Introduction: The Untapped Power of Smaller Factories

For decades, Bangladesh’s Ready-Made Garment (RMG) industry has been defined by its giants—large, export-approved factories in Dhaka, Gazipur, Chattogram, and Narayanganj. These mega units have supplied global fashion brands with the scale, compliance, and manpower needed to meet high-volume orders at competitive costs.

Yet beyond the capital’s industrial zones lies another story—one of small and mid-sized factories in towns like Kushtia, Bogura, Jessore, Comilla, and countless semi-urban clusters. These factories—classified as Tier-2 (100–500 machines) and Tier-3 (10–100 machines)—have traditionally operated on the margins as subcontractors, supplying to Tier-1 units or domestic markets.

Once dismissed as “too small” or “not compliant enough,” these units are now emerging as agile, cost-efficient, and strategically located production partners. The post-pandemic supply chain reset, rising operational costs in major hubs, and buyers’ push for flexibility, sustainability, and diversified sourcing have brought them into the spotlight.

With the right interventions—process modernization, skill building, compliance upgrades, and digital adoption—Tier-2 and Tier-3 factories can leapfrog into the global sourcing network.

Why Tier-2 Factories Are Becoming Strategically Important

Let’s explore what makes these smaller factories more relevant in today’s evolving sourcing environment:

Lower Operating Costs

Land, utilities, and wages are significantly cheaper in Tier-2 and Tier-3 regions. Unlike Dhaka or Chattogram, where operational costs have risen sharply, factories in smaller towns benefit from natural cost advantages—without compromising on quality, when equipped with the right processes.

Nearness to Raw Material Hubs

Many of these towns are close to spinning mills, dyeing houses, or cotton-growing zones. This geographical advantage allows for reduced transport costs, faster access to materials, and a lower environmental footprint—metrics that global buyers now track closely.

Government Push for Decentralization

Bangladesh’s government is actively developing new economic zones and industrial parks beyond the capital. From BEPZA zones in Jamalpur and Sirajganj to regional BSCIC clusters, infrastructure is steadily improving. Tailored incentives like tax holidays, reduced land lease rates, and wage subsidies are making these locations more attractive.

A More Stable Workforce

Labor saturation in Dhaka has led to high attrition and wage inflation. In contrast, Tier-2 and Tier-3 towns offer a more stable, loyal, and trainable workforce. With the right skill development, these workers can deliver consistent, high-quality production.

Barriers Holding Back Tier-2 and Tier-3 Units

Despite their potential, most Tier-2 and Tier-3 factories face structural bottlenecks that limit their ability to serve global buyers directly:

Limited Compliance Certifications

Factories in these regions often lack certifications like WRAP, GOTS, SEDEX, or BSCI—making them ineligible for most direct brand sourcing programs, even if their output quality is strong.

Manual Processes and Low Tech Use

Production remains largely manual, from cutting to packing. Quality assurance is visual and inconsistent. ERP systems, barcode tracking, or digital dashboards are rare, affecting traceability and reliability.

Weak Managerial Capabilities

Supervisors and mid-level managers often lack formal IE (Industrial Engineering) training. Line balancing, efficiency tracking, and lean tools are either misunderstood or unused, leading to inefficiencies and excessive rework.

Dependence on Middlemen

Without direct brand connections, these units rely heavily on buying agents or local traders. This reduces margins, restricts order visibility, and leaves factories vulnerable to last-minute cancellations or payment delays.

The Buyer’s Perspective

Today’s fashion brands don’t just want cheap labor—they want speed, traceability, and ethics. Here’s why Tier-2 and Tier-3 factories in Bangladesh are suddenly appearing on sourcing radars:

• Small Batch, High Mix: As brands shift towards “test and repeat” models and reduce MOQ (Minimum Order Quantity), smaller factories can offer the flexibility larger ones can’t.
• Resilience and Risk Diversification: After the COVID-19 disruptions, buyers are seeking alternatives beyond their Tier-1 supply chains. Tier-2 units help reduce dependency risks.
• Localisation for Efficiency: Factories closer to textile zones cut down delays. If a spinning mill, dye house, and sewing unit are all within 50 km—lead times shrink drastically.
• CSR and Traceability Goals: Smaller, compliant factories with transparent supply chains are aligned with sustainability goals—often becoming “preferred vendors” when brands evaluate ESG performance.

