Effects of Covid-19 Pandemic on Supply Chain Management in the Clothing Sector and Possible Solutions

According to the World Trade Organization’s statistical data, global clothing export had a 2,61% share of the world’s general exports in 2019 [1]. As can be seen, the clothing sector is one which possesses significance in global trade. However, the sector has been negatively affected by the pandemic due to its labor-intensive structure and working conditions.

Stores are closed due to the restrictions, therefore sharp drops have been occurred in product sales. In spite of this, retailers are encouraging consumers to shop online by providing free shipping and discounts. Nevertheless, while online shopping remains a viable option, rising unemployment, falling incomes and growing uncertainty mean that purchasing new clothing may no longer be a priority for many consumers. At the peak of the outbreak in China, shortages of raw materials and inputs caused manufacturing disruption across the world. Many enterprises have stopped their manufacturing and closed their factories in Mexico, China and Bangladesh. These impacts have negatively affected the whole supply chain. Besides this, the decreasing production and sales amounts have negatively affected working conditions and employment. Small and medium sized enterprises, which are a vital source of employment and growth in the sector, are likely to suffer the greatest impact of this pandemic [2].

The production systems and processes which have been used in the clothing industry will be changed slightly or greatly after the pandemic. The COVID-19 pandemic will speed up the adaptation process of the clothing industry to technology (the transition process to industry 4.0) and will provide rapid and efficient production. On the other hand, consumers and buyers have shifted to online purchasing models, and this situation is causing a significant growth in e-commerce. The increasing significance of e-commerce will affect e buyers and retailers, and consequently the number of enterprises and retailers which would like to benefit from omni-channel strategies will increase. However, the pandemic will negatively affect labour rights. Many clothing workers have lost their jobs during pandemic or they have lost their incomes due to unpaid leave [3].

On the other hand, according to the World Trade Organization, Turkey was the sixth biggest clothing exporter in the world in 2019 [4]. Besides this, it is the third biggest clothing supplier in the European Union [5]. According to the Turkish Statistical Institute, Turkey exported 17,5 billion dollars’ worth of clothing in 2019. The clothing sector had a 10% share in Turkey’s general exports in 2019. The sector showed a 16 billion dollar net foreign trade surplus in 2019 [6]. In addition to these, according to the annual industry and service statistics of the Turkish Statistical Institute, the sector had an approximately 14% share in the manufacturing sector in terms of employment and enterprise number in 2018 [7]. As can be seen from the data, the clothing sector continues to preserve its significance and place both in the Turkish economy and global market. However, it is predicted that the Turkish clothing sector will be negatively affected by the COVID-19 pandemic, like its global rivals and stakeholders.

In this context, this research aims to determine the effects of the COVID-19 pandemic on the clothing sector, which possesses a significant place both in the Turkish economy and global clothing market, via supply chain management elements, which reflect the sector like a mirror. Also, it aims to specify possible solutions against the negative effects of the COVID-19 pandemic.

Clothing sector is characterized with short product life cycles, high variability, unpredictable variable demand, too many inventory items, low predictiveness, instant purchases, high product range and increasing outsourcing [8, 9, 10, 11]. Clothing supply chain is complicated [9, 12]. It is full of uncertainties and unpredictability, as well as being characterised by temporal markets, short product life cycles and a high product range [12]. The clothing supply chain is a relatively long chain, which generally includes too many members [9, 12].

COVID-19 has created a ripple effect in the clothing supply chain. First, disruptions occurred in raw material procurement from and clothing production in China due to the lockdown in Wuhan. Afterwards, clothing demand declined sharply as the lockdown started in Europe during the second week of March 2020. These disruptions were followed by store closures around the world. As the pandemic started to spread in South Asia, a lockdown was announced in India and Bangladesh in the last week of March 2020, bringing the clothing industry to a complete standstill. At this point, many global clothing brands and retailers in Europe and America cancelled their approved orders or delayed their payments. The cancelled orders and delayed payments caused issues in many supplier countries. The cancelled orders affected production and the labour force and caused disruptions in the clothing supply chain. In other words, the COVID-19 pandemic created an unprecedented situation in the clothing supply chain, where demand, supply and manufacturing got completely disrupted and delinked [13, 14]. Besides this, these effects on clothing consumption and imports caused an increase in unemployment in clothing exporter countries like Bangladesh, China and Vietnam [15].

As the virus and pandemic upends the global economy, the fashion industry has begun to appreciate the importance of a resilient, flexible, and dependable supply chain. This situation may create a unique opportunity for providing sustainability in fashion and bringing supply chains to own countries from the other countries [16].

