March 12, 2020
Study says globally renowned companies are planning to shift work orders from China to other Asian countries, including Bangladesh.
Bangladesh will benefit from the fallout of the coronavirus as most of the globally renowned companies are planning to shift work orders from China to other Asian countries, including Bangladesh, according to a new survey.
Hong Kong-based QIMA, a leading provider of supply chain compliance solutions and which partners with brands, retailers and importers to secure, manage and optimise their global supply network, surveyed the executives of more than 200 globally renowned companies between February and early March.
Half of the survey respondents are considering shifting supplier sourcing away from China to new countries or regions, including Vietnam India, and Bangladesh, as well as near-shoring and re-shoring options, the survey report said on Tuesday.
Nine out of 10 businesses report being affected by the Covid-19 epidemic, with US-based respondents more likely to be hit than EU-based companies and the regions reliant on Chinese suppliers feeling the most impact.
“World consumption is decreasing. I don’t see it impacting us positively yet. Some 30 per cent work orders are being slashed by a few customers,” said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association.
Factory closures were cited as the top issue resulting from the outbreak, followed by labour shortages and delays in raw material supplies, the report said.
Only 4 per cent businesses consider themselves prepared for an event like the coronavirus outbreak.
Although China is the epicentre of the coronavirus, the disease has spread to more than 100 countries since its outbreak in early January.
Almost half of the respondents rank the coronavirus epidemic as a bigger threat to their business than the US-China tariff war.
More than 90 per cent are concerned about the long-term impact of the outbreak and almost as many expect to see significant changes in how they manage supply chains.
Some 91 per cent of the respondents reported that their business and supply chain were affected by the virus and 40 per cent reported a strong impact on their business.
There was a strong correlation between a respondent’s reliance on China for purchasing and the reported degree of the coronavirus impact on their business, the report said.
Of the respondents with more than half of their purchase from China, more than 50 per cent reported being strongly affected, compared with 12 per cent of the businesses buying less than half of their items from China.
Among the respondents whose supply chains are feeling the impact, more than half indicated that they had switched or considered switching to suppliers in regions or countries other than their current sourcing destinations because of the outbreak.
However, not all industries and companies have the ability to be that agile: a sizeable portion of respondents reported taking the “wait and see” stance, while some noted they were not in the position to move production.
Among the respondents who have moved or are planning to move their sourcing to new geographies, the most popular destinations are: Vietnam, India, Bangladesh, Europe, Turkey and the US.
Some 45 per cent of North American and European companies reported to have plans to source from new countries and are giving some thought to near-shoring and re-shoring.
Nearshoring is the practice of moving a business operation to a nearby country, especially in preference to a more distant one. Reshoring is the process of returning the production and manufacturing of goods back to a company’s original country.
For instance, among the US-based respondents who are considering switching suppliers, 27 per cent stated plans to move production to the US, while a further 17 per cent were looking at Latin and South America.
The re-shoring sentiment was even stronger across the Atlantic: 50 per cent of EU buyers with plans to diversify are considering sourcing more from European countries and another 30 per cent from Turkey.
Apart from home regions, western respondents are considering buying more from Vietnam, India and Bangladesh.
Respondents in the toy, accessories, homeware and footwear sectors reported higher levels of impact of the virus on their business, with up to 100 per cent respondents indicating some impact and more than half saying their business was strongly affected.
Meanwhile, the effect reported by textile and apparel businesses was among the lowest, with 12 per cent saying their supply chain was not affected by the outbreak.
Similar trends were observed in the promotional products sector, where 10 per cent of the respondents reported being unaffected.