Turkish garment manufacturers voice concerns about cancelled orders

Turkish Garment Manufacturers

Turkish garment manufacturers have voiced their concerns about the effect cancelled orders are having on their industry and have called for closer collaboration from brands and retailers to help them weather the crisis.

Around 1.5 million people are employed in garment manufacturing in the country and the Turkish Clothing Manufacturers’ Association Board (TGSD) said the lockdowns around the world had led to retailers and brands taking “alarming actions”.

The TGSD called out several of the actions that it and its members had witnessed including:

  • retailers declaring to the manufacturers that there will be no future orders until further notice obliging manufacturers to cover labour and overhead costs on their own for an indeterminate period of time
  • retailers calling for the suspension of production in the pipeline
  • in “rare cases” soliciting discounts or cancellations for goods that are in the pipeline.
  • requesting an extension on the payment terms for shipped goods that are on their way to distribution centres or already in the stores

Thus far the focus on the effect of cancelled orders had been on Bangladesh, which is the world’s second largest ready made garment manufacturer outside of China, which says it has lost $2.4bn in orders.

A number of big name retailers have pledged to pay for work in progress and cover some costs of cancelled work, be that for materials or helping pay factory workers, such as Primark, H&M and Next. However many have not and have been requesting discounts and refusing to take delivery of orders.

The TGSD issued an open letter today to remind European and US retailers, who make up the majority of its exports, that those businesses will lose valued suppliers moving forward if they do not contribute to some of the costs of cancelled orders.

“A halt in high-volume production at the beginning of the season means that large quantity orders are creating massive inventories for the factories. Along with the inventory cost, manufacturers bear full liability for materials nominated by brands on their own, which constitutes an existential threat to companies most of which operate within one-digit margins. If brands do not help their suppliers finance the minimum liabilities, suppliers will not be able pay their employees’ salaries and secure their livelihood,” it said.

It went on to call for brands and retailers to open a dialogue with suppliers in order that they can work with manufacturers to get through the crisis.

“Manufacturers acknowledge the difficulties faced by retailers in trying to retain their liquidity needed to keep them afloat. As long as the requested delay time is reasonable, manufacturers may bridge the gap by benefiting from relief programs or monetary funds provided by the Turkish government.

“Global brands should do the same and benefit from loans pledged by their own governments of European and American countries, which constitute Turkey’s major markets. This crisis presents an opportunity for retail businesses and manufacturers to reinforce their dialogue, and continue to communicate with mutual respect and understanding to maintain a healthy and sustainable supply chain.

“However, if some retailers and brands prioritise short-term gains at the expense of other stakeholders in the supply chain, the word “sustainability” loses its credibility as the guiding principle for them and becomes an empty promise for the next generations,” it said.

The UN’s International Labour Organisation recently called for urgent collaboration between stakeholders to support garment industry workers across the world affected by the COVID-19 pandemic.

The call to action brings together key stakeholders in the industry in the wake of unprecedented social and economic disruption that has resulted in the closure of factories and retail stores, illness, and widespread loss of income and unemployment.

It aims to mobilise sufficient funding to enable manufacturers to ensure business continuity, payment of wages, as well as income-support and job retention schemes to protect garment workers’ income, health and employment. Primark is among the retailers to support the scheme.