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The Financial Express

RMG makers redraw virus battle plan

| Updated: March 09, 2021 18:19:53


RMG makers redraw virus battle plan

Apparel makers adopted a number of strategies including cost-cutting, reorganising capacity and utilisation plan and efficiency enhancement to cope with the impact of the Covid-19 pandemic, industry people said.

Cost-cutting included reduction in workforce, suspension of overtime and less investment in research and development, they said.

Other approaches included opting for new products and markets such as online marketplace and upgrading technologies, they added.

To deal with the crisis, diverse practices like taking orders below production costs were also noticed among the enterprises, they noted.

According to a recent study, about 10 per cent out of the 620 surveyed factories said they had taken 50-100 per cent of their orders which did not cover their production costs.

The study also found that such tendency was rather high among the factories, mainly woven units, located in Dhaka and Gazipur.

Talking to the FE, Shahidullah Azim, managing director of Classic Fashions, said manufacturers had to accept such work orders to keep their units running and pay wages to their workers.

When asked, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Dr Rubana Huq said the Covid-19 pandemic had unprecedentedly disrupted the global sourcing pattern of clothing.

The first wave of the pandemic startled the industry with cancellation of orders and left the manufacturers under pressure. The buyers were also equally under stress, she added.

Though a significant portion of the cancelled orders were reinstated, she said, the faltering recovery from the pandemic led the buyers to follow a conservative sourcing policy-smaller orders and shorter lead time.

And above all, an unprecedented collapse in retail sales caused by the second wave of Covid and the emergence of new variants had curtailed the demand significantly. As a result, export was plummeting consecutively every month (retail sales in the EU and USA markets declined by 28 per cent and 16 per cent respectively in December).

"So, factories are running with great uncertainties as well as underutilization of the capacity, price decline and deferred payments. The resulting supply chain and resource inefficiency are causing financial losses," she said.

To cope with the situation, Dr Rubana said, factories were compelled to adopt time-befitting approaches like reorganizing capacity and utilization plan, efficiency enhancement, opting for new products and markets including online marketplace and upgrading technologies.

Regarding both firing and hiring of workers and capacity expansion, she said contrasting pictures were found in knit and woven factories. Woven garment exports had declined by 11.49 per cent in July-February of the current fiscal year while knitwear exports had slightly retained the growth trend growing by 4.06 per cent.

Talking to the FE, Mostafiz Uddin, managing director of Denim Expert Limited, a factory based in Chattogram, said he had to minimise the costs by taking steps including suspension of workers' overtime as well as innovation and research.

There was no overtime in his factory in recent months due to a lack of work orders, he said. He had to pay Tk 2.0 million monthly in overtime payment, he added.

"I used to subscribe to few fashion journals to have an idea about the next trend and fashion which I now have stopped to minimise the costs," he added.

SM Khaled, managing director of Snowtex, said they had to face difficulties in running the factory for eight hours daily as their orders were cancelled or delayed due to the pandemic until mid-February.

He, however, said they were looking to go for 10 hours' work a day from March for getting fresh orders. His company would hire additional 1,000 workers by the current month, he added.

The capacity expansion by setting up a new factory had been halted due to the pandemic, Mr Khaled said. The new unit having 80 lines would be completed by 2021, he added.

According to a study jointly conducted by the Center for Policy Dialogue (CPD) and the Mapped in Bangladesh (MiB), about 0.357 million (3.57 lakh) garment workers had lost jobs during the Covid-19 pandemic.

The average number of workers in a factory in December 2019 was 886 which came down to 790 in September 2020, it showed.

The study also found that as many as 37 per cent out of the 620 surveyed factories had both retrenched and recruited workers during the Covid-19 pandemic.

CPD research director Dr Khondaker Golam Moazzem said during the research, they had found 40 per cent of the surveyed factories taking initiatives to recycle wastage/excess inputs generated during 2017-2019 as part of their risk-coping strategies.

About 50 per cent factories mentioned that they had installed cost-saving technologies while small-scale enterprises, especially those located in Narayanganj and Chattogram, were left behind compared to other categories of enterprises.

The study also showed that the factories, mainly large and medium ones, were planning to expand their online market exposure while interestingly small factories were also interested in exploring that area.

However, only 13 per cent factories had concrete plans to set up online-based IT infrastructure in their factories within next three years, according to the study.

Explaining the manufacturers' plans in this regard, Mr Moazzem said online buyers were not same traditional buyers who sourced from Bangladesh.

"They are different buyers. They place orders for small volume with short lead time but offer better prices."

These buyers who sell online did not source from Bangladesh before the outbreak of Covid-19 mainly because of a long delivery time. They now began exploring the sourcing opportunity in Bangladesh because of the local manufacturers' capacity to supply small volumes and take short time orders during the pandemic, he explained.

It did not mean that local makers would retail or sell their products online, rather they would supply garment items to buyers who retail online, he noted.

The government should provide infrastructural support to such factories especially small and medium ones so that they could grab the opportunities, he suggested.

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