Until the 2010s, China seemingly dominated the US and European markets for ready-made apparel. The trade accounted for almost 40 percent of the total import volume in both regions. However, a recent survey conducted by McKinsey revealed that over 86 percent of the chiefs of purchasing in various ready-made garment companies are slowly reducing their levels of sourcing from China in the coming five years due to the capacity constraints as well as waning profit margins. As an alternative, Western procurement experts are looking towards the Far East and South-Eastern Asian countries. Many purchasing officers have reported that they are considering Bangladesh as the next emerging hot-spot for ready-made apparel. International surveyors have concurred with the finding, yet expressed concerns regarding Bangladesh sourcing keeping the inherent hurdles in mind.
McKinsey survey forecasted that the export value of the apparel sector will grow 7 to 9 percent annually within the next decade, thus expanding the market nearly 3 times by 2020. Subsequently, European and US purchasing officers plan to extend their sourcing channels to Bangladesh in the coming years. They also revealed that they want to expand the range of fashionable items, such as outerwear and formal wear. The survey also indicated that the most significant reason behind the popularity of Bangladesh sourcing is competitive pricing and the lucrative potential of capacity increase. The country reportedly employs over 74 million garment workers in about 5000 factories, pulling Bangladesh ahead of most South-Eastern Asian countries in the competition. Moreover, the quality in terms of entry-level mid-market items and the value that Bangladesh garment manufacturers offer is very satisfactory. Despite the advantages, there are some significant challenges that apparel companies might face while conducting their business here. We have identified five particular barriers to sourcing that might affect the country’s potential.
Raw Materials
Bangladesh observably lacks the required amount of natural and artificial fibers required for the industry, thus making it overtly dependent on external sources. This disadvantage is further complicated by the volatility of the prices for raw materials. Moreover, the reliance on imports makes room for sourcing risks and lengthens the total time. To alleviate the situation, the growth of a local sector for providing the necessary raw materials is highly sought after. This development will also notably reduce lead times and in turn, cut logistical costs.
Infrastructure
Underdeveloped infrastructure is another significant impediment to Bangladesh sourcing of ready-made garments. Especially, transportation bottlenecks may create unproductive lead times and subsequently, delay the delivery to the end-users. Experts say that this issue will result in even more complications in the future since the current customer behavior is showing a notable inclination towards lesser lead times.
Another infrastructure concern in Bangladesh is energy supply. Most local suppliers from the region report that the facility is extremely poor. Although the Bangladesh government has reportedly prioritized upgrading power systems and assured smooth distribution all over the country, it will take several years to materialize the endeavor.
Compliance
In Bangladesh, labor and other social compliance aspects are monitored mostly by non-governmental organizations. International forums have reported that the enterprises in Bangladesh significantly fall short of fulfilling agreeable standards of labor welfare and other necessary guidelines about compliance. Additionally, local suppliers greatly vary in their level of compliance. Moreover, environmental compliance has picked up pace only very recently. Nevertheless, the US and European purchase officers have stated that the standards are gradually improving and might become agreeable soon.
Skilled Workforce and Supplier Performance
One of the greatest impediments of Bangladesh sourcing is the insufficient amount of skilled workforce, especially in terms of middle management. Lack of investment in new technologies and machinery further contributes to the problem. On the other hand, neither the suppliers’ productivity nor the performance of local suppliers is satisfactory as per international standards. These issues must be resolved to mitigate the effects of increasing wages and to close observable gaps with contending sourcing countries. Addressing the challenges will also help Bangladesh to attract as well as satisfy customers’ requirements in sophisticated products.
Political and Economic Stability
Most purchasing officers associated with Bangladesh stated that the political and economic stability of the country will continue to have a massive role in determining the future of sourcing from the country. Incessant unrest, public demonstration, strikes, and the likes have become serious concerns for the purchasing staff. Subsequently, it has a deep impact on the economic stability of the country, thus directly concerning the commercial sector. If the political turmoil increases in the coming years, many foreign apparel companies are likely to shift their bases from Bangladesh.
The Role of the Stakeholders to Solve the Problems
Considering the immense potential of Bangladesh to become the largest apparel sourcing powerhouse, all the concerned players in the sector should come forward and collaborate to mitigate the barriers. This will not only provide better business opportunities to the US and European enterprises but also bring forward Bangladesh to the forefront of global trade. To this end, the three major stakeholders of the endeavor, namely the suppliers, the buyers, and the Bangladesh government will have to work together. The government must prioritize investment in infrastructure, trade support, and skill development. Buyers from the US and Europe, on the other hand, must improve their operational execution in terms of reducing the complexity of internal procedures and minimize response time. Pursuing compliance efforts more rigorously is another important task for buyers. Also, the suppliers will have to improve the supply chain efficiency by creating more transparent networks and expanding support systems for lean operations. Renegotiating pricing with the buyers, if necessary, will also help to boost the purchase confirmation. By and large, building sustainable and closer relationships between buyers and suppliers will fortify the supply chain.
The current market trends and needs indicate that Bangladesh has all the potential to become the future hot-spot for ready-made garment sourcing. More and more apparel companies from first-world countries are showing steady interest in Bangladesh sourcing as they continue to engage local manufacturers and suppliers. Therefore, by eliminating the existing barriers, Bangladesh can indeed become the next apparel sourcing hot-spot.