can smes survive climate change? eva marie arts and crafts versus typhoon yolanda ser percival k....
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Can SMEs survive climate change? Eva Marie Arts and Crafts versus Typhoon Yolanda
Ser Percival K. Peña-ReyesEconomist, AIM RSN Policy Center for Competitiveness
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AIM RSN Policy Center for CompetitivenessResearch on Micro, Small, and Medium Enterprises
Enterprise Performance in Asia- In partnership with the International Development Research Centre.- It aims to support and promote evidence-based research on micro, small,
and medium enterprises (MSMEs) in middle-income Asian countries.
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Significance of the Study
In ASEAN, Small and Medium Enterprises (SME) account for more than 90% of all enterprises, employ 50-99% of the domestic workforce and contribute about 32-77% of total domestic output in their respective countries. In the Philippines, the number of SMEs grew by 66% from 492,510 in 1995 to 816,759 in 2011. Similarly, the numbers of those employed by these firms have grown by 45.7% from 2.7 million in 1995 to 3.9 million in 2011.With climate change, we expect calamities to happen more frequently and with greater intensity. As such, SMEs could be more vulnerable to climatic shocks compared with large enterprises.
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To identify and illustrate factors that could influence dire outcomes by focusing on the production chain of Eva Marie Arts and Crafts .
To illustrate the important linkages across the resilience of this firm with the resilience of the entire production chain to which it belongs.
Objectives of the Study
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Data sourcesofficial and media sourceskey informant interviews focus group discussions Initial interviews carried out by a local coordinator and case writer in May 2014Fieldwork by a team from APC from June 9 to 12, 2014
Methodology
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Sources of Raw
Materials
Production Chain
Eva Marie Arts and
Crafts, Inc.Distributors Retailers
Weavers and Embroiderers
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PRODUCTION INPUT:
400 weavers and 80 embroiderers
PRODUCTION OUTPUT:
Up to 200 boxes or 10,000 finished pieces of bags, wallets, and other items per shipment
Production Chain
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Type of Labor Employment Arrangement
job-out weavers They had the responsibility to source their own tikog .
Alternatively, they could also buy tikog from Eva Marie at PHP 500 per bundle and pay on a staggered basis.
a bundle of tikog ≈ 4 mats
2 panel mats/week; PHP 180 to PHP 200 per mat (PHP 72 to 80 per day)
in-house embroiderers and coordinators
full-time employees who worked 8 hours a day and were paid a daily wage of PHP 150
one family-sized mat in three days
in-house coordinators to find job-out weavers to help finish orders; provided quality control as well
Production Chain
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Sources of Raw
Materials
Breaks in the Production Chain
Eva Marie Arts and
Crafts, Inc.Distributors Retailers
Weavers and Embroiderers These elements
bore the brunt of Typhoon Yolanda.
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Elements in the Production Chain Immediate Effects of Typhoon Yolanda
Suppliers of Inputs Storm surge washing away all raw materials; difficulty in finding alternative sources
Eva Marie Arts and Crafts, Inc. Where to get financial support?- Cash from relatives- Global Communities- Government loans
Affected by no-build-zonesHampered by strict building requirements
Weavers and Embroiderers Damaged homes; relied on relief goods and cash-for-work; could not produce due to scarcity of tikog and buri
Breaks in the Production Chain
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Global CommunitiesPartnered with Eva Marie and its artisansProvided overall management and material support for livelihood restoration, asset recovery, and shelter repair kits distributionTapped Eva Marie’s existing production chain network, in order to course its support to the targeted beneficiariesEva Marie was tasked with the distribution to the beneficiaries and buying some of the materials to be distributed.
Interventions by Different Organizations
• Cash-for-work Programs– To immediately boost incomes
and speed up debris removal and clean-up operations
– PHP 260 per day for 8 hours of work; people to participate just once; work duration lasting 7 to 10 days
– Examples• Plan International Inc. • UNDP• DSWD
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Interventions by Different Organizations
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Elements in the Production Chain Response of Production Chain Link
Suppliers of Inputs Found alternative sources, but still constrained
Eva Marie Arts and Crafts, Inc. Optimistic outlook; had to increase prices; made adaptations for climate change; considered alternative warehousing and insurance
Weavers and Embroiderers Became hard to source because some of them still went for cash-for-work
Distributor/Exporter Intervened in issues regarding competition; provided production incentives
Resilience of the Production Chain
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Before Yolanda After Yolanda
Price per bundle of tikog Eva Marie sold to weaver
PHP 500 PHP 1,200
Price per mat at which Eva Marie bought from weaver
PHP 180 to 200 PHP 350 to 380
Cost of producing one mat for the weaver
PHP 33 to 56 PHP 80 to 133
Take-home income per mat for the weaver
PHP 124 to 167 PHP 217 to 300
Resilience of the Production Chain
• Need to upgrade the market so that the products could be sold at a much higher price
Minimum wage (non-agriculture) in Samar (Region VIII), assuming 8 working hours per day, 5 working days per week
PHP 260 per day
Workers’ compensation pre-Yolanda, assuming 2 panel mats per week sold at PHP 180 to 200 per mat
PHP 72 to 80 per day
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Learning Insights
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• Need for firms to adopt disaster risk reduction strategies in their production
• Improve public infrastructure under shock-prone environments
• Close coordination and proper timing of interventions
• Need to streamline processes for firms to get government assistance in times of disaster
Learning Insights
Timeline of Events for Eva Marie Arts and Crafts, Inc.
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Time Event
October 15, 2013
Last shipment to Japan and cash inflow before Typhoon Yolanda.
October 16, 2013
Eva Marie bought materials in Cebu worth P160,000 to prepare for a volume order from Tommy Bahama. The shipment was set for December 15, 2013.
November 8, 2013
Typhoon Yolanda hit Samar, and a storm surge of about 10 ft. washed away the raw materials and products ready for shipment. It has also destroyed the showroom of Eva Marie Arts and Craft. A few days later, the Adona-Yu family left Samar for Manila to seek refuge.
November 24, 2013
Eva Marie met with Christopher Rae of Global Communities in Manila to talk about her situation and the situation in Samar. Global Communities did not promise anything at first, but they expressed their intention of helping the community by donating shelter kits/ GI sheets to households in the coastal areas that were affected.
December 2013
Some suppliers who were not affected or those who were able to save the tikog, buri, and mats sold their products to Eva Marie.
January 2014 Global Communities went to Basey to assess the extent of the damage. A contract was signed by Global Communities and Eva Marie Arts and Crafts. Eva Marie was assigned to purchase the fishing kits and sewing machine and to head the distribution of shelter repair kits, fishing kits and weaving kits for the community in exchange for three sewing machines and money to buy the raw materials, such as tikog and buri.
February 2014 The firm started the embroidery of bags for shipment. They also applied for a loan under the Department of Trade and Industries.
March 2014 The firm was able to make its first shipment after the typhoon.
May 16, 2014 The firm’s application for loan to DTI was approved.
June 2014 The firm was able to confirm thousands of products ordered by Tommy Bahama to be delivered by December 2014.
