The Difficulty Of Garment Manufacturers: People Return To Work, Orders Are Gone.

From worrying about no one's work to worrying about not working, in the face of such a V turn, the response time of the new crown to Chinese factories is less than two months.

"At the end of January, customers, including ourselves, were worried about capacity and on time delivery. Now the factory has fully resumed work, but because of the reduction in orders, we have to control the production capacity at 7 per cent." In March 22nd, Ye Mao, who runs a hat factory in Taizhou, Zhejiang, told the first financial magazine. Because most of the customers are in the most serious epidemic in Europe, he said he was ready to empty workers for 2 to 3 months without orders.

In the middle of March, the textile and garment manufacturer Yida group began to receive some customers' notice to stop the production of the existing orders. "Even if the orders have been finished, there are customers who do not let us temporarily ship them." No similar situation has occurred in the most serious domestic epidemic. " Ma Weiping, general manager of Guangdong Yida Textile Co., Ltd.

The United States and Europe are the largest overseas export markets, accounting for 63% of the group's total annual business. Since March, the large-scale sale of terminal stores in Europe and the United States will inevitably result in a heavy setback for such manufacturers. "At present, some of our key European and American customers have cancelled orders directly, and some have stopped all orders on the production line." Ma Weiping said.

Chinese factories basically resumed their work in mid March, but the reduction of foreign trade orders became a new problem.

According to the statistics of the United Nations Statistics Division, in 2018, China made a 28.4% share in the global market, which was far ahead of 16.6% and ranked second in the United States. It is the world's leading manufacturing superpower. Another McKinsey data shows that China contributes 35% of the total output of the global manufacturing industry.

Apparel manufacturing is only a branch of China's huge manufacturing industry. As a global factory, China made a crucial role in the epidemic.

In the early days, China was the first to face the peak of the epidemic. The market was generally worried that once the epidemic was not effectively controlled, the goods manufactured in China would delay production and shipment time. The global supply chain would be disrupted, and nearly 30% of the retail market would be affected by the interruption of supply.

The apparel industry in China is mainly concentrated in the Yangtze River Delta and the Pearl River Delta region. The characteristics of the near port have brought about the agglomeration effect for the high-speed industry. But in recent years, with the increase of labor cost and land cost, some factories have begun to transfer to inland areas such as Henan, Jiangxi, Sichuan and Hubei, or to recruit large numbers of workers from the above areas. But no one would have thought that the outbreak would be concentrated in Hubei.

On the face of it, the Chinese apparel manufacturing supply chain, which is pressed by the epidemic situation, wants to restart, so long as the workers arrive at the post, they can solve it. But this is not the case. Nearly two months of home segregation policy in the country has completely eliminated the real retail gold week under the original Spring Festival holiday. The tension of the nationwide anti epidemic will suppress consumers' desire for shopping for a long time, and these demand side tightening will soon be transmitted to the supply side.

Entering March, domestic demand has not yet been effectively restored, and there is an urgent epidemic in Europe and the United States. The gloomy picture that the global retailing industry can foresee in the next few months will let many brands decide to suspend production or cancel the list on a large scale, or even give up sales in a quarterly basis.

If the brand side voluntarily abandoned the spring and summer market in 2020, manufacturers would have to accept this situation passively. The instant transformation of the situation and the adjustment of production and operation that it has brought to every factory will undoubtedly mean some difficult decisions.

Once the domestic demand is suppressed, the retail industry will bear the brunt. Once it is affected, the manufacturing industry will soon become a problem. Under the background of global economic integration, no role can be left alone. Xue Donghui, general manager of CREE international flexible employment business, said in an interview with "first finance" YiMagazine, "if the Japanese Olympic Games are postponed, if the epidemic control of the US is not effective, if the two largest trading partners in China fall, what will you do to solve the problem?"

It is only a matter of time and simplest to solve the problem in the factory. Outside the factory, in the global supply chain that has long been interdependent but still looks fragile today, the restart of Chinese factories is still difficult.

Ups and downs of orders

According to the conventional rhythm, Wu Yi should place an order to the factory in April every year, but after the Spring Festival ended this year, she failed to get in touch with the factory successfully in February.

Wu Yi worked as a marketing director and production planning officer in a Japanese online clothing brand. The sale pattern of the company is mainly based on the advance sale, and consumers usually place a month to a month and a half on the website. After completing the development proofing work, the brand will complete the whole process of sample shooting, commodity loading, ordering to the factory, ordering shipment and shipping to Japan in this period. The advantage of this model is low inventory and high turnover, but the benefits will be bad when the front-end supply chain breaks down because of uncontrollable factors.

