Bangladesh stands as one of the world’s major garment exporters, with the ready-made garment (RMG) sector accounting for a remarkable 84 percent of the country’s total exports, as reported by McKinsey. This sector of Bangladesh has been a cornerstone of its economic success, offering employment opportunities to approximately four million workers, predominantly women, and contributing to the country’s social and human development.
Nevertheless, the sector faces numerous challenges that pose a threat to its competitiveness and sustainability in the global market. In this article, we will delve into the vision, challenges, and solutions for Bangladesh’s garment sector, while highlighting how Groyyo Consulting can play a pivotal role in helping the sector achieve its ambitious goals.
Vision 2030: A $100 Billion Industry
The Bangladesh government and the RMG industry have set an ambitious goal of transforming the sector into a $100 billion industry by 2030. Achieving this requires annual growth rate of approximately 12 percent, surpassing the previous decade’s average growth rate of 8.7 percent. To turn this vision into reality, the sector must focus on diversifying its products and markets, upgrading its technology and skills, enhancing its infrastructure and logistics, and ensuring compliance with social and environmental standards. By doing so, the sector can pave the way for a prosperous future.
Challenges in Supply Chain Management
The performance and profitability of the RMG sector are heavily influenced by the
efficiency and effectiveness of its supply chain management. Supply chain management encompasses the coordination and integration of all activities and processes involved in producing and delivering goods and services, from sourcing raw materials to distributing finished products to customers. However, the RMG sector in Bangladesh faces numerous challenges in managing its supply chain, including:
– Limited Technological Adoption: The industry heavily relies on manual labor and outdated technologies, resulting in inefficiencies, increased production costs, and extended turnaround times. According to a McKinsey study, only 6 percent of the RMG factories in Bangladesh have embraced digital technologies, whereas the figures stand at 60 percent in China and 80 percent in Turkey This insufficient technological adoption also hampers the sector’s capacity to manufacture high-value and diversified products, such as functional and smart garments, which are in high demand worldwide.
– Inadequate infrastructure: Bangladesh’s infrastructure, encompassing roads, ports, and logistics facilities, often falls short of meeting the demands of the garment industry. As a result, delays, disruptions, and increased costs ensue. For instance, shipping a container from Bangladesh to Europe takes approximately 35 days, compared to 21 days from Vietnam and 15 days from China. Furthermore, frequent power outages and gas shortages hinder the production process, necessitating reliance on expensive diesel generators.
– Limited backward integration: The textile industry heavily depends on imported raw materials, such as yarn and fabric, leaving it susceptible to fluctuations in global commodity prices and disruptions in the supply chain. According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), about 70 percent of the sector’s fabric requirements are imported, with China being the primary source. This heavy reliance on imports not only hampers the sector’s value addition and profit margin, but also contributes to high production costs, as raw materials account for approximately 60 to 70 percent of the total cost.
– Unskilled workforce: Bangladesh boasts a significant labor force, but unfortunately, there is a dearth of skilled workers in critical areas such as design, quality control, and supply chain management. Consequently, this shortage often results in quality issues and production bottlenecks. According to a survey conducted by the International Labour Organization (ILO), only 14 percent of RMG workers in Bangladesh have received formal training, while the figures stand at 53 percent in Vietnam and an impressive 74 percent in China. Furthermore, the workers’ limited level of education and literacy hampers their ability to adapt to emerging technologies and processes.
– Poor Information Flow: In the supply chain, effective communication and coordination among various stakeholders, including manufacturers, suppliers, and buyers, are often lacking. This can result in misunderstandings, errors, and delays. For instance, research conducted by the World Bank revealed that approximately 40 percent of RMG orders in Bangladesh experience late delivery, primarily due to inadequate information flow and planning. Moreover, the absence of transparency and traceability in the supply chain amplifies the risk of unethical and unsustainable practices such as child labor, forced labor,and environmental pollution.Workforce training deficit: The education system must enhance its ability to equip graduates with the necessary skills and knowledge to thrive in the modern supply chain landscape. According to a report by the Asian Development Bank (ADB), Bangladesh has;one of the lowest tertiary enrollment rates globally, standing at 19 percent, while India and China have rates of 37 percent and 51 percent, respectively. Additionally, the education system often falls short in terms of quality and relevance, leading to a mismatch between the skills demanded by industries and those possessed by graduates.
