Retailers and brands have made difficult decisions in recent weeks, often based on limited options but with unintended consequences. We’ve all seen the headlines. These decisions are impacting their trading partners—and their own brand equity—during the current coronavirus crisis. We’ve seen the reports coming out of places such as Bangladesh, where it’s been stated that the garment industry faces a $10 billion loss from cancelled orders, affecting more than 2 million workers. In Myanmar, reports show more than 10,000 lost jobs at the onset of the crisis.
One supplier of gloves and accessories to several major retailers had nearly 100 percent of its orders cancelled.
Many retailers and brands have enjoyed the past 10 years of massive growth, largely supported by their key trading partners and suppliers in sourcing hubs such as Bangladesh, Sri Lanka and Vietnam. While the global pandemic has essentially shut down many portions of commerce and pushed brands and retailers into survival mode, their responsibility to trading partners is still a priority they seek to address. Suppliers are a direct component of the brands they serve. If we, as an industry, can balance our needs with those of our trading partners, we can avoid causing irreparable damage and put us back on a path towards recovery.
A time for partnership
In a recent research report, the Center for Global Workers’ Rights came out with the following statement in response to the current climate: “The responsible approach is for brands and retailers to find ways to access lines of credit to cover their obligations to supplier factories, so they can cover their expenses and pay their workers to avoid sending millions of workers home with no ability to put food on the table, let alone cover medical expenses.”
It’s important to note that the race to secure capital and to raise cash doesn’t have to create an environment where it’s the retailer or brand versus suppliers. Consider the analogy occurring in the current consumer environment. Despite sufficient overall supply of food and toilet paper, consumers feel shut off from these essentials due to bottlenecks in current supply flows. Goods exist, but there’s no clean infrastructure to make them available to the end customer. As a result, consumers race to acquire and hoard these goods for their own self-preservation.
In many ways, the same holds true for capital and how it traditionally feeds into the supply chain. Retailers and brands turn to extending payment terms and squeezing their suppliers when forced to raise capital. This is often a shortsighted strategy.
The supply chain is a digital infrastructure that connects brands and retailers to their suppliers and finance providers so the flow of capital can be injected exactly when, where and how it’s needed. Today, there is no shortage of finance providers willing to make capital available to suppliers overseas. In most cases, it’s just a matter of connecting those finance providers to the supply chain with the right set of data, documents and access to transaction flows. Once connected to a network of finance providers that are embedded into supply chain transactions, buyers and suppliers can maneuver multiple capital levers to ensure business continuity during times of uncertainty, as well as in times of growth when capital is needed to support spikes in demand.
Building a foundation
This digital foundation, which is built to ensure capital, consists of four main elements:
- A digital cloud infrastructure that breaks down many of the barriers and silos that traditionally exist between internal teams and departments, such as sourcing and finance; and eliminates walls between trading partners to enable collaboration—which we’re all finding is essential in today’s remote work environment.
- Document and process automation, where purchase orders, invoices, approvals and all decisions and communications moving the wheels of global trade are digitized and viewable by all trading partners. Invoice approvals are managed by exception to speed up the process of getting suppliers paid.
- A network of finance providers willing to deploy various financing programs into global supply chains. These programs represent pre- and post- shipment financing by leveraging data to support credit decisions and unlock more capital.
- Visibility into both the physical and financial supply chain. This means that all necessary parties can see the documents, orders and key milestones occurring within a transaction. With that visibility, capital can be injected based on those events and triggers to ensure liquidity for suppliers.
So, what exactly does this look like in the real world? Join Infor, Standard Chartered Bank and RTS International on April 29 for an important panel discussion on the impact of a multi-bank platform to support global trade and the benefits it can deliver to brands, retailers and their suppliers now and during times of rapid growth and expansion. Can’t attend live? Register now to receive a link to the on-demand recording.