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2 years ago

A futuristic view on Bangladesh's RMG industry

-Reuters file photo
-Reuters file photo

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The ready-made garments sector of Bangladesh is said to be the powerhouse of Bangladesh. 'Made in Bangladesh' has earned its respect worldwide. RMG sector has played a vital role in the growth of the country's economy, contributing up to 83 per cent of export earnings. The journey of Bangladesh's garments manufacturing started about 61 years ago in 1960 with Reaz Store, later named as Reaz Garments Ltd. It was not until 1973 that the Bangladesh RMG industry first exported any garments overseas.

Bangladesh garments industry has seen massive growth due to EU GSP scheme, tax holidays for foreign companies, the establishment of EPZ and back-to-back LC facilities for manufacturers which allowed both small and large manufacturers to grow. According to BGMEA, 135 LEED green garment factories certified by the U.S. Green Building Council (USGBC), Bangladesh has 9 out of the world's top 10 green garment factories, on top of which 500 more factories are in the process of getting LEED certification. Though the industry boasts having the highest number of LEED certified factories in the world, it has still not gained the capability to diversify. It seems like the industry has found its comfort zone in manufacturing low-cost products, hence there has been minimal investment in diversifying.  According to industry specialists, about 99 per cent of accessories needed to make cotton or knitting products are sourced locally whereas other crucial products such as polyester and synthetic fabrics are sourced from countries such as Taiwan, China and Korea. This lack in backward linkage is not only increasing the lead time for shipment but putting prodding on workers to make up for the delay in sourcing. According to industry specialist Ms. Shwapna Bhowmick, Head of the Country of Marks and Spencer Bangladesh sourcing office, Bangladesh has the potential to expand up to $80 million from Marks and Spencer alone if the country invests in value added products like laces, bra-cups and other accessories. This dependency on foreign suppliers has left us with very little bargaining power, costing a large portion of the revenue made from shipments. According to Bangladesh Bank Research Department, the import of RMG raw materials for July-September FY'21 was a staggering 2845.83 million which was 35.02 per cent of the total export.

It is unfortunate that the world's third biggest ready-made garments manufacturer and exporting country is still struggling with having the highest lead-time for exporting. It is understandable that not every company has the capacity to have in-house supply chain whereas many industry giants do have internal freight forwarder and C&F to get the job done as quickly as possible. However, there has been minimum initiatives to utilise expert 4PL companies like Maersk, which has immense potential to shrink the lead time and make shipping cost effective. Bangladesh now having the lead-time of shipping to U.S. in about 77 days and to European nations in about 55 days is the highest compared to its competitor nations like China, Vietnam and India. It is not only the lack of involving 4PL service experts but also the lack of digitalisation that has given rise to lead time. The documentation process and procurement procedure may feel nostalgic and take one back to 2010. Although the garments industry is considered a low-tech industry, the pioneers of the industry have reached rock bottom when it comes to digitalising this sector. It was only after 2012, the year in which the Rana Plaza and Tazreen factory incidents happened, that investments were made to remediate the lackings in the infrastructure, but the supply chain has seen little or no advancement yet. A good way to come out of it might be utilising applications like 'supplier portal' by Klopman to speed up the processes in Supply Chain. The implication of such an application is expected to lower lead-time as it will keep necessary parties of the supply chain on loop without causing delay and may also help find the bottleneck of the organisation.

What Mr Nurul Kader Khan, founder of Desh Garments and the pioneer of Bangladesh's RMG industry realised in 1979 is not yet understood by many today that skilled labour is a significant resource to the organisation. Even in 1979, Mr Nurul Kader had the mindset to invest in training 130 employees in Daewoo Company to build an efficient workforce. Needless to say, Bangladesh is getting most of its orders due to having low manufacturing costs. While trying to maintain this 'low manufacturing cost' most businesses have lost their bargaining capacity and put little or no effort into training their workers. Since the country has an abundance of unskilled and unemployed workers, we can also see that the productivity of the employees is far less compared to that of China or other competitors.  An industry providing job to 4.2 million workers has barely any female employees serving in white-collar jobs. Most educated females or even males find this sector very risky due to frequent riots and conflicts between blue-collar workers and the management. In fact, workers in white-collar jobs often get demotivated when the company hires a foreign manager in an important decision-making role for the company. When the company owners are asked why they prefer to hire a foreign employee rather than a local, they typically respond by saying they lack knowledgeable local professionals in this field who can efficiently communicate with foreign coworkers, which is a necessary skill, otherwise they (the owners) would not be "wasting their money" hiring high paying foreigners. In an attempt to train future leaders of the industry, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) established their institute BGMEA University of Fashion & Technology but the effort has hardly seen any results in the last ten years.

With the current productivity and achievements, the industry has a lot to improve upon and needs proactive thinking to keep moving in a desired manner.

Mohammad Ashraful Islam Khan, Head of Supply Chain Advisory Services, KPMG Bangladesh. Rageeb Shahryar, Supply Chain Management Intern, Walton Hi-Tech Industries Limited.

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