All posts tagged: #chainsupply

Latest COVID Surge Hampering Factory Activity in Asia

The development spells more supply chain trouble for the North American promo products industry.  Manufacturing output is slowing in key production centers in Southeast Asia due to the rampant spread of COVID-19’s delta variant, making it more difficult and more expensive for western brands to get goods produced and shipped to North America.

The slowdown in activity has the potential to get worse in the weeks ahead in the wake of developments like stay-at-home orders issued by the government in Vietnam, a key country for the production of everything from apparel and shoes to upholstery.

The grim news comes as the global supply chain for virtually every industry is already in disarray due to COVID-caused complications.

The promotional products market is no exception.   Rising raw-material prices, congestion at ports, insufficient labor and domestic transport capacity, skyrocketing costs for shipping containers/ocean freight, unfavorable monetary exchange rates and more have resulted in promo experiencing inventory shortfalls, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.

One thing driving up costs and making it harder and pricier to get promo goods manufactured is constraint on factories related to attempts to control outbreaks of the delta variant in Asia, where the vast majority of domestically sold promotional products are produced.

COVID clearly weighed on Southeast Asia factories in August, where manufacturing managers in Vietnam, Thailand, and the Philippines all reported deeper contractions in activity.

The IHS Markit purchasing managers’ index (PMI) for Vietnam dropped from 45.1 in July to 40.2 in August. It was the third straight month of declining activity and the lowest reading since April 2020. Readings above 50 denote expansion; below 50 signifies contraction. Vietnam produces more than 30% of the United States’ shoe imports and is second only to China when it comes to supplying the shoes and apparel that are imported to America.

 

 

Meanwhile, Thailand’s PMI retreated month-over-month from 48.7 to 48.3 – the seventh time in the last eight months that activity eroded. The Philippines recorded its lowest PMI in some 15 months, falling from moderate expansion territory in July (50.4) to contraction in August (46.4).

Indonesia’s PMI rose more than three percentage points month over month to 43.7 in August, and Malasyia’s inched up to 43.4, but that still means contraction was occurring in both countries, just not at as rapid a rate. Elsewhere, India bucked the trend, with IHS Markit data showing that manufacturing remained in expansion with a PMI of 52.3 in August. Still, India’s rate of expansion declined, having slipped from 55.3 in July.

Analysts say the fact that the overwhelming majority of people in these countries are unvaccinated is fueling the COVID outbreaks and thus impacting factories’ ability to function.

“Southeast Asia’s under-vaccinated economies have been fighting record levels of infections and deaths, including in Thailand, Malaysia and Vietnam,” Bloomberg reported. “Of 53 countries in Bloomberg’s latest Covid Resilience Ranking, the bottom five are all in Southeast Asia.”

In August, more than 80 apparel and footwear brands, including Nike, penned a letter to President Joe Biden pleading with his administration to donate vaccines to Vietnam. “The health of our industry is directly dependent on the health of Vietnam’s industry,” the letter said. 

The White House is reportedly providing an additional 1 million doses of the Pfizer vaccine to Vietnam, a rollout expected to start on Sept. 1/Sept. 2.

 

 

The official PMI for China, which has temporarily shuttered certain ports and implemented localized lockdowns in recent months in attempts to combat delta flare-ups, declined slightly from July (50.4) to August (50.1).

The reading indicated manufacturing expansion was still occurring in August, but there were headwinds. The new export orders sub-index declined to 46.7 in August from 47.7 in July. Furthermore, the Caixin Media and IHS Markit PMI for China showed that manufacturing there had fallen into contraction, with a tally of 49.2, the lowest level since February 2020 when societal shutdowns grounded production activity in China.

Manufacturing activity continued to expand in Japan, Taiwan and South Korea, but those countries experienced month over month PMI declines that indicated the expansion was slowing.

By Christopher Ruvo, PROMOGRAM 

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House Votes to Ban Xinjiang Cotton

If the bill becomes law, it could affect supply chains, drive up cotton prices and influence apparel trends. Those developments would impact the promotional products industry, experts say.

Concerned over reports of forced labor, the U.S. House of Representatives has passed a bill that would ban the import of all cotton from the northwestern China province of Xinjiang – a move that could have a dramatic effect on apparel supply chains, potentially including those in the promotional products industry.

The House, which approved the bill in a 406 to 3 vote on Tuesday, Sept. 22, is now sending the legislation to the Senate for consideration. The Senate would have to approve before it could become law.

Xinjiang makes about 85% of China’s cotton. China produces about 20% of the entire world’s cotton supply.  “About one in five garments flowing into the U.S. contains Xinjiang cotton. It would be a challenge to identify any major apparel brand or retailer whose supply chain doesn’t run through Xinjiang,” Scott Nova of the Worker Rights Consortium, a nonprofit labor rights organization that monitors global supply chains for abuse, told NBC News.

