As per World Bank's latest report "global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed. The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline". All the world's major apparel manufacturing and exporting countries belong to this category of "Developing Countries". Current recession prevailing in the world will have many and deep implications for the International Apparel trade especially for Apparel manufacturers and exporters.


"MANY" as in small/ medium apparel manufacturers and exporters across the world have been forced to shut leaving thousands of people jobless... even big players due to ever falling profits have had to streamline and cut costs to be able to survive through this rough time which has lead to direct as well as indirect job losses.


"DEEP" as in due to recession customer was not buying much, few orders were available which resulted in manufacturers reducing their CM's to approximately half of what they were getting earlier, so as to grab those few orders available and keep their lines running. Even though the lines were running manufacturers made very little profit and in some cases they made no profit, as the orders were acquired at very low CM's. Manufacturers had to try and make money on fabric and trims that too was possible only if they were doing FOB programs. Throughout the world apparel manufactures focused on short term strategy in hope that soon recession will be over and things will be back to normal.


Eventually whenever slow and painful process of economic recovery starts will it bring back the golden old day?? The answer unfortunately is no because of two main reasons:


1. During this long recessionary time customers have tasted blood; with apparel manufacturers having quoted very low CM's to remain afloat. To bring the CM's back to same profitability level as before recession will be a very difficult task and will take long time (if that ever does happen). Apart from talking time, this all will depend on factors like-


Past history and relationship with customer being most important, apart from that other factors like development turnaround time and service offered. Not to forget on time shipment performance and lead times. But the bottom line is and will always be the price.


Post quota pressure on CMs was already high and CMs had gone down as the customers were free to place order where ever they got best CMs across the world. Due to recession again CMs have come under pressure and apparel manufacturers really need to go back and work on their strategies as things will get tougher and tougher. The only silver lining here is that it will be very difficult for new manufacturers to enter the trade.


2. Protectionism is another huge factor which apparel manufacturers would have to keep watching. Protectionist voices have increased in number and intensity over the last one year, fortunately till now in the Apparel trade we have not seen any protectionist policies being implemented by any of major importing countries but just because it has not been done till now does not guarantee it will not be done.


The key for survival lies in Supply Chain management. Only those apparel manufacturers and exporters will survive who have the most effective and efficient supply chain. Keeping pace with end customers who are willing to place orders anywhere in world depending on where ever they get best quality at the best price at the required time, apparel manufacturers and exporters will have to adopt same strategy while sourcing their raw materials especially fabrics as fabric constitutes approximately 55% to 65% of apparel cost and has longest lead time.


Apparel manufacturers and suppliers will have to overhaul both front and back end of their supply chain.


CM's in apparel trade refers to the cutting and apparel making price charged by manufacturers and exporters to Customers.