The adverse purchasing practices, delayed payments, lower price offers and less work orders by global buyers might force a good number of suppliers out of business, industry people fear.
A new survey also revealed that the financial pressures threaten to make many apparel suppliers unviable and are likely to cause, or have already caused, large-scale dismissals of workers.
"Currently, most suppliers or 61 per cent reported being paid 60, 90, or even 120 days after order shipments," says the report.
On an average, suppliers surveyed will have to wait 77 days after they complete and ship customers' new orders, to receive payment, which was 43 days before the pre-pandemic period.
The survey 'Leveraging Desperation: Apparel Brands' Purchasing Practices during Covid-19' was conducted by the Centre for Global Workers' Rights (CGWR) at Penn State University.
It was conducted on garment suppliers in Bangladesh, Cambodia, Egypt, El Salvador, Ethiopia, Guatemala, India, Indonesia, Kenya, Mexico, Myanmar, Nicaragua, Pakistan, Peru, and Vietnam.
The largest number of respondents out of 75 was based in Bangladesh and the online research was done between July and August 2020.
Before Covid, only 34 per cent of buyers took 60 days or longer, after shipment, to pay suppliers. Now, 66 per cent are imposing 60-day or longer payment terms.
"Before the pandemic, payments terms of 120 days or longer were extremely rare. Now, one in four buyers has imposed such terms," said the report published in October.
Industry people claimed that the majority of the cancelled orders of more than US$3.0 billion during March-April were reinstated with the condition of deferred payments.
Many of the factories were closed during the pandemic while more will be out of business if such financial pressures by buyers continue, Mohammad Hatem, vice president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said.
"The deferred payment by buyers increases our bank liabilities. Our cost is going up, though they are reducing the rate of apparel items," he noted.
Shahidullah Azim, managing director of Classic Fashion Ltd, said local manufacturers are now have to wait 120 days or 180 days or even more to get payment against shipped orders.
"As a result, we are getting delayed payment while our loan becomes forced one causing high interest rates," he said, adding it also causes difficulties in making timely wage payment.
Mr Azim, a former leader of the Bangladesh Garment Manufacturers and Exporters Association, however, said he is now able to reduce the days from 180 days after continuous negotiations with buyers.
Echoing Mr Azim, SM Khaled, managing director of Snowtex, said his company is facing deferred payment issues during the Covid-19 period.
Three of his buyers on Saturday agreed third party financial arrangement against 90 or 120 days deferred payments, he said, adding whenever the deferred payment schedule is made, they will get the payments with additional charges once they submit the required documents to the third party.
"The third party arrangement has also cost, which the supplier has to bear," Mr Hatem added.
On an average, buyers have told suppliers they must cut prices by 12 per cent, relative to the last year's price for the same product, according to the report.
"As a result of lost volume and more onerous prices and payment terms, 57 per cent of suppliers reported that, if current patterns continue, it is extremely likely that they will be forced out of business," the report noted.
As much as 75 per cent of suppliers reported that they have had to cut workers' hours as a result of buyer purchasing practices during the pandemic, with approximately one quarter of suppliers are cutting working time by over 25 per cent.
On an average, the suppliers have dismissed 10 per cent of their workers.
They anticipate dismissing another 35 per cent of their workers if the current trends continue.
Talking to the FE, BGMEA president Dr Rubana Huq said, "All these factors directly impact our business and uncertainty of business placement is gradually leading factories to despair."