As early as in the early January, Wu Yi heard from social media and relatives and friends that a severe virus was spreading in China, and that the SARS situation might repeat itself in 2003. A few days later, more and more reports of new crown pneumonia were reported. "At that time, the company had already begun to discuss whether it would really affect sales, considering that the order that had been ordered before the Spring Festival in China should be rushed out as soon as possible." Wu Yi told the first finance and economics YiMagazine.

Wu Yi's service companies in China mainly maintained long-term cooperation with factories in Guangzhou and Nantong. But in mid January, the factories in Guangzhou had already been on holiday. Wu Yi had to communicate with Nantong's factories in an urgent way, so that all the orders originally planned for shipment at the end of February were completed ahead of schedule, and finally completed the last shipment in January 19th.

But the shipment of that order in Nantong is only a few thousand pieces. After the Spring Festival, factories in China are generally not affected by the epidemic, and the pre-sale in February can only be cancelled. "Basically, 50% of the business this month is invalid." Wu Yi said, "we don't know exactly what the factories and fabric suppliers are, but at that time the whole market was chaotic."

According to Wu Yi's experience, Japan's March and April are the season of selling long sleeved costumes, but after mid April, consumers will soon turn to buy short sleeved costumes. That is to say, if the Chinese factories fail to deliver the goods on time, the long sleeved garments will become stock in the Japanese market because they can't sell. Now, Wu Yi's plan for placing orders in the middle of March to the end of March was not allowed in February 23rd. In April, the long sleeved market of spring clothes can only be given up and concentrate all the energy on the summer wear in May and June.

However, the development of summer clothing is also not smooth. Before March 10th, the Guangzhou Zhongda cloth market had not resumed business. Wu Yi could not buy the fabric to make samples, but had to resend the fabric from South Korea and Japan. But in the middle of 2, the epidemic in Korea also broke out, so the plan to buy it in South Korea was invalid. "This process wasted a lot of time, too many uncertainties directly led to our March production plan halved, a series of chain reaction so that we have not been able to slow down." She explained.

There are more uncertainties that are interfering with the push of business. The Nantong plant announced its resumption of production in February 10th because of the smaller local impact on the epidemic. However, the first shipment planned for completion in February 25th almost failed. This is because a large number of factories have not yet returned to work or the capacity can not be fully recovered. The cargo volume of the cargo ship has been reduced sharply and unable to sail. In the end, some companies have shipped the goods that they did not need to have enough goods to make the cargo ship sail.

Over the past two months since the outbreak of the outbreak in January 20th, many Chinese factories have experienced the ups and downs of orders, orders and the withdrawal of orders.

Lin Anna, a foreign trade factory worker who mainly deals with the orders of France's fast fashion brands, revealed to the first financial magazine that many French customers worried about the expansion of orders due to the expansion of the epidemic in China. The early February after the Spring Festival reduced the order. "The impact at the beginning was not particularly big, because the situation abroad was good."

In order to deliver the goods on time, Lin Anna's factory soon resumed work and resumed production. Due to the storage of a number of fabrics and accessories before the Spring Festival, the capacity of the factory has not been greatly affected. However, since March 12th, the outbreak of the outbreak in France and other European countries has led to a gradual shutdown of government policies to deal with the epidemic. A large number of retail stores have been forced to close, and the future direction is very uncertain. "From this time on, our overseas customers have proposed withdrawal." Lin Anna said that most of the orders were withdrawn at the end of March and shipped to Europe in May, but it is not yet clear whether Europe can control the epidemic within two months. It is difficult to solve the problem of cargo distribution and warehousing after arrival, and Lin Anna and her French customers are waiting.

The European and American epidemic has entered a critical period, and retail sales in various countries have been closed down.

Examination of supply chain capability

Whether manufacturers or brands are willing to tide over the global epidemic crisis, they must undergo a major test of supply chain management capability. As long as one link is slightly out of touch, the whole chain will be affected.

Any small link may affect the production plan of the brand, for example, the zipper shipment time of YKK usually takes about two and a half months. Lin Anna told the first finance and economics YiMagazine that the YKK zipper and other fabrics and accessories had been prepared ahead of the Spring Festival holiday.