 

Transformation Blueprint: A 4-Step Model for Global Readiness

In today’s dynamic apparel supply chain, Tier-2 and Tier-3 factories in semi-urban clusters are no longer just low-cost subcontractors—they’re future growth engines. But becoming globally competitive doesn’t always demand massive capital expenditure. What it does require is a clear, structured transformation roadmap.

1. Smart Factory Layout & Process Modernization

• Lean layouts to reduce motion waste and improve space utilization
• Energy-efficient machines like servo motor sewing or auto-spreaders
• Visual management systems for line tracking, hourly output, and bottleneck alerts
• SOPs & work aids to build consistency across styles and batches

Impact: 10–20% improvement in throughput and better utilization of manpower

2. Workforce Training and Upskilling

• IE-led workshops for supervisors on pitch time, WIP control, and line balancing
• Skill mapping & cross-training for operators to handle different machines and styles
• Quality mindset building through upstream defect detection training
• Soft skills & compliance awareness for team leaders

Impact: Lower rework rates, smoother style changeovers, and better audit preparedness

3. Digital Enablement on a Budget

Even simple tech can create major gains:

• Google Sheets dashboards for production, defects, and absenteeism
• Tablet or barcode-based bundle tracking
• Digital logs for preventive maintenance and issue reporting
• Cloud-based order tracking tools to improve buyer communication

Impact: Better planning, faster decisions, and stronger buyer confidence

4. Compliance and Audit Readiness

• Install inline and end-line quality check gates with visual standards
• Maintain audit files on fire safety, ESI/PF, wage slips, grievance redress
• Gender equity measures: POSH policies, toilet upgrades, day-care support
• Digital traceability using QR codes for key material lots

Impact: Enables brand onboarding and smooth passage through social audits

How Tier-2 and Tier-3 Units in Bangladesh Are Scaling Up with Strategic Interventions

Case Study : Best Maker Fashion Wear Ltd.

A premium apparel exporter specializing in knitwear, denim, and woven garments, Best Maker Fashion Wear Ltd. has earned trust from global brands for its ethical practices, quality control, and on-time delivery.

Through the PROGRESS initiative, Groyyo Consulting is helping Best Maker:

• Redesign factory systems and processes to boost efficiency.
• Implement lean practices such as 5S to improve workplace discipline.
• Restructure the quality assurance function and set clear quality benchmarks.
• Introduce data-driven tracking templates for daily output, defects (DHU), and right-first-time (RFT) metrics.
• Build capacity through targeted training and role-based accountability.

Like S&J Fashion, Best Maker’s transformation journey is supported by a phased approach—from diagnosing process gaps to embedding quality-focused SOPs for long-term adoption.

Role of the Swisscontact PROGRESS Project

The PROGRESS (Productivity & Standards Improvement Through Skill Development) project—funded by Swisscontact—is designed to uplift Tier-2 and Tier-3 factories in Bangladesh. By providing structured consultancy, skill development, and process optimization, the project aims to make these smaller units globally competitive.

For both S&J Fashion and Best Maker Fashion Wear Ltd., the PROGRESS project:

• Bridges skill gaps through hands-on training for staff and workers.
• Drives process standardization via SOPs, KPIs, and performance monitoring systems.
• Promotes workplace discipline through lean manufacturing tools like 5S.
• Aligns workforce roles with factory growth goals, improving accountability.

By combining global best practices with localized solutions, PROGRESS is enabling these factories to meet international compliance, improve efficiency, and position themselves as serious contenders in the global supply chain.

Tier-2 and Tier-3: The Next Tier, Not the Second Tier
Bangladesh’s Tier-2 and Tier-3 factories aren’t lagging behind—they’re simply under-recognized. With the right guidance, these smaller units have the potential to become world-class manufacturing partners for global brands looking for cost efficiency, agility, and ethical production.

At Groyyo Consulting, we’ve witnessed firsthand how a well-managed 200-machine factory in a place like Jessore can surpass a 1,000-machine facility in both efficiency and customer satisfaction. The future of Bangladesh’s garment industry lies not just in getting bigger, but in getting smarter.

Our expertise is in helping small to mid-sized apparel factories realize their full potential through operational excellence. We focus on embedding efficiency, discipline, and agility into the very fabric of their operations—creating sustainable improvements, not just quick fixes.

In today’s global marketplace, size alone doesn’t guarantee success—responsiveness, transparency, and reliability do. Small scale is no longer a limitation—it’s a deliberate competitive advantage.

Divya Mohan
General Manager (International Business)
divyamohan@groyyo.com