Pandemic induced supply chain disruption in the fashion world

The pandemic affected a complete dissociation in the supply chain in the textile and apparel industry.

supply chain, pandemic, fashion industry, disruption, logistics, demand, supply, raw material, apparel, textile, manufacturing, economic crisis, livelihood
During the pandemic, with logistics coming to a grinding halt, the fashion industry invariably buckled.

– By Akhil Duggar Jain

The greatest impact of the Covid 19 virus, undoubtedly, was on the health and wellbeing of people all over the world. The consequent lockdowns that were imposed had a rippling effect on every aspect of the social and economic fabric of communities. All sectors of the economy spiraled downwards like never before and are still recovering from the onslaught. The world has lost over 4 trillion dollars, and India, the second-largest hit country after China, has witnessed a loss of 52.6 lakh crore in GDP.

The fashion industry is one vertical that has never seen a dull day over the past several decades. The industry is so versatile and inclusive, running consistently with a hundred per cent market share, that it thrives no matter what. The first-ever experience of heading south was during the pandemic that jolted the fashion industry out of its complacency. Most other sectors have witnessed fluctuations of some sort or the other, but this perhaps was the first big setback for this industry.

The travel-tourism industry, as well as the logistics industry, were perhaps the worst hit in recent times. With logistics coming to a grinding halt, the fashion industry invariably buckled. The demand side of the business as well as the supply side of the apparel and accessories vertical took a huge beating. Demand hit rock bottom with lockdowns which led to social distancing, closure of retail business outlets, customer thrift and saving, and prioritizing essentials, among other factors. On the supply side, shut down of production, breakdown of logistics, import restrictions, non-availability of raw materials, and acute escalation in the price of raw materials and logistics, all of these had a consolidated impact on supply chain, affecting production. 

Break down in the supply chain

India makes up about 16 per cent of textile imports to the US and about 5 per cent of apparel and accessories, according to Peterson Institute for International Economics. 

India is the world’s second-largest exporter of textiles and apparel with a massive raw material and manufacturing base. The textiles industry is a significant contributor to the economy, both in terms of its domestic share and exports. It contributes about 7 per cent to industrial output, 2 per cent to the GDP and 15 per cent to the country’s total export earnings. 

The pandemic affected a complete dissociation in the supply chain in this industry. The shutdown of China, a major exporter of raw material, followed by India, Bangladesh, Vietnam and Thailand left the global fashion industry in a lurch, particularly in the Western markets. Textile and apparel manufacturing units, the next link in the chain, too shut down. Of course, with cargo ships and airlines remaining anchored and hangered, international logistics was stalled. Domestic logistics, majorly trucks, remained stationary, hitting the local movement of raw material and finished products.

Economic crisis

As a result, major apparel retailers and brands postponed or canceled orders worth billions of dollars, which included those that were already manufactured and stood ready to be shipped, in a scramble to minimize losses and keep shareholders happy. 

The fashion industry is always in a state of flux. Trends change at a very rapid pace. Hence, design, procurement and production are executed several months before the finished product hits the retail market. Payment for the garments is not given until they have been shipped, which is standard practice. The consequence of this present payment process places the suppliers and their workers in a highly perilous and vulnerable position. It is estimated that western brands, for instance, canceled around $ 2.8 billion of existing orders in the wake of the pandemic. 

Cotton, silk, and denim from India are highly popular abroad so are the raw gems, and Indian design talent has found success across fashion centres around the world. With the cancellation of orders by the western brands, the Indian fashion and apparel market thus incurred huge losses.

While India constitutes a smaller fraction of imports as compared to China, it still plays a significant role in certain sectors, which makes it difficult to shift the supply chains outside the country.      

Loss of livelihood

This industry is one of the largest job creators in the country, employing about 45 million people directly. However, it was those at the bottom of the supply chain that was most affected, as the pandemic forced many suppliers to suspend or lay off millions of factory workers, often without severance and pay. They have pushed an already threatened group into hardships and greater poverty. Such an unfair system has been exposed during the pandemic.

At least 1.2 million garment workers in Bangladesh alone have been furloughed, as reported by the Bangladeshi and Garment Manufacturers Exporters Association (BGMEA). Manufacturing associations, exporters and labour groups were urging the brands to not cancel the orders to mitigate the devastating impact on the 60 million garment workers across the world.

The recovery path

Unlike other industries, a smooth and robust supply chain is essential for the fashion industry to survive and thrive. A rapidly metamorphosing industry, failure to cater to the demands and changing tastes of customers, is the surest route to backlash and setback. With the links of the supply chain being restored, business is slowly picking up. Policy modifications to protect the interest of the grassroots of the industry, in consonance with technology innovation and out of the box thinking will help restore the industry and bring livelihoods back to the deprived millions. 

(Akhil Duggar Jain is the Executive Director of Jain Amar Clothing Pvt Ltd that owns western wear brand, Madame).

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Industry