Wu Yi's company had to buy some zippers with high price from Japan and other countries because they did not advance the order, then sent them back to Chinese factories to arrange production. "It can take a month to buy things that are normally available in Guangzhou's big market in one or two hours." Wu Yi said that as far as possible to reduce the use of accessories such as zippers, buttons, lace and so on, the next batch of goods also reduced some of the printing time which consumed longer hours.

In the first two weeks of the resumption of work, Ye Mao's hat factory is waiting for all suppliers to return to work. "In the early stage, we are going to work in fabric factories and printing and dyeing factories, otherwise, without order, I will not be able to produce my orders." He said.

When the uncertainty of the whole market increases, the enterprises with the more complete chain of supply chain will have higher risk resisting ability.

Yida has many overseas garment factories in Vietnam, Sri Lanka, Mauritius and Malaysia, but 99% of its fabrics and raw materials depend on China's exports. When China's manufacturing industry was completely shut down after the Spring Festival, it submitted to the Guangdong provincial government an application for key production processes in advance of the resumption of work in February 3rd, with the effect of "possibly affecting international trade, which is urgent to resume work", which was 7 days earlier than the February 10th prescribed by the state.

After fully resumed in February 20th, the recovery rate reached 90% in the domestic market. The early masks from various channels at home and abroad were exhausted, while more than 30 thousand employees in the country consumed at least 900 thousand masks per month. Yida has even opened a mask production line, and independently developed a washable cotton masks that can be reused 30 times. Each employee received two, which could last two months.

In contrast, the foundries with relatively short supply chain and relatively low management content are facing a much more serious situation.

Duan Lianshuang runs a clothing company that receives orders from brands and sends them to the next generation of factories. Originally, half of his orders were placed in lower level factories in Hubei, but after the outbreak of the epidemic in Hubei, almost no factory could return to work until May. In early March, his subcontract factory resumed less than 28%, which severely delayed the delivery time of orders before the Spring Festival. "Many brands may suffer a double blow. First there is no income when goods are available, goods become stock, and then there is no goods to sell when there is income. This is very fatal. " He explained.

Duan Lianshuang has also been affected by various delays in the delivery of orders. The major customers in the domestic market cancelled orders directly because of the time of delivery. Overseas customers stopped orders and waited for the development of the local epidemic. Duan Lianshuang expects that even if his subcontracting factory can resume production capacity in April, the production rate of fabrics and accessories in the market will not be enough, and this will also directly affect the delivery date of his order. Despite the fact that there are still some enquiries on orders, he did not dare to pick up orders from May to July. "I'm afraid I can't do it. I'm conservative. I'd rather not take orders, not to cause trouble." But there are also radical people who take orders and occupy market share at this time. That's the two style. " He said to "first finance" YiMagazine.

Duan Lianshuang expects clothes companies to go bankrupt this year, and the bigger the companies are, the more trouble they will get. Unless the book Liquidity Fund is adequate enough, many companies will have difficulty in carrying out the spring and summer of the fault.

Lin Liang, deputy general manager of the fashion group of Japan fashion brand, "broadcast sowing", told the first financial magazine that all the brands' research and development plans for autumn and winter costumes were postponed for more than 20 days in 2020. "The restriction of the epidemic on the movement of people has depressed consumers' usual demand for shopping, which is a key factor affecting sales." In recent years, the market competition has accelerated, and the fashion of broadcasting has accelerated the expansion speed of offline stores, and is also an important factor leading to inventory pressure. "Clearing inventory at any time is not a good way to do it." Lin Liang said.

Even in recent years, FILA, a star company in sports apparel industry, has encountered the dilemma of "goods smashed". Anta's 2019 earnings data show that FILA's year-on-year sales rose 55% to 60% over the same period. According to past data, FILA's sales last year were around 16 billion yuan. People in the industry disclosed to the first finance and economics YiMagazine that FILA's sales target in 2020 increased by 20%, so at the end of last year, a large number of shops were set up, and about 3 billion yuan of stock was prepared for the spring sales this year. But now they are almost impossible to sell, and the cash flow of all distributors and headquarters is in these spring clothes.

If the shipment can not turn into cash flow, the supply chain will be dragged to death. According to the first financial investigation YiMagazine, a large number of factory orders are required to be cancelled after the production is completed. Not only accounts receivable cannot be recovered, but also these goods are directly transformed into the factory's own inventory. "I don't know when it will last. I didn't expect that one day, we would really be reduced to export to domestic sales, and we would sell" original order "in China. A factory owner who has just cancelled 400 thousand orders has said to "first finance" YiMagazine.