The disruption risk due to lockdown is increased if a product’s inputs are procured from multiple suppliers or if the suppliers are located in close geographical regions. In order to decrease this effect, enterprise management should determine which products belong to these groups. Afterwards, it can take short-term precautions by reallocating inventories between regions or by reducing dependence on products/inputs, which can cause disruptions. Besides this, enterprises should support their suppliers, which are in financial distress. Business partners in the supply chain should be supported as much as possible in order to provide business continuity, supply chain unity and social sustainability [17].

The demand for clothing products is decreased because of the pandemic. In order to get rid of this situation with the least damage, enterprises should consider supplying and stocking products based on satisfying the actual demand throughout the season instead of supplying and stocking products based on the predicted demand, which is actualised at the start of the season. This supply chain management strategy provides greater agility in responding to potential demand disruptions. Selling online is another precaution which can be taken against demand disruptions. Strong online sales presence has provided sales continuity to enterprises after store closures [17].

This research aims to determine the effects of the COVID-19 pandemic on supply chain management in the Turkish clothing sector, which continues to protect its significance and place both in the Turkish economy and global clothing market. Also, it aims to specify possible solutions against the negative effects of the COVID-19 pandemic.

In accordance with the aim of the research, a survey was conducted in clothing enterprises which operate throughout Turkey. These enterprises constitute the reach of the research. According to the annual industry and service statistics of the Turkish Statistical Institute [7], there were 56.603 enterprises which operate in the clothing sector by 2018. The sample size was calculated as 382 enterprises at a 95% confidence interval and with a 5% error margin.

As stated by the Turkish fashion and textile cluster project; İstanbul, İzmir, Denizli and Bursa are the provinces in which the clothing sector is clustered and intensively operates [18]. Therefore, 400 enterprises were chosen which operate in those provinces and which are registered in those provinces’ chamber of industry, according to simple random sampling.

The surveys were conducted between June and November 2020 using face-to-face interviews and remote access (mail and online survey) techniques. After the repatriation and evaluation of the questionnaires sent back, 391 of them were incorporated in the research. 52% of the questionnaires were completed via the face-to-face interview technique, whereas 48% of them were done via remote access techniques. The questionnaires were answered by senior managers (production managers, marketing managers, finance managers, human resources managers, deputy general manager) and enterprise owners.

A survey form, which consisted of 14 main and 63 sub-questions, was used as a data collection tool. The survey was ethically approved by Ege University’s Ethical Board of Social and Human Sciences Scientific Research and Publication in 10.06.2020 with protocol number 612.

At the beginning of the statistical analysis, the reliability of the questionnaire was measured and the reliability co-efficient α was found as 0,885. α was calculated as 0,887 only when the statements which analyse the effects of the COVID-19 pandemic are taken into consideration. Besides this, α was found as 0,719 only when the statements which analyze the possible solutions are taken into consideration. According to this, the scale of the questionnaire and that of the statements which analyse the effects of the COVID-19 pandemic are seen to be highly reliable, whereas the scale of the statements which analyse the possible solutions is found to be quite reliable.

61% of the participating enterprises were established in 2016 or after, and 80% of them were founded as incorporated or limited company. Besides this, 83% of them possess 250 employees or less and 73% of them have a 10 million dollar annual turnover or less. According to this, most of the participating enterprises are classified as small and medium sized enterprises.

44% of the participating enterprises produce clothes from both woven and knitted fabrics. 62% of them manufacture for both their own brands and others. Only 11% of them produce for their own brands. Moreover, 71% of them mostly export to the European Union and the United Kingdom. After these countries, they substantially export to Middle East countries, Russia, Ukraine, USA and Canada. Moreover, 85% of them supply their inputs from Turkey. China is the second country from which inputs are mostly procured. The market distribution of the participating enterprises is found to be 62% foreign and 38% domestic.

91% of the participating clothing enterprises indicate that the COVID-19 pandemic has decreased their capacity utilisation rates. The pandemic has caused a 46% decrease in capacity utilisation rates on average. This situation can be explained by the almost 50% decrease in the enterprises’ production amounts in March, April and May 2020, in which the effects of the lockdown both in Turkey and the world have been mostly felt. However, 89% of the enterprises have benefited from short-time working allowance. The enterprises have used possibilities like short-time working allowance and unpaid leave due to the unemployment restriction of the government. Also, 49% of the enterprises have suspended their capacity increase investments during the pandemic.

The survey offered 35 statements which analysed the effects of the COVID-19 pandemic. All participating enterprises were required to choose their agreement levels for each of those statements. On the quinary likert scale, ‘I absolutely agree’ is coded as 5, ‘I agree’ as 4, ‘I have no idea’ as 3, ‘I don’t agree’ as 2, and ‘I don’t agree absolutely’ as 1. Firstly, the averages and standard deviations of the statements were calculated. Afterwards, the statements were evaluated with exploratory factor analysis and gathered into eight groups. The findings obtained are given in Table 1.

