When Bangladesh’s garment industry was beginning to recover and turn itself around in the changing world after Covid-19, the Russia-Ukraine war changed the dynamics of the economy around the world. The unbridled price inflation of daily essentials brought hardship to public life. With the increase in energy supply and its cost, people all around the world were forced to rein in the cost of their daily life.
Sales of clothing stores decreased and brands continued to stockpile mountains of products. At the same time as a garment-producing country, our orders continued to decrease. These ups and downs in demand around the world will continue, but we have to be strategic.
Let’s start by thinking a little differently about managing our industry so that we can handle ourselves in any situation rather than being swept away in the current. To equip ourselves with sustainable, self-reliant and situational market management we need to rethink the following strategies for managing the industry.
Capacity-based management or profit-based management
We generally take orders based on production capacity in our industrial operations. For example, if we can produce ten lakh pieces of clothing in a month, we negotiate with the buyer accordingly. In most cases, 60-80% of the orders we have taken are on a profit basis while the remaining orders are taken at a loss even though we try to fulfil our capacity.
What happens is that we subsidise the orders that we make a profit from and ship the orders that are running at a loss. Our logic is that if the order is fulfilled without losing the workers, the loss will be less. This is a wrong strategy. We should now say ‘no’ to the loss orders and only accept orders that are even marginally profitable. You don’t have to pay if the machine is sitting idle, but you have to pay if the worker is sitting idle.
In other words, with a profit-based management strategy, you will be in a better position than taking orders at a loss with subsidies even if you reduce the profit. Your mental health will be better. Your workers will have job security. But with a capacity-based management system, you will always be in danger and your workers will always be in fear of losing their jobs.
Employment growth or worker’s quality of life — which comes first?
We, industrialists, are not contracted to the government to increase employment every year. But it is our responsibility to take care of the workers we employ. That is to pay their salaries on time according to our ability; guarantee their rights; provide security to their family and socio-economic situations; there is no justification for boasting only about increasing the number of employees without ensuring 100% provision of social justice and protection etc.
As per our current strategy, there is a lot of tension and we end up destroying the market ecosystem by taking orders without the profit needed to pay them on time. Due to this, we cannot ensure the fair price of the product from the buyer.
Buyer dependence or export diversification?
Many of our factories depend on a small number of customers. Some of these buyers or reputed brands also give them work throughout the year. But the problem is that when the global situation worsens and their sales decline, they cannot ensure “ethical purchasing practice” even if they want to. They regularly stop production, push back shipment dates, stop placing new orders, etc, this in turn affects the producers.
Therefore, the number of buyers should be increased and the necessary marketing should be strengthened. Factories that do not have their own marketing team to provide services are in a worse state. They often work through middlemen such as buying houses or other means where they have very little bargaining power. So in addition to the work done through buying houses, the initiative should be taken to increase the business directly to the buyer by developing a marketing circle.
Product diversification and export market diversification are matters that need attention. In order to create a versatile customer, it is necessary to continue to try to produce new products. By entering new markets, we can reduce our dependence on specific buyers which will sustain our business. In terms of product diversification, we need to increase the diversification of fabrics and value addition to products. We need to produce orders that are challenging to manufacture. Product versatility will help increase your customer base and only this strategy can sustain your factory for a long time.
Investment in manufacturing or investment in backward industries
One of our negative strategies in industrial management strategy is solely increasing investment in the sewing lines. Based on unwritten verbal assurance or projection of the customer we increase the capacity of the sewing line day by day. Even by borrowing money, the number of production lines has been increased so that we can ensure the supply as per the demand of our customers.
But today, as our demand has shrunk, we are in dire straits with this massive workforce. Workers feel insecure about their salary and they are in the dark about how they will be looked after. If salaries are not paid on time, worker unrest will rise and the situation will become volatile. Print and electronic media will publish negative reports about the industries.
But Bangladesh still has to import 60% of its raw materials from China. Instead of being self-reliant by investing in backward industries, we invested towards cash flow in an unplanned manner. The result is today’s lament.
There has indeed been a big jump in our accessories industry in the backward industries, but the real area was the textile industry where we could not invest as expected. Many may rationalise with some “ifs and buts” for the sake of argument, but at the end of the day, we have been beaten by business tactics. Vietnam and India have taken advantage of this.
If we could at least set up some industries in textile mills for synthetic fabrics, at least we would have more diversity in today’s climate. Moreover, we could invest in technical textiles, high-end fashion textiles, etc. So let’s not increase the production of the sewing lines, instead, let’s invest more in fabric production. This strategy will help us to produce high-value products in future.
For the sake of argument, one may say that our gas supply is insufficient. But I want to say that within our existing infrastructure, many new fabrics are possible that we may not have tried. In the time our factory remains idle throughout the year, many new products can be produced within the infrastructure. But we have never felt the need to explore this.
Productivity comes first or supply of raw materials comes first
Productivity in our factories has been identified as a major problem for many years. We all deal with it more or less. But have you ever noticed that we only spend 10% of the time on an order on manufacturing it? That is if we accept an order for delivery in 60 days, then the last 6 of these 60 days are spent on manufacturing the product while 54 days were spent only on acquiring the raw material and the buyer approval process.
The result is: on the day we go to production we find that some work has not been approved or some raw materials have not been delivered properly. In other words, we have not been able to establish any accountability for the productivity of 54 days in our management. Meanwhile, we spend crores of taka to increase the productivity of the remaining 6 days.
We have to make a drastic change in strategy here. In my experience, I have found that the timely delivery of correct raw materials and completion of the approval process in time automatically increases productivity. Our main problem is in the supply chain, not productivity.
Production planning or planned production system
We need another strategic shift. And that is the planned production system. We now operate according to production plans, most of which are not completed on time. It means, on the day when we are supposed to produce the order, we cannot do it according to our plan. Our strategy should be a planned production system, so that on the day that an order is planned, it must be produced.
If we only do this, I can guarantee you will not have to invest in new sewing machines in your factory. You will automatically acquire 20-30% new capacity without requiring any new investment.
Increasing export volume or preventing river pollution
Despite having an Effluent Treatment Plant (ETP) in all dyeing mills in our country, the river water in our industrial areas is polluted and unusable. We have been dumping our waste into the river while avoiding the eyes of regulatory agencies to save costs. We need to become a responsible manufacturing plant before increasing export earnings. We should no longer produce by destroying people, the environment and the ecosystem etc. We need to be aware now and plan our actions and strategies accordingly.
Finally, we have to establish ourselves as a responsible factory, after 2029 we will no longer get GSP benefits.
Moreover, the European Union is making new legislation that is aimed at ‘protecting human rights’ and creating a ‘sustainable environment’. Availing GSP+ benefits will also have new conditions, and more stringent announcements will soon be made on ‘Climate Change’, ‘Social Justice’, ‘Collective Bargaining’ etc. We must therefore be prepared with new approaches, new strategies and new innovative energies.
The author is the Managing Director of Cute Dress Industry
