Maintaining Sustainable Supply Chains During COVID-19

29-05-2020

 

The COVID-19 has had devastating impacts on international trade. However, it can also be seen as a wakeup call that we need to strengthen buyer-supplier relations. Social and environmental responsibilities in trade are more important than ever.

“In such a challenging time, corporate social responsibility (CSR) is more needed than ever, as to sustain global supply chains and international trade,” said Christian Ewert, President of amfori.

In order to better understand the challenges and needs of our Members and Producers, the amfori COVID-19 Task Force conducted a survey in April.

The data below comes from amfori’s survey on the impact of COVID-19 on supply chains. We gathered replies from over 160 1 member companies from 17 countries and over 400 producers from the top 10 sourcing countries 2.

Fig. 1 Over 90% of Members who responded have experienced high impact on their businesses during the pandemic

Fig. 2 Most of our Member Respondents are sourcing from China

Fig. 3 Over 75% of Members faced decreasing consumer demand, which led to cancellations or delays of orders

Fig. 4 Over 72% of Producers faced the cancellation of sales orders by buyers

The common top challenges for both Members and Producers due to the COVID-19 are the following three issues:

  • cancellation or reduction of orders due to decreased consumer demand
  • blocked or delayed shipment due to logistics system control/suspension
  • cashflow

Alongside these challenges to businesses, working conditions are also being affected. According to the ILO, 1.25 billion workers worldwide are being affected by the cancellation of orders, increased lay-offs, delay and reductions in wages and working hours, business closure and potential health risks at workplaces. There are an additional two billion workers from the informal sectors who are also at risk.

Members are encouraged to adopt amfori’s Responsible Purchasing Practices in order to sustain businesses amidst this challenging time and uphold sustainable working conditions.

“During this difficult time, we believe that Responsible Business Conduct is the only route that will ensure business relations can be strengthened during a time of crisis. This will not only ensure business continuity where possible but safeguard human rights and enable human prosperity across global value chains. Indeed, all actors in the global value chain will need each other. In other words, dialogue, solidarity and collaboration will be key,” says Christian Ewert. 

amfori members’ qualitative survey

amfori Network Representatives in nine countries conducted phone interviews with 48 key members in 12 countries and found out:

  • China remains the main sourcing base thanks to the established business partnerships, comprehensive supply chains and reliable production quality
  • most of the companies will not change/adjust their sourcing strategy
  • Members hope amfori will re-iterate the commitment and action for sustainability and call for ethical trading at buyer level, especially due to order cancellation at critical periods

Over 160 Members in 17 countries responded to our Members’ quantitative survey. We found that:

  • around 40% of respondents are reducing their orders of non-necessities and asking for payment terms extensions to overcome cashflow challenges
  • around a quarter maintain business as usual without adjustment or change in their contractual agreements with producers
  • over 40% of respondents expected that the supply orders would continue to decrease in Q2 2020
  • 65% of respondents have engaged their suppliers/producers in their impacted sourcing plan/communication

Over 400 Producers in 10 top sourcing countries responded to the Producers’ survey. We found that:

  • 60%+ of Producers were asked by their buyers for payment extensions
  • 60%+ of the Producers said that product delivery for existing orders has been delayed and over 30% of them had to absorb the unplanned cost of delivery themselves
  • 42% of Producers believe that buyers adopting sustainable sourcing/responsible purchasing practice is the best way to maintain sustainable trade

Working together is the best way forward

Although buyers and producers may have different priorities, there are constructive ways to tackle the challenges together.

One important collaboration is that buyers and producers should engage each other in their impacted sourcing plan and communications. This way they can overcome the business challenges together.

Our survey shows that 65% out of 160+ respondents have engaged their suppliers/producers in their impacted sourcing plan/communication. However, only 43% out of 400+ producers confirm that their customers/buyers have engaged them in their impacted sourcing plan/communication. There is certainly room for enhanced communication between the two groups.

From our Members’ quantitative survey, government incentives/support measures are ranked as the most needed measures for tackling the challenges. From our Producer’s survey, Buyers adopting sustainable sourcing/responsible purchasing practice is ranked as the top measure needed to maintain trade; government funding support comes second.

In response to the above needs, amfori has been exploring funding opportunities for Members and Producers in various countries. Download the List of global funding & List of fundings available in APAC key sourcing countries.

Our COVID-19 Task Force will continue to identify resources and solutions to address our Members’ needs while recovering from the COVID-19 pandemic.

 

1 Australia, Austria, Belgium, Canada, China/HK, Denmark, Finland, France, Germany, Italy, Netherlands, NZ, Spain, Sweden, Switzerland, UK, US

2 Bangladesh, Cambodia, China, India, Morocco, Myanmar, Pakistan, Thailand, Turkey, Vietnam