The pandemic has mostly affected supply chain management in the clothing sector in terms of the following elements: decrease in profitability, decrease in average order numbers, decrease in average product numbers per order, decrease in production amounts, increase in finished product inventories, increase in inventory costs, decrease in efficiency, increase in occupational health and safety precautions, increase in cash needed, and decrease in the number of inputs which are supplied from abroad.

The Turkish clothing supply chain, which is an important part of the global clothing supply chain, has inevitably been affected by all the negatives which affect the whole. During March, April and May of 2020, in which lockdowns were intensive; global clothing demand sharply declined, consumer demand altered due to the increase in homeworking, and there was a decrease in outdoor activities, despite the demand for casual and sportswear increasing. The demand for clothing products decreased or was postponed due to unemployment and unpaid leaves. As a reflection of this situation, big buyer groups and brands have cancelled or postponed their orders. Buyer groups/brands have not accepted finished orders and delayed their payments. This situation especially has affected small and medium sized enterprises which work as suppliers of these big buyers/brands. These small and medium sized enterprises have also stopped their productions and delayed their payments to their own suppliers. The decrease in sales and production amounts has caused financial bottlenecks and the need for cash has increased. The standstill of the operating and turning wheels has spread through the whole chain in waves and has gradually increased the negative effect. This situation indicates that the ripple effect, which has occurred in the global clothing supply chain [13, 14, 15, 19], has also occurred in the Turkish clothing supply chain.

According to the findings obtained, the pandemic has negatively affected all activities (production, procurement, sales, logistics, knowledge management, inventory management etc.) in the supply chain. Participating enterprises indicated that the sector’s production technologies will be updated to industry 4.0 in the medium and long term. Besides this, the online trade activities of the enterprises have increased, and even the enterprises which have never introduced online trade have reverted to online sales. In this context, the results obtained are in accordance with those of the global clothing supply chain. The International Labor Organization [3] has specified that the pandemic will speed up the adaptation process of the clothing industry to technology (transition process to industry 4.0). Furthermore, the literature [3, 17] emphasises that the significance of online trade would be increased due to the altered consumer buying behaviours.

The results of the exploratory factor analysis which refers to the statements that analyse the effects of the COVID-19 pandemic on supply chain management in the clothing sector indicate that the sample is suitable and reliable for factor analysis (Kaiser-Meyer-Olkin measure of the sampling is found to be 0,859, and the significance of Bartlett’s Test of Sphericity is found to be 0,000). Principal component extraction is used for extracting factors with eigenvalues over 1, and the rotation of the factor loading matrix is chosen as varimax. The standard loading of 27 statements are higher than 0,50 (they vary from 0,703 and 0,507), and the cumulative variance of 8 factors is found as 63,50%. The loadings (scores) of the statements within Table 1 are taken from the rotated component matrix (only six loadings are lower than 0,50). The eight factors obtained as a result of exploratory factor analysis, are renamed (Table 1).

The survey offers 16 statements which analyse the possible solutions against the negative effects of the COVID-19 pandemic. All participating enterprises are required to choose their agreement levels for each of these statements. On the quinary likert scale’ I absolutely agree’ is coded as 5, ‘I agree’ as 4, ‘I have no idea’ as 3, ‘I don’t agree’ as 2, and ‘I don’t agree absolutely’ as 1. Firstly, the averages and standard deviations of the statements were calculated. Afterwards, the statements were evaluated with exploratory factor analysis and gathered into three groups. The findings obtained are given in Table 2.

According to the research results, the enterprises have mostly needed employment support within the scope of possible adoptable solutions against the negative effects of the COVID-19 pandemic. This support is followed by the postponement of tax debts, easy access to financial resources, investment support, online trade support, postponement of credit debts, and financial support, respectively.

In addition, more than 80% of the enterprises indicated that government support for employment, finance and exports which have been given during the COVID-19 pandemic, are inadequate. Moreover, they specified that sectoral cooperation, efficiency of marketing activities and utilisation of domestic supply resources should be increased and the logistics sector, relations with suppliers and occupational health and safety systems improved.

The results of exploratory factor analysis which refers to the statements that analyse the possible solutions against the negative effects of the COVID-19 pandemic indicate that the sample is suitable and reliable for factor analysis (Kaiser-Meyer-Olkin measure of the sampling is found to be 0,824, and the significance of Bartlett’s Test of Sphericity is found to be 0,000). Principal component extraction was used for extracting factors with eigenvalues over 1, and the rotation of the factor loading matrix was chosen as the varimax. The standard loading of 11 statements is higher than 0,50 (they vary between 0,736 and 0,522), and the cumulative variance of 3 factors is found to be 56,87%. The loadings (scores) of the statements in Table 2 are taken from the rotated component matrix (only one loading is lower than 0,50). The three factors which are obtained as a result of exploratory factor analysis, are renamed (Table 2).