Rep. Jim McGovern, a Democrat from Massachusetts, introduced the Xinjiang cotton ban bill. He was motivated by various investigations that indicate more than 1 million ethnic Uighur people from Xinjiang are being held in internment camps where they’re forced to work in factories and on cotton farms against their will. At the camps, authorities make the primarily Muslim Uighurs study Marxism and renounce their religion, NBC reported.

Governmental authorities in China call the alleged internment centers “re-education camps” and assert that they provide vocational training, lead to employment and help fight extremism. There is no forced labor, Beijing officials say.   McGovern – and others in the House that voted for his bill – don’t buy that line. “It is time for Congress to act,” McGovern said during a debate on the bill. “We found that the evidence of systematic and widespread forced labor in Xinjiang is astounding and irrefutable — and includes evidence from camp detainees, satellite imagery of factories being built at internment camps, and public and leaked Chinese government documents.”

Stephen Lamar, president of the American Apparel and Footwear Association, last week told U.S. lawmakers that a blanket ban on cotton or other products from Xinjiang would “wreak havoc” on supply chains. He said an all-out ban on Xinjiang cotton and/or other products from the province would be impossible to enforce.

Lamar’s comments to the House’s Ways and Means trade subcommittee came on Sept. 17, a few days after the U.S. Department of Homeland Security’s (DHS) Customs and Border Protection (CBP) issued Withhold Release Orders (WRO) on apparel, cotton, hair products, computer parts and other items produced by particular companies in Xinjiang.

“Such a WRO or legislation would no doubt make headlines, but they would wreak havoc on human rights, economic development and legitimate supply chains, themselves already battered by COVID-19 all over the world,” Lamar said. “As a country, we simply do not have the capability or capacity to implement or comply with or enforce a blanket WRO or the proposed legislation right now.”

Eric Simsolo, director of business development at Gardena, CA-based Top 40 supplier Next Level Apparel, said that if the Xinjiang cotton ban becomes law it could trigger cotton price increases and propel a shift toward more synthetic fibers in apparel. Both of those developments would impact the promo products industry.  “Between India and China, you have 47% of the world’s cotton supply,” Simsolo told Counselor. “If one were to be limited, or turned off, you would have a large supply issue for the world’s cotton commodity exchange. Long story short, prices will go up. The vendors that are smart about how they source and have the least impact on their COGS will be able to survive the price wars. This increase in cotton will directly affect cotton and cotton-blends. If prices go high enough, we could see the demand for and usage of synthetic fibers like polyester, nylon and modal go up.”

Simsolo also thinks a cotton ban – or even just the discussion around it – could compel more promo industry apparel companies to intensify their corporate social responsibility efforts (CSR). He noted that Next Level has a robust CSR program and that its supply chain is not exposed to human rights issues. “The Fair Labor Association has had their eye on the Xinjiang region for some time now,” Simsolo told Counselor. “In some ways, this proposed ban is catching up to the rhetoric that companies with serious CSR’s have been watching.”

Avenel, NJ-based Vantage Apparel s one of those companies with a serious CSR focus. The Top 40 supplier already maintains a strict corporate code of conduct that includes annual factory audits. As news about forced labor in Xinjiang has spread, Vantage “immediately reviewed our supply chain mapping chart to reconfirm that no raw material supplies were coming in from that region,” Gina Barreca, Vantage’s director of marketing, told Counselor. “We also reached out to our manufacturing partners and all of our factories have submitted an undertaking confirming there is no forced labor of any kind, especially from the Xinjiang region.”

Top 40 supplier alphabroder has been diligent about avoiding Xinjiang. The Trevose, PA-based supplier conducts traceability and transparency assessments of its manufacturers’ supply chains to evaluate fabric and component origin in its private brands — North End, Devon & Jones, Ultra Club, Harriton, CORE365 and TEAM 365.

“Based on the assessment, we determined that no items used in the manufacturing of alphabroder private brand apparel styles is from the Xinjiang region,” Andrea Lara Routzahn, alphabroder’s senior vice president of portfolio and supplier management, told Counselor. “We will remain vigilant to ensure that we do not knowingly purchase any components for our goods that originate from the Xinjiang region of China.”

Chinese authorities have said that U.S. legislative action aimed at Xinjiang has nothing to do with human rights.  “Lately, China has shown with facts and numbers that issues relating to Xinjiang are by no means about human rights, ethnicity or religion, but about counterterrorism and anti-separatism,” said Zhao Lijian, a foreign ministry spokesperson. “What the U.S. truly cares about is never human rights. It is just using human rights as a cover to suppress Chinese companies, undermine stability in Xinjiang and vilify China’s Xinjiang policy.”


Reprinted from Promogram, By Christopher Ruvo

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