In this article, we comment on some of the ideas in an interview between Wilson Zhu, COO (Chief Operating Officer), Li&Fung and Anna Tehan, EVP Corporate Communications, Fung Group.
How many of us were delighted to see “a return to the normalization of trade between the world’s two largest economies.” (Phase I of China-US trade agreement) Weeks later we were overwhelmed by the news about the Coronavirus outbreak (Covid-19) and its effect on the global supply chain. Both of these disruptions compounded the intense problems world economies are currently facing.
On Manufacturer.com, there was an article published about “The Corona Virus Threatens the Global Apparel Industry.“
Anna Tehan:
Wilson, as soon as the US and China signed the Phase I agreement, which we all hoped would mark a return to some normalization of trade between the world’s two largest economies, the Novel Coronavirus outbreak caught everyone off guard.”
Wilson Zhu:
Well, for the time being, no one is even talking about the Trade War, which is on the backburner now. What does that mean? That means the impact of this Coronavirus outbreak on the global supply chain is so big and unprecedented that the US-China trade war is not even worth people’s attention. In a trade war, the involved parties can negotiate, and you have a sense of control. There has been some sense of losing control and the uncertainty trumps everything. The biggest fear in business is uncertainty – but that is what we have right now and what we are facing as an industry – the unknown.”
ATS (Apparel Textile Sourcing):
Time will tell which is the more serious disruption to business. In the immediate present, China must gain control of the spreading of the Virus. But in the long-term, Phase II of the Trade war will have a more profound effect on the global economies.
Anna:
I understand suppliers resumed operations last week, on Monday, February 10. Do you sense any progress?
Wilson:
While some restarted operations on February 10, it has not been consistent. Local governments are empowered to impose additional requirements, such as quarantining, returning employees, or inspecting the worksite. So, the first week was painful and slower than many people expected as controlling the outbreak was and is still the number one priority.
But, as we enter the second week, things are getting better for two reasons: The government is gaining confidence that they have better control of the outbreak, and they are listening to the voices of business.”
ATS (Apparel Textile Sourcing):
As of today, February 24, the virus seems to be spreading around the world in a rather alarming way. Japan, South Korea, Italy, and Iran seem to be in panic mode. At the time that China is managing positive effects with its strict measures, other countries are facing an increased threat.
Anna:
Is it safe to say, shipment delays are inevitable?
Wilson:
Yes. We actually expect delays to increase over the next few months as many factories are currently finishing production with materials already produced and purchased before the holiday break. But now, second-tier suppliers, such as fabric mills, will not be able to necessarily deliver fabrics needed for ongoing garment production. As a matter of fact, even a small hangtag or a zipper’s delay will stop the entire production flow.”
ATS (Apparel Textile Sourcing):
We strongly agree with Wilson’s comments. No one is quite sure yet where the weakest links are in the global supply chain in terms of the virus outbreak.
Anna:
Is this a supply chain challenge we are facing in China alone?
Wilson:
Not at all. We are operating in a borderless platform and the entire supply chain is seamlessly integrated, so the ripple-effects are endless. For example, China remains the largest textile producer in the world.”
Anna:
How do you think Li & Fung is positioned to understand and handle these two wars?
Wilson:
We are better positioned because of the global sourcing and production platform we have been building in our 100-year-plus history. It is interesting to see just how real and inspiring this is during a double crisis like this.”
ATS (Apparel Textile Sourcing):
Countries that have solid supply chain techniques will recover more easily once the virus has been defeated. Also, these countries will be in a better position in the negotiations with other economies, particularly the United States. It is impressive to see the confidence that Wilson expresses.
Anna:
In what way?
Wilson:
Well, when we created the vision statement, we knew the direction and our dream, but we didn’t know exactly how the future will play out. No one predicted the intensity of the US-China trade war, nor the Coronavirus outbreak – yet both of these have completely disrupted our industry. But we are starting to see the strong vital signs of our future.”
Anna:
So, information and data actually become a value-added service?
Wilson:
You said it so well. In the time of a crisis, information is gold. The Crisis Management Team follows three guiding principles:
- Tell it all
- Tell it now
- Tell it yourself”
Anna:
With so much disruption on the ground, how do you get the truth?
ATS (Apparel Textile Sourcing):
The most serious problems as of today about the Corona Outbreak are skepticism and panic among ordinary people in many parts of the world. In the present, this factor is causing enormous economic disruption. Populations throughout the world must be able to believe the statements from the medical professions (also the World Health Organization) and from government leaders.
Anna:
There has been a lot of criticism about how China is handling the crisis. You are on the ground, and understand the language and culture, what is your opinion?
Wilson:
Wow, you asked a tough and sensitive question. Let me be very straightforward and honest with you. I would say that some of the critics are innocent, some biased, some well-intended and constructive and some purely hostile.”
Conclusion
As we can see from this interview, this story in both cases is not nearly over. We do not know in either case how the future will unfold.
