6 years ago

RMG orders on up, match them with deliveries

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The pressure of increased purchase orders is weighing on the readymade garments sector. With already a plateful on its hands, more are in the pipeline, according to industry observers. Some entrepreneurs estimate a 20 per cent increase in orders compared with what was registered at this point in time of the last fiscal year.

The  uptrend in the  placement of   orders  has been   already  having a bearing   on  export earning statistics up to a degree. In the coming months the  earning spike will be more pronounced  because generally  on completion of the export process  three -- four months will have elapsed before  the foreign currency proceeds  hit   our tills.

According to the data of the Export Promotion Bureau, in January last  apparel export worth $288 crore was recorded. In February and March  the figures were US$ 260 and U$ 257 crores  respectively, representing  16.86  per cent and 12.60 per cent growth in two months, let alone the higher figure in January. In April last, the earning at US$247 crore reflected a growth of 11.89 per cent. Thus the total growth in the first ten months of the on-going  fiscal works out to 9.37 per cent.

It has to be noted that the purchase orders are offering on the whole a price reduction of 5-7 per cent as compared with  last year's prices.

What are the possible  reasons behind the stepped up    purchase orders. At least four reasons are cited by  garments professionals: First, Primark, VF, Inditext, Lee & Fang, along with other Brands and buying houses  are expanding  their business. Secondly, the economic situation in Europe  is much better than in last year. Thirdly, several Brands in China are relocating a portion of their orders; Bangladesh  may be  beginning to  benefit from the shift. Last but not least, many factories  may have  closed down  after having run out of  wherewithal  in carrying out  reform.

Although several  industries  feel the heat of  spike in purchase orders, yet a  rush of orders is experienced by the compliant factories. One  important but risky feature  is for the industry  taking orders  beyond  their  inherent  capacity to cope; so that sub-contracting is being  contemplated  to flesh out the gaps in terms of squaring up with the orders.

The manufacturers and exporters  will be bringing in business on an ancillary front; the increase in orders will  put  corresponding  pressure  on factories  turning out thread, carton, poly bag, back-board, butterfly, hanger  and other garments accessories. The backward linkages  will have to be activated to keep the RMG sector up and running full steam ahead. One gap is underscored by Abdul Kader Khan, President of Bangladesh Garments Accessories and Packaging Manufaturers and Exporters Association (BGAPMA). The hike in the price of paper has  been a handicap in the manufacture of cartons. Because the garment factory owners  are not  quite  increasing  the price at their end.

But the elephant in the room is the  lower price-tag  on offer which may hinder optimising  the benefits of  increased orders the  RMG sector seems poised to be  receiving. Even some factory owners tend to think that the lowering price may not even enable them to meet the cost price.

But it is paradoxical-if our products are competitive in quality, why shouldn't they fetch competitive prices? We believe we have some levers to   pull with the buyers/importers in terms of  the   margin of profit  factored in the equation that is weighted in favour  of the  brands at the expanse of exporters.

Somewhere something has to give in for the improvement of the industry  of which the workers' safety and welfare  are the key elements .

Finally, we must strive to improve port handling to deliver on the orders with adequate  lead  time having been retained  through the preceding stages.

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