network. The four major industry associations – the Indonesian Textile Association (API), the Turkish Clothing Manufacturers Association (TCMA), the Istanbul Ready-Made Garments Exporters’ Association (IHKIB) and the Moroccan Association of Textile & Clothing Industries (AMITH) joined the initiative on ‘manufacturers payment and delivery terms’, according to a press release by the STAR Network.
So, going by the latest developments, one would assume that things are all set to change in the days to come, and rightfully so, to bring in the much-needed equilibrium between the buyers and suppliers, which would perhaps be in the benefit of all.