The following main hypotheses are suggested by considering the results of exploratory factor analyses:

The two main hypotheses include 22 sub-hypotheses due to 11 factors (8 factors regarding effects and 3 factors regarding possible solutions) and 2 size properties (annual turnover and number of workers). All sub-hypotheses are tested at a 95% confidence interval. According to the results obtained, 8 hypotheses are accepted, whereas 14 hypotheses are rejected.

Six sub-hypotheses belonging to first main hypothesis have been accepted (Table 3). According to the results obtained, the participating enterprises, which are classified as small and medium sized enterprises according to their annual turnovers and number of workers, have been more impacted by the effects of the pandemic on finance, sales, information flow, efficiency and R&D activities. These findings are a reflection of those in the global supply chain. According to literature [2], the pandemic has more negatively affected small and medium sized clothing enterprises.

2 sub-hypotheses belonging to the second main hypothesis have been accepted (Table 4). In contrast to small and medium sized enterprises, large-scale enterprises have indicated more that the government support against the negative effects of the pandemic are adequate.

The COVID-19 pandemic, which has influenced the whole world in a short time, has negatively affected world trade. At this point, the clothing sector comes into prominence, as it possesses an important place in global trade as one of the sectors which have been significantly affected by the pandemic. Therefore, the Turkish clothing sector should be analysed due to its significance in the sector. Turkey is the sixth biggest clothing exporter in the world and the third biggest clothing exporter in the European Union. Also, it comprises 10% of its country’s export by itself. Thus, as the global clothing market has been negatively affected by the pandemic, it is unavoidable that the Turkish clothing sector would be a part of this situation.

According to the research results, 91% of the participating Turkish clothing enterprises have indicated that the pandemic has decreased their capacity utilisation rates. The pandemic has caused a 46% decrease in capacity utilization rates on average. However, 89% of them have benefited from short-time working allowance.

The pandemic has mostly affected supply chain management in the clothing sector in terms of the following elements: decrease in profitability, decrease in average order numbers, decrease in average product numbers per order, decrease in production amounts, increase in finished product inventories, increase in inventory costs, decrease in efficiency, increase in occupational health and safety precautions, increase in cash needed, and decrease in the number of inputs which are supplied from abroad.

According to the results obtained, the participating enterprises which are classified as small and medium sized enterprises according to their annual turnovers and numbers of workers have been more impacted by the effects of the pandemic on finance, sales, information flow, efficiency and R&D activities.

As stated by the research results, the enterprises have mostly needed employment support within the scope of possible achievable solutions against the negative effects of the COVID-19 pandemic. This support is followed by the postponement of tax debt payment, easy access to financial resources, investment support, online trade support, postponement of credit repayment, and financial support, respectively.

Furthermore, more than 80% of the enterprises have indicated that government support with respect to employment, finance and exports given during the COVID-19 pandemic are inadequate. Moreover, they have specified that sectoral cooperation, efficiency of marketing activities and utilisation of domestic supply resources should be increased, and in the logistics sector, relations with suppliers and occupational health and safety systems should be improved.

In light of the results obtained, the possible precautions which can be taken against the negative effects of the COVID-19 pandemic can be summarised as follows:

Digitalisation should be integrated in all processes in the supply chain.

To sum up, it is determined that supply chain management in the Turkish clothing sector has been negatively affected by the COVID-19 pandemic. Order disruptions and cessations have disrupted employment, production, procurement and investment processes, due to which financial disruptions have occurred. The most significant possible precautions that can be taken by enterprises can be indicated as follows; benefiting from government support, moving towards online trade and an omni-channel strategy, introducing necessary alterations in product ranges, giving essential importance to innovation, efficient use of occupational health and safety systems, shortening the supply chain as far as possible, integrating digitalisation into all processes of the supply chain, and increasing the efficiency of marketing activities. Also, it is thought that these suggested precautions are consonant with the future tendencies of the sector, because the sector is in an alteration process. After the pandemic, some precautions or alterations which were made during the pandemic process will be permanent. Turkish clothing enterprises will use online trade and omni-channel strategies more, will produce more classic and timeless products, will shorten their supply chains, and will use domestic suppliers more. Also they will move towards different markets and will digitalise all process as far as possible. Therefore, the sector will be more digitalised, its supply chain will be simplified, and its product lines and marketing strategies will be altered.