– Compliance issues: The industry has come under criticism for violating labor rights and causing environmental concerns. As a result, buyers and international organizations have intensified their scrutiny. Following the tragic incidents of the Tazreen factory fire in 2012 and the Rana Plaza factory collapse in 2013, which claimed the lives of over 1,000 workers, several initiatives were launched to enhance the safety and working conditions of RMG factories. These initiatives include the Accord on Fire and Building Safety in Bangladesh, the Alliance for Bangladesh Worker Safety, and the RMG Sustainability Council. However, the particularly in areas such as wages, working hours, freedom of association, and environmental management.
Transformative Approaches for Overcoming Obstacles in Garment Manufacturing
To overcome the challenges and achieve the vision of becoming a $100 billion industry by 2030, the RMG sector in Bangladesh needs to adopt a holistic and collaborative approach, involving the government, the industry, the buyers, the workers, and the civil society. Some of the possible suggestions to improve the supply chain management of the sector are:
– Adopting technological innovation: The industry must embrace and invest in cutting-edge technologies, including automation, digitalization, artificial intelligence, and blockchain, to boost productivity, efficiency, and flexibility. This will also enable the industry to create value-added and diverse products such as functional and intelligent garments that cater to evolving customer preferences and needs. Additionally, fostering a culture of innovation and research and development is crucial, achieved through collaborations with academic institutions, research organizations, and technology providers.
– Improving infrastructure: The government should enhance the country’s infrastructure and logistics facilities, including roads, ports, railways, power plants, and gas pipelines. This will facilitate the smooth flow of goods and services, reduce transportation and production costs,and enhance the sector’s competitiveness. Additionally, the government should ensure reliable power and gas supply to RMG factories and encourage the adoption of renewable and alternative energy sources like solar and biogas. This will decrease dependence on fossil fuels and alleviate the environmental impact
– Enhancing backward integration: To reduce dependence on imported raw materials and increase value addition and profit margin, the sector must develop and strengthen backward linkage industries such as spinning, weaving, knitting, dyeing, and finishing. This will provide the sector with better control and flexibility over its supply chain, enabling it to respond faster Additionally, diversifying sources of raw materials, both domestically and internationally, will help mitigate the sector’s vulnerability to price and supply fluctuations, ensuring resilience in its supply chain.
– Upgrading workforce skills: The sector must enhance the skills and competencies of its workforce, both current and potential, to meet the demands and complexities of the modern and dynamic supply chain. This necessitates providing adequate and high-quality training and education in areas such as technical, managerial, and interpersonal skills. Additionally, it is crucial to create opportunities for lifelong learning and career development. Furthermore, attracting and retaining skilled and talented workers requires offering competitive wages, benefits, and incentives, as well as cultivating a conducive and safe working environment.
– Improving information flow: To ensure a smooth and timely flow of information and feedback, effective communication and coordination among various stakeholders in the supply chain, including manufacturers, suppliers, and buyers, is crucial. This can be achieved by implementing standardized systems and platforms like enterprise resource planning (ERP), radio frequency identification (RFID), and cloud computing to facilitate data and document exchange. Additionally, enhancing transparency and traceability in the supply chain is essential. This can be accomplished by disclosing and verifying the information and practices of suppliers and subcontractors. Utilizing technologies such as blockchain and QR codes enables effective tracking and monitoring of product movement and origin. By improving communication, coordination, transparency, and traceability, the sector can overcome challenges and optimize its operations for better efficiency and effectiveness.
