Cambodia has been hit by unrest as union leaders and workers fight for a higher minimum wage

Cambodia has been hit by unrest as union leaders and workers fight for a higher minimum wage

The international apparel supply chain faces a complex array of risks and variables, and buyers are putting a high priority on minimum disruption. Indeed, there's a stark link between the three top-ten supplier countries whose imports to the US have fallen this year so far.

The latest data on US apparel imports paints a rosy picture for seven of the top-ten suppliers in the first four months of the year - with their shipments rising anywhere between 0.9% for China at the head of the table, to 12.7% for Vietnam (at number two) and 10.2% for India (number seven).

But it's a very different picture for Bangladesh, Indonesia and Cambodia - countries that between them account for 18% of US apparel imports.

For these three, 2014 has been marked by a fall in shipments in the period from January to April, dropping 3.5%, 1.7% and 0.2% respectively. And, worryingly, the declines appear to be accelerating, tumbling 5.3% for Bangladesh, 7.0% for Indonesia, and 7.9% for Cambodia in the month of April alone.

What these countries all have in common are instability and disruption to the supply pipeline caused by local disorder and unrest.

For Bangladesh, the US's third-largest apparel supplier, shipments to the US have now fallen for four months in a row following last year's factory safety issues and subsequent strikes and disruption as a pay rise was negotiated for apparel workers. There were also widespread disturbances in the run-up to January's parliamentary election.

Indonesia, too, was hit by a national strike at the end of last year by workers demanding higher salaries, and unions are continuing to push for a 30% hike in the minimum wage from 2015. On top of this, local firms have also highlighted concerns that a further hike in electricity tariffs will raise production costs and affect the industry's competitiveness in export markets.

A slump in US garment imports from Cambodia is also likely to be due to concerns over poor work conditions, and industrial unrest sparked by poor pay.

Jeans giant Levi Strauss & Co recently confirmed to just-style that it has reduced its sourcing from Cambodian garment factories in a bid to "minimise supply-chain risk and ensure delivery" amid ongoing unrest in the country.

The company said it decided to cut back its orders from Cambodia following widespread strikes in January and the resulting government crackdown, which led to the deaths of four garment workers. 

Other brands and retailers, including H&M, Gap, Puma and Inditex have also warned the Cambodian government that due to the disruption to production and shipping caused by continued unrest, Cambodia is at risk of losing its status as a strategic sourcing market. 

Social unrest and violence in supplier countries were listed among the key issues to watch by industry executives taking part in this year's annual just-style survey on the challenges likely to be seen in the apparel industry and its supply chain in year ahead.

And with long lead times meaning it takes several months for any changes to sourcing patterns to start to emerge, it may only be now that the full impact on buyer confidence is being seen.

Indeed, there's no doubt that tensions continue to rise, with much of this focus being driven towards increasing minimum wages. And as workers everywhere are armed with cellphones, their increased connectivity means they are now better informed on wage concessions granted elsewhere.

There's also the likelihood that social unrest followed by strikes and violence in developing countries has a risk of escalating to levels that could undermine industry generally - not just garments.

This was very much the case in Vietnam last month, when foreign-owned garment and footwear plants were caught up in anti-China protests linked to the country's deployment of an oil rig in disputed waters in the South China Sea.

While just-style has been told the unrest is unlikely to impact long-term industry investment, it remains to be seen whether buyers' confidence in the country - the second-largest apparel supplier to the US - will be affected.

What is certain, however, is that brands and retailers are increasingly risk adverse with their purchasing power. And for many, putting a high priority on minimum disruption in their supply chains has translated into relocated orders rather than having to face the possibility of cancelled or delayed deliveries.

And in what might turn out to be an unexpected twist, US retail giant Gap is to start sourcing apparel from Burma/Myanmar for the first time. Rising risks and costs of producing in Bangladesh, Cambodia, Vietnam, China and Indonesia may mean that Burma no longer seems such a risky proposition after all.