"We are discussing in the industry conference. In 2020, the garment industry has been abolished for a whole year, not in March or April, but for a whole year." Yu Li Da, the founder of quantity, said in an interview with "first finance", "even if the epidemic can be lifted from April to May, you will immediately open the winter order meeting, and the goods will not be ready for production. You need to buy Fabrics, make accessories, and keep pace with the upstream and downstream. But now the situation is very likely that you haven't had time to ship out, and the supply chain enterprises are running out of funds one after another to declare bankruptcy, and this chain reaction may cause the whole industry to collapse rapidly.

The custom-made production mode of the main products is special. It mainly produces and sells its own brand and C2M customized products. When the main business is experiencing a low production season, it will undertake some OEM orders to fill production capacity. Therefore, when the epidemic leads to a sharp reduction in external orders, quantity goods can partially offset the negative effects of surplus capacity by maintaining and developing their own brand businesses. In the next few months, there may be no new orders, Yu Li Da plans to accelerate the growth of the volume brand business, to fill the entire supply chain 80% to 90% of the volume of business to hedge the shortage of external orders.

The supply chain model of garment industry has undergone many changes in the past 20 years. ZARA, H&M and other brands have created the so-called "fast fashion" mode, that is, one year ahead of the completion of all design and production work, but when the shelves are shipped on a weekly basis, they create a weekly update experience for consumers. The electricity supplier has accelerated this trend, and the chain of production to sales is becoming shorter and shorter. The net red business representative represented by Sydney and Zhang Dayi confirms the feasibility of the flexible supply chain, that is, the customer direct connection factory (C2M) mode.

Nowadays, some clothing brands aim at the first order quantity of a commodity, usually only half of the expected sales volume, and consider additional orders after market verification, so as to control the backlog risk. Under the premise of market stability, this mode can maximize the efficiency of capital use, because as long as the order is placed, the factory will produce, and at the same time, reduce the brand's own inventory burden. But when the major natural disasters such as earthquakes, tsunamis, epidemic diseases and uncontrollable emergencies are coming, once the problems in any part of the industry chain become more serious, the more efficient and fast business mode will be faced with the greater risk, because there will soon be no goods to be sold.

Zheng Yaying, vice president of commodities group I.T, a fashion brand retailer in Hongkong, told the first finance and economics YiMagazine that the self brand of the group is still on the platform of the electronic business. It is still a product shipped before the Spring Festival. "The epidemic has a great impact on the retail industry as a whole. The fact that there are no guests in the shop on the line is a fact. International and domestic freight transport has also been greatly affected." Zheng Jingshan, chief business officer of I.T group, said that I.T is also adjusting the pace of design, production and listing in the next quarter based on factory capacity, logistics capacity and the recovery of retail stores.

In early January, when the epidemic did not erupt in China, Wu Yi found some Japanese ODM companies and businesses to purchase merchandise inventory to fill the February sales, but soon the stocks of those companies were also sold out. In previous years, orders for February and March would normally be shipped before the Spring Festival. But in the Spring Festival of January this year, no one expected that the epidemic would lead to less deliveries in February. "Since the middle of February, Japan is in a state of nothing. We don't know who to order. We are all anxious to send orders to Korea and Vietnam. Wu Yi said.

In late February, the development of China's epidemic situation came to an inflection point. Workers gradually resumed their 14 day quarantine period, and orders began to return to China. Wu Yi found that the production schedule of the fixed cooperative factories at the end of March was already full. "We forced the factories to squeeze out the production space to make up for a portion of the losses in March, and many other orders in the middle and late 2 of the month will be shipped in the early part of April."

At the same time, she found that the quality of commodities also declined significantly. "Since February, we have found that several of the fabrics are not dyed properly, and the process level is much worse than before, and most of the recent colors are wrong. Because many workers are temporary unskilled workers, and orders are surging again, there will be problems. " Wu Yi explained.

Game between risk and efficiency

Wu Yi has recently increased the number of orders for the company. For example, in the past, 1000 items were first ordered and then the sales volume added to the website would be directly booked for 3000 pieces, so as to deal with 2 to 3 months of sales. "But a one-time advance reserve is a big risk, because it can not be sold, in fact, you do not know."

