Circulars

IMP. LETTER NO C-2/ 20 / 20 DTD 9th April 2020

Without doubt, what we are witnessing today is a crisis of unprecedented severity. It has not been seen before, and hopefully, will not be seen again.

At the moment, the entire focus is on keeping ourselves safe, and undertaking whatever measures one can to minimize the spread of the Virus Covid-19. We hope all of you and your loved ones are safe and healthy and pray that you remain so in these difficult times.

However, as all of us are aware, the economic backlash of what is happening today is going to be as bad, if not worse, as what we are facing now.

Your Association, CMAI, is doing all it can to convince the Government for an urgent need to intervene and help the Industry. We have had Representations, con-calls, discussions, and meetings. We have conveyed to them our anguish and our pain.

We are hoping they will hear our distress call and provide some relief. However, we also need to help ourselves. We cannot and should not depend on the Government or any third party to help. We need to strengthen ourselves.

Cancellations of orders, stuck inventories, unpaid dues, and Bank defaults are just few of the consequences that all of us are going to face.

So, what do we do? How do we, as an Industry, react? How should our MSME members respond to this crisis?

Obviously, all businesses will have their individual situations, responses, and strategies. But here are a few general guidelines, especially for our MSME members to follow:

1. First and foremost, let us remember that the entire value chain will be impacted – however big or small. Some will have greater holding power, some less.
2. The only way, therefore, is to adopt a co-operative and coordinated approach. Antagonistic, legal, combative, and you vs. me approach is unlikely to succeed in most cases.
3. We will have to cut expenses. Expenses are of two types – people and non- people. We should try to avoid cutting people costs as far as possible. Remember, these people have been our source of strength for years. They have helped us to be where we are today. They have their families to feed – and depend on us to do that. So, keep that in mind when you reduce costs.
4. Let us look at non-people costs first. Cut down to the bare minimum all Marketing, Promotion, and Advertising costs first. Cut down, but do not eliminate. Consumers tend to forget. And we need them to remember our Brands when they return to the market. And return they will. So, keep some communication with your consumers going, but reduce it wherever possible.
5. Dispose off current inventory at best available price. Do not be greedy and keep hoping you will get a better price. Keep in mind we are in the Fashion business. Fashions change, fashions become outdated. The older the inventory, lower will be its value. In any case, what extra you may earn after 6 or 9 months, will be lost in interest cost.
6. Keep yourself Cash Healthy. Conserve cash. If you have some assets which are not really producing returns and are with you simply because you didn’t need the money, this is the time to cash in their value – even a slightly reduced value. Today, the businessman paying his vendors will be respected far more than the one owning 10 galas.
7. If you are working in multiple locations, even two or three adjacent galas, ask yourself – can I reduce the number? You will save electricity, security, transportation, even some manpower, amongst other things.
8. Many of us deal with basic products. Basic T-Shirts, Shirts, Trousers, etc. these may not be Brand or Customer specific. Try to divert existing stocks to other customers rather than keep for the original buyer. Perhaps a change of label might be the only additional input required. Denim Jeans too, if Buttons and Rivets not yet stitched.
9. Speak to your Buyers/Customers. They are also in a bad shape. But try to work out a win-win arrangement. The important issue today is to sell your existing inventory at the best possible terms. Do not feel hesitant to offer a bit of additional discount or agree to a higher than usual credit period. You sell your inventory, while they get some additional margin and an extra time to pay you. This may appear unfair at first sight, but we need to remember that our Buyers are also facing the same crisis of existence. If they survive, so will we. Let’s try to work together today. You gain something, they gain something.
10. Of course, analyze your Buyers very carefully. It may be better to have goods with you which can be sold later or diverted than dump it on a buyer who is unlikely to survive this crisis.
11. Speak to your Vendors on the same lines. They too will be facing a crisis. Be reasonable to them too.
12. Most importantly, do not shy away from speaking to them. when you avoid their calls, their concern turns to doubt, irritation to anger. Reassure them that you are there to sort out the problems. That you are not going to take advantage of the situation. That you are not going to run away. Reassurance often works as much as actual payment.
13. One of the best ways to do this is to keep making part payments whenever possible. Do not wait for the ideal situation when you can clear the entire amount of a supplier. That situation may take a long time to come. And a vendor will feel a lot more reassured if he keeps getting some payments against his dues.
14. The above are obviously just suggestions. Each organization can negotiate its own terms.
15. CMAI will continue its efforts to persuade all parties to conclude a mutually beneficial arrangement.
16. Although we must try to avoid hurting the weakest members of our society, it is possible that some reduction of manpower or manpower costs may be inevitable in some cases. Again, here are steps that are recommended, possibly in that order:
17. Most owners do have withdrawals. Reduce these withdrawals by 50%.
18. Talk to your Management staff and persuade them to take a Salary reduction. Make a part of this reduction in the form of a Salary cut, and part as a deferred payment, spread over 12 months.
19. Similarly, persuade your Office Staff to accept some salary cut and some deferred payment.
20. In all this, identify your most crucial core team. The ones on which your organization’s performance depends on. Take care of these. Remember, these trying times are not going to last forever. When normalcy returns, you will need these champions.
21. Again, all these are suggested measures, and individual organizations will have to work out their own equations.
22. As stated earlier, try to avoid manpower reduction to the minimum. However, if inevitable, ensure that all legal dues are settled.
23. Where workers are on a piece rate, revisit the rates, and see if a portion of this could be converted into an incentive plan, perhaps combined with attendance bonus. This will help in reviving productivity and production more expeditiously.

In conclusion, all of us at CMAI will do the best we can to help, assist, and guide. Do let us know if there is any way we can be of any specific help.

WISH ALL OF YOU ALL THE VERY BEST. STAY SAFE. FACE THE CRISIS WITH COURAGE, ETHICS, AND HUMANITY.

TEAM CMAI