The current coronavirus pandemic is having a major impact on the suppliers of sporting goods, particularly in terms of orders, material shortages and cash. Reports from China, Vietnam, Cambodia, Indonesia, Bangladesh, Myanmar and other major sources indicate that many of them are resorting to massive layoffs or facing labor shortages as a consequence of the disruption of the the supply chain and the transportation infrastructure. Meanwhile, many of their clients are reconsidering their product development and supply chain strategies.
A global survey of sporting goods industry manufacturers and their clients recently conducted by the World Federation of the Sporting Goods Industry (WFSGI) found that a majority of them (60%) believe that it will take between 91 and 180 days to recover after the Covid-19 pandemic. Not surprisingly, no respondents at all expect to get back to 100 percent of their previous business performance, and only 5 percent believe that their business will reach 90 percent of its pre-pandemic performance.
The demand does not seem to be uniformly affected around the world. Around 90 percent of sporting goods manufacturers see decreasing orders from customers in Europe and North America. The ratio is considerably lower, around 30 percent, for orders from customers in Latin America, the Far East and South Asia. Supply chains are the most affected in the Far East (68%), followed by Europe (64%), South Asia (54%). Supply chains in North America are only affected for 22 percent of respondents while in Latin America less than 10 percent see an impact on their supply chain.
Shortages of materials are a problem, as more than 70 percent of the respondents said they are facing them due to the closure of manufacturing facilities. The safety regulations that have been imposed by several countries have not been without consequences either. More than 86 percent of respondents are affected by regulations that have specifically been implemented in relation to the coronavirus pandemic.
Cash flow issues are impacting both current activities and future plans. More than 86 percent of respondents are challenged by low cash flow due to extended payment terms and order cancellations, as well as by orders that are not delivered in time. Meanwhile, salaries are being paid in advance of the cash receipts, which make matters worse. Cash flow issues are seen as a major constraint also on future plans, with 50 percent of respondents believing they will have to refrain from investments because of these issues.
Moreover, close to 60 percent of the suppliers who participated in the survey indicated that they are facing possible labor shortages due to the forced closure of their companies. Just under 30 percent are facing these shortages due to travel restrictions imposed on workers and the shutdown of public transportation. Around 20 percent have seen staff not coming to work since they have to take care of family members or are reluctant to return to work due to fear of being infected.
Asked what kind of measures they were envisaging in reaction to the situation, 14 percent confessed that they had no particular plans. Close to 70 percent said they would consolidate production, nearly 60 percent said that they would focus on eliminating waste through lean production methods and close to 20 percent pointed to automation as a solution.
The WFSGI survey also indicated that the situation may lead to a concentration on a few strategic partners, which may make it difficult for the smaller players. Most of the manufacturers’ clients prefer to deal with flexible suppliers, while around 25 percent value efficiency and stability in the production process.
Only a little more than 15 percent of them want to switch to local sourcing for the local markets and 30 percent will look for “regional centric” or ”global market centric” supply chain solutions. More than 70 percent will work on a leaner and more adaptive supply chains and over 55 percent are looking for innovative ways to cope with the disruption, but many indicated that they still don’t know what they are going to do.
Sustainability, price and functionality will be important criteria in product development in the future. No less than 70 percent feel that environment-friendly products will be the most important market trend after the pandemic. They indicated that running and outdoor sports will stand out in terms of sports participation and the related market demand.
The above results, all related to sporting goods manufacturing, are drawn from responses collected during the months of March and April. The WFSGI is carrying out a “monthly pulse survey” to assess the impact of the pandemic on the sporting goods industry globally. The survey is open to all companies within the industry, and not just WFSGI members, via the following link: https://www.surveymonkey.com/r/7VF7FW8.The anonymous results are shared by WFSGI publicly on its Covid-19 hub.
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