Meanwhile, the production and marketing plan for the second half of May was also ahead of schedule. Wu Yi has completed the annual plan from March to January next year. In order to deal with the uncertainty and chaos in 2020, we must cut corners and take precautions.

A factory reflects the whole industry. In the first quarter of 2020, China's garment industry experienced a slow thaw process after such a rapid freezing. On the one hand, the speed of thaw depends on the resumption of factories and the recovery of capacity in China. On the one hand, it depends on the release rate of global consumer demand.

Wang Zhenyong, who runs a fabric factory, told YiMagazine, "first financial" YiMagazine, at present, a factory's capacity to return to its normal state of 50% is a good performance. The rapid reduction of external consumption demand is a more worrying hidden crisis. He predicted that the impact of this round of the epidemic on China's clothing industry will be roughly 60 thousand to 8 trillion of the output value. Accordingly, the annual sales volume of the entire Chinese apparel supply chain is expected to decrease by 15% to 20%.

But the reduction in factory orders in China is not entirely caused by the epidemic. According to Lin Anna's observation, the factory's order situation will also be affected by the delivery situation in the past years, and the competitive advantage of the Southeast Asian market.

Over the past five or six years, labor intensive industries represented by textile foundries are moving to the Southeast Asian market with cheaper labor costs on a large scale. H&M transferred the core procurement right from Shanghai to Hongkong to manage the supply chain system of Southeast Asia more efficiently. ZARA, UNIQLO and other famous brands have taken similar actions, which means that China's garment industry and textile manufacturing industry itself is facing unprecedented challenges.

Ye Mao also expressed similar concerns. Because part of the orders before the Spring Festival can not be shipped normally, the factory can only explain and coordinate with the customers. However, some of them can be postponed, some of them may be cancelled directly. Although the CCPIT or customs will help to issue a "force majeure certificate", even if the customer does not pursue your legal or financial responsibility due to force majeure, you may end up losing the customer. The proportion of Southeast Asia is rising year by year, and this year, customers may be concentrating on factories in Vietnam, Philippines or Kampuchea. Ye Mao said.

Because Europe's major events have been cancelled, customers in France, Germany, Italy and other countries have cancelled orders related to events. Ye Mao is not optimistic about this year's export orders. And the idea of exporting to domestic sales has always been there, but it is a long-term accumulation process, "it is not a problem that can be changed if we turn around." This year, Ye Mao has cancelled the summer trip to Europe to take part in the industry exhibition and transferred to the Exhibition hosted by the same sponsor in China. Although the exhibition's effect was very ordinary in the past years, he had to place more hope in the country.

"We are also reflecting on whether we should not place all the production areas in China or even in Southeast Asia, but rather to go to other countries and regions such as India." Wu Yi said to the first financial magazine, "even in China, factories should be dispersed to Jiangxi, Xi'an, Shandong and other places."

For the head office of clothing industry such as UNIQLO, ZARA and H&M, risk diversification can really make the supply chain system more stable and stable. When China is affected by the epidemic, production stagnation, Southeast Asian factories can share output. When Southeast Asian epidemic becomes more and more serious and China starts to enter the recovery stage, it can also turn production back to China.

However, for the vast majority of small and medium-sized enterprises, the supply chain dispersion also corresponds to higher operation cost and management difficulty. In fact, there are many obstacles to disperse the factory to other inland cities in China. For example, because the distance from the port is far away, the delivery cycle will be passively extended. This problem can be solved only if the shipping price is balanced with the shipping price, which is almost impossible to achieve in the short term.

In 2003, the outbreak of SARS broke Guangzhou's clothing market for nearly half a year, and the whole garment industry chain was hit hard. In 2011, a magnitude 9 earthquake occurred in Japan and triggered a tsunami, which destroyed a large number of garment factories originally located in Fukushima Prefecture. The disaster caused Japan's garment industry to suffer heavy losses and jointly damaged the business situation of the upstream and downstream enterprises in the industrial chain. After every disaster, the operators of the garment industry will reflect on how to make up for the weak links in the supply chain, so as to cope with the next disaster more flexibly.

In the case of social and economic stability, enterprises must tend to improve operational efficiency to a more important position. For China's garment manufacturing industry and the manufacturing industry in a wider sense, for many small and large factories, there will be some changes in the supply chain during the restart process, but once the crisis is over, everyone will return to the game of risk and efficiency.

Wu Yi, Ye Mao and Lin Anna are aliases. )