Overview of Textile Industry 1.1 Country Profile Official name : Peoples Republic of Bangladesh Area : 144 000 sq km Population : 150 million Language : Bengali, English Geographical Location: South Asia Time : GMT + 6 hours Main Industries : Textiles, jute, Leather, Frozen Foods, Agriculture, etc. GNI per Capita : US $ 470 (2006) : US $ 620 (2008)
History of Apparel Industry in Bangladesh There were only 9 export oriented garment manufacturing industry in 1978, earned only 1 million dollar. Some of them were very small, produced RMG for local market as well. Four such small and pioneer garments were Reaz garments, Paris garments, Jewel garments and Boishakhi garments. Reaz garments established in 1960, as a small tailoring outfit, named Reaz store in Dhaka. Served only domestic market of its initial 15 years. In 1973, it changed its name to Reaz Garments Ltd and started to export by selling 10 000 pieces of shirt to France, valued 13 million franc in 1978.That was the first direct export of apparel.
History of Apparel Industry in Bangladesh Desh Garments Ltd., first joint venture in Bangladesh, Technical and marketing collaboration with S. Korean Daewoo Corporation, established in 1979. First 100% export oriented company. In 1980, Youngone (49%) and Trexim (51% equity) formed a company named younone Bangladesh exported first consignment of padded and non padded jackets to sweden in dec 1980. It had trained 120 operators including 3 women in S. Korea Went to the production in 1980.
History of Apparel Industry in Bangladesh Till to the end of 1982, there were only 47 garment manufacturing units. Break through occurred in 1984-85 when numbers of garment factories increased to 587. In 1999, there were 2900 garment factory in the country. Average growth rate of garment export is 22%. Now, the numbers of garment manufacturing units in Bangladesh is 5500.
Reasons of Growth External Reasons: GATT Approved multi fiber agreement (MFA) Quota, As a LDC, get preferential access in EU. GSP Internal Reasons: 5% cash incentives No import duty Bonded warehouse facilities Back to back L/C Concessionary rates of interests FDI of Joint venture facilities Concessionary duty on imported machinary EPZ facilities
Textile ProductionMainly Two Sub-sector:a. Woven: Horizontally Integrated 85% woven fabric imported off 3 billion yards Demand increases @ 20% Requires comparatively higher investment. 223 modern weaving plants, each with an annual capacity of 10 million meters, will be set upb. Knit: Vertically Integrated Almost self-reliant - 95% Collected Locally.Annual Increment of Consumption of fabric : 20%
Value Chain: Michael Porter in 1985 introduced in his book ‘ The Competitive Advantage: Creating and sustaining Superior performance’ the concept of the Value Chain. Michael Porter suggested that the organization is split into ‘primary activities’ and ‘support activities’. Primary activities: Operation, Logistics, marketing, Service, Support Activities: Procurement, Technology development, Human resource mgt, Infrastructure.
Value Chain: Knit Almost complete value chain Some of the factories fully vertically integrated : Spinning to finished garment. Competitive wage, Easily trainable workforce, Expanding supply side capacity, government supporting policy helped to gain competitive advantage. Core strength is backward linkage. 90%-95% knit fabric produced locally Net export is higher than woven. In FY 2006-07, Export share of knit and woven were 37.39% and 38.25% respectively. Cumulative average growth of knitwear is 27%. Advantages of Bangladeshi Knitwear: Self sufficient – 95% fabric and accessories collected Locally. Integrated Good capacity exists Unbeatable in price Cheap labor with high stitching capability Good reputation of Bangladeshi Knit apparels all over the world.
Value Chain : Woven Only a few weaving factories that offer quality product. So, majority of fabrics has to be imported – higher purchasing cost, dependency on external supplier, pricing disadvantages. Can meet only 15% of fabric demand. More than 220 modern weaving mill need to be set up, each with an annual capacity of 10 million yards. Annual Consumption of fabric: 3 billion yards.
Backward Linkage Supporting Industry Spinning, weaving/knitting, dyeing, finishing Industries. In addition to these, Interlining, labels, buttons, sewing threads, packing and packaging materials, zippers, draw strings all are backward linked industries. 70% of accessories collected locally. Share of BB L/C in total export dropped from 68.33% in FY 1995 to 45.1% in the first eight months of FY 2001. Total investment in backward linkage is US$ 2B.
SWOT Analysis Strength: Competitive price advantage due to cheap labor and Governmental Assistance Skilled Human Resource Duty and Quota free access and GSP in EU Integrated Supply Chain, Specially in Knitwear International Image of a reliable supplier of basic Products.
SWOT Analysis Weakness Weak Structure, in particular production efficiency, product development, marketing skill, customer service, controlling, planning, management skill, technical know how Producing mainly basic products, Heavily depend on importing woven fabrics, low value addition Poor image of adapting international and Corporate social standards Political, Social and worker unrest.
SWOT Analysis Opportunities: Potential for higher value addition by developing backward linkage. Reduce lead time by developing infrastructure of transportation, faster custom clearance, strong backward linkage Improved image by adapting environmental and social standards Diversifying apparel product; switching from basic product to fashionable product. May get preferential access in USA and Canadian market in near future.
SWOT Analysis Threats: Risk of loosing competitive advantages- development steps required. Poor political and investment climate leading declined interest of importers Poor capital formation Risk of loosing know-how transfer, staff qualification, Totally depend on others for raw materials as Bangladesh produce neither natural fiber nor MMF. Increased international competition Woven sector requires huge investment Single market concentration.
Distribution Structure Contact Directly to the apparel producers regarding price, samples, delivery schedule etc – more dependency on manufactures regarding quality. Production Agencies/Buying house: Take care of product development, purchase of fabrics and accessories, follow up production, conducting inspection, scheduling shipment date etc. Satellite office: Has own QC dept. and other staffs to conduct the operations.