– Addressing workforce training deficit: The education system must enhance the preparedness of graduates to excel in the modern supply chain landscape. This entails revising and updating the curriculum and pedagogy, ensuring relevance and responsiveness to industry needs and market demands. Additionally, there is a need to improve access and quality by expanding infrastructure and facilities, enhancing governance and management, and fostering collaboration and partnerships with industry and stakeholders
– Ensuring compliance: The sector must prioritize compliance with national and international labor rights and environmental protection standards and regulations. This necessitates enhancing the safety and working conditions in RMG factories through the implementation and monitoring of measures and recommendations from initiatives and organizations like the Accord, the Alliance, and the RSC. Additionally, the sector should strive to improve workers’ wages and benefits by adopting a fair and transparent wage-setting mechanism, while also ensuring the freedom of association and collective bargaining. Moreover, reducing the sector’s environmental impact can be achieved by embracing cleaner and greener production practices, including the judicious use of resources.
How Groyyo Consulting Can Help: Groyyo Consulting is a prominent consultancy firm specializing in textile and apparel supply chain management and innovation. With our profound experience and expertise, we have been instrumental in enhancing the supply chain performance and competitiveness of the RMG sector in Bangladesh and beyond. Our comprehensive range of services and solutions includes:
– Supply chain assessment and optimization: We specialize in assisting the RMG sector with evaluating and enhancing their supply chain processes and operations. Our approach encompasses the entire spectrum, from sourcing raw materials to delivering the final products. By leveraging advanced tools and techniques, including data analytics, simulation, and optimization, we can identify and eliminate bottlenecks, inefficiencies, and risks within the supply chain. Our ultimate goal is to boost productivity, improve quality, enhance efficiency, and promote agility throughout the supply chain.
– Supply chain innovation and transformation: We assist the RMG sector in adopting and implementing cutting-edge technologies and solutions, such as automation, digitalization, artificial intelligence, and blockchain. These innovations aim to revolutionize their supply chain and enable the creation of value-added and diversified products and services. Our comprehensive support includes everything from design and development to testing and deployment, ensuring seamless integration and alignment with existing systems and processes.
– Supply chain training and development: We facilitate the growth of the RMG sector by enhancing the skills and competencies of its workforce, both current and potential, to meet the demands and complexities of the modern and dynamic supply chain. Our comprehensive training and education programs are tailored to provide high-quality instruction in technical, managerial, and interpersonal skills, fostering lifelong learning and career development opportunities. Moreover, we strive to attract and retain skilled and talented workers in the RMG sector by offering competitive wages, benefits, incentives, and a conducive and safe working environment.
– Supply chain compliance and sustainability: We assist the RMG sector in ensuring compliance with national and international labor rights and environmental protection standards and regulations. Our efforts focus on enhancing factory safety, working conditions, and the implementation of recommendations from initiatives and organizations like the Accord, the Alliance, and the RSC. Additionally, we strive to improve worker wages and benefits through fair and transparent wage-setting mechanisms, while promoting freedom of association and collective bargaining. Moreover, we support the RMG sector in minimizing their environmental impact by adopting cleaner and more sustainable production practices, including efficient water and energy usage, responsible chemical management, and proper waste and emissions control.
Groyyo Consulting is dedicated to supporting the RMG sector in Bangladesh in its pursuit of becoming a $100 billion industry by 2030. Our focus lies in enhancing and innovating supply chain management, as we believe that a robust and sustainable supply chain is crucial for the success and advancement of the RMG sector and the entire nation.We have worked with reputed firms like 4A Yarn Dyeing Ltd. (Team’s Group), MG Niche Stitch Ltd. (Mohammadi Group), Everbright Sweater Ltd., NPM Apparel (Marium Group), Tarasima Apparel Ltd. & Remi Holding Ltd. from Bitopi Group and many others. Should you be interested in our services and solutions, please reach out to us at 
abhishekyugal@groyyo.com divyamohan@groyyo.com
or visit our website at https://consulting.groyyo.com
Divya Mohan
Business Manager, divyamohan@groyyo.com
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