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Brands Cancel $100 Million in Bangladesh Orders—Putting Thousands of Jobs at Risk

With production orders being rescinded daily, factories in Bangladesh are staring despair in the face—and workers could be collateral damage.

This week, brands and retailers have been pulling back placed production orders as they shoulder shrinking demand and closed stores that can’t currently benefit from shipments of new product.

Their requests—which have come as written communications from C-level executives—have been manifold, according to a sourcing agent close to the matter. Brands and retailers with business in Bangladesh are asking vendors to outline what fabric is ready for production and what isn’t, and cancelling orders for the latter. In some cases, they’ve agreed to delay use of the fabric, and in others, they’re washing their hands of it entirely.

But what’s been perhaps among the most jarring of demands, beyond requests to cancel orders for goods that have already been produced, is that some brands and retailers are asking for discounts on previously placed orders.

Moves like this could prove detrimental for factories that have already paid to purchase the raw materials for the now cancelled or postponed goods, as well as distributed wages to workers, because buyers typically don’t pay until goods are shipped.

What’s more, according to reports in local newspapers, some buyers are asking their Bangladesh suppliers if they can pay for the products they are taking 30 days later than when the would have. In some cases, they want to make their payments to manufacturers—who already face cash flow challenges—even further out than that.

And this at a time when many factories could very soon be at a loss for how to pay their workers.

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“Just in the last one week, an estimated $100 million [in orders] have been asked for cancellation in Bangladesh,” the agent told Sourcing Journal. “It seems that…maybe 80 percent of factories will not be able to pay more than a month [worth of wages], and 20 percent may.”

By others’ estimates, it may not even be as many as 20 percent of factories that can shoulder their business and its staff for much longer than 30 days.

Some brands and retailers are reducing their production receipts by as much as 75 percent through July, or in some cases, through August. And despite corporate social responsibility efforts and aims, most companies have been focused on saving themselves as times get tough amid the COVID-19 pandemic, over considering the well-being of the workers who have been making the clothes to drive their earlier successes.

“There is no sympathy for anybody in the supply chain or where workers can go,” the agent said. “We have not faced any crisis like that.”

Now, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is stepping in to help protect the sector.

In a meeting this week with local buying offices of foreign brands, leaders from the BGMEA said no confirmed placed orders should be cancelled. For brands that would like to postpone orders, they said the goods should be partly paid for so the factories would have funds to pay workers. In its own concession to aid brands and retailers, BGMEA said factories would be willing to hold the goods until companies are ready to take them.

Concern for workers in the second-largest garment manufacturing country after China is mounting.

On Friday, global workers’ rights group Clean Clothes Campaign said more than 100 factories in Bangladesh have already lost orders, which could have “dire” consequences for workers and a country that relies on garments for as much as 80 percent of its exports.