Poor purchasing practices by brands and retailers during the pandemic have had a knock-on effect on suppliers and their workers, increasing management stress, jeopardizing job security and driving a decline in productivity, a new report has found.
While many buyer purchasing practices were “problematic” even before the coronavirus outbreak, according to the Better Buying Institute, a Texas-based research organization, and Ulula, a supply-chain tech firm, Covid-19 brought with it a “surge of poor practices as buyers scrambled to protect themselves from the crisis,” including canceled orders, extended payment terms and demands for steep discounts.
In a survey of 17 suppliers in Vietnam conducted late last year, more than half said they have experienced changes to forecasted orders and reserved capacity, shipping date extensions and “high-pressure” cost negotiations that have created “more” or “much more” uncertainty about current and future orders. Besides making it more difficult to provide fair wages and safe working conditions, the heavier economic pressure has resulted in increased worker layoffs, greater worker overtime and the escalating use of subcontracting or temporary labor, they said. For several suppliers (17.5 percent), the changing practices have also led to higher worker turnover and slackened productivity.
On the other hand, “best practices” such as flexibility with order ship dates and delivery timelines, two-way dialogue about business challenges, not canceling orders and on-time or early payment have yielded benefits whenever they occur. Such approaches have enabled suppliers to better follow social distancing guidelines, retain workers, pay workers’ wages in full and on time, contribute to workers’ social benefits and provide adequate personal protective equipment, they said.
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In another survey of 1,360 workers from 13 factories, also in Vietnam, the Better Buying Institute and Ulula found that more than half were more fearful of losing their job than before the pandemic, although most respondents (92.6 percent) said their contracts remained the same and more than 80 percent said they were able to take sick leave when needed. At the same time, more than two-thirds (72.8 percent) said they experienced more anxiety and stress. Roughly one-third of workers said they felt most concerned about safety at work, followed by family safety and personal finances.
The negative impacts of Covid-19 “fell disproportionately on the most vulnerable,” the report noted. Of the overall sample, 35.4 percent of workers said their salary was less sufficient compared with before the pandemic for fulfilling their basic needs, and 23.6 percent reported salary reductions even when they worked their regular hours. When the responses were broken down by gender, women appeared to be more affected than men.
“There were other significant findings, though with less pervasive worker impact. For example, working for a supplier that reported more pressure on their business profitability and economic sustainability was linked with more workers reporting their contracts changed for the worse and feeling most concerned about [the] possible termination of their employment,” the report’s authors wrote. “Furthermore, working for a supplier that reported more difficulty in providing good working conditions and wages was related to an increase in the percent of workers reporting they felt most concerned about safety at work and in the percent of workers reporting their employer did not provide PPE.”
As with suppliers, any buyer best practices provided a corresponding boost in conditions for workers. When a supplier reported fair payment practices, for instance, fewer workers reported salary reductions, concerns about personal finances or delays in wage payments. They were also more likely to say that their salary was about as sufficient for fulfilling their basic needs as before the pandemic. And though their wages still fell short, they were in a better financial position than workers employed by suppliers whose buyers did not use fair payment practices.
“The value of research connecting purchasing practices to both supplier and worker experiences within one buyer’s supply chain cannot be understated,” the report’s authors wrote. “While these experiences are influenced by other buyers working in the same factories, this research enables buyers to better understand and address the challenges faced by those suppliers and workers within their sphere of influence. The long-lasting impacts of the pandemic on global supply chains justify a continued focus on these connections.”