While minimum wage increase has become imminent and another big increase in gas price is to hit very soon, the owners of textile and apparel factories in Bangladesh feared a severe aftermath. Many expressed that this time the industry won’t be able to absorb these shocks. Increasing cost of raw materials like cotton, dyes-chemicals etc. is to make the situation more complex.
Figure 1: Major cost increasing components going to dry out the competitiveness of Bangladesh textile and apparel industry.
Current government before it starts asking vote for next election will increase the wages for private sector workers including textile and RMG sector. As the government already has increased the salary of government workers, the increase in the private sector is inevitable. Increasing cost of living in Bangladesh has already made the lives of such workers very difficult.
In this perspective, while workers’ representatives are asking for a living wage, the industry owners are in fear of losing competitiveness if they have to pay more than 30% they are paying now. The workers’ representatives are asking to almost double it up. While Bangladesh’s main competitive advantage was cheap labor, after increasing wages, the wage will no more remain at the bottom among the key competitors.
At the same time to support the government’s ambitious plans, the country is quickly becoming import dependent for its fuel and so the cost is increasing at an unbearable rate. A country where the garment industry came mainly because of the availability of abundant cheap natural gas; now it is becoming dependent on LNG, the costliest form of natural gas. To cover up the huge cost of LNG, the government has declared the plan to increase the gas price for industries. Most likely it will almost be doubled. Eventually, the cost of electricity is on the rise as well.
So, not only the cost of human operations is going to be doubled within a few months but also the cost of machine operations will be doubled. Altogether the textile and apparel industry who are already struggling with increasing cost and lack of profitability will fall in a dire situation.
So, not only the cost of human operations is going to be doubled within few months but also the cost of machine operations will be doubled. All together the textile and apparel industry who are already struggling with increasing cost and lack of profitability will fall in a dire situation.
Being a cotton based industry, Bangladesh textile and apparel industry is heavily import-dependent for its raw materials like cotton and other fibers, other input materials like dyes-chemicals and machinery. Prices of almost all above-mentioned input materials have increased significantly in recent times. Factories are struggling with the latest order portfolio for saving pennies. They are also concerned about upcoming orders, whether they will get an upcharge from buyers or not.
Other operational and system related costs are also on the rise. As gigantic infrastructure projects are not yet in the position to sooth traffic conditions around industrial zones, and as the Chattagram port is struggling with inefficiencies, cost of transportation and shipment has increased significantly. Due to weight limitation in two major bridges in Dhaka-Chattagram highway the loading capacity of cargo trucks has been halved already. All together transportation and shipment cost has been doubled and in some cases, it has been tripled.
All the above realities have brought up a burning question to the industry how to cope up with this situation to continue to do business. There have been some traditional ways of tackling such situations in the industry. Some of them were effective enough for them to survive in short-term but now it seems a real-time has come to make a real effort in the expected transformation to survive amid these challenges and also to continue to grow, otherwise the sector may collapse.
There has been a trend, when profitability went down, companies asked for a new loan from banks to buy new machinery to increase production capacity to increase production. The main objective was to keep the total profit on the rise even though the rate of profit goes down. With larger and vertical operations factories could reduce overhead management cost and add fractions of profits from different processes those they were outsourcing previously. Meanwhile, such unplanned expansion and lack of focus on ‘core competence’ have made such factories severely vulnerable. Many such factories are running and making losses every day now. Today they have no other options but to invest in increasing management and production efficiency to save their plants.
Figure 2: All major ways of increasing competitiveness depend on setting up effective management.
Importance of manufacturing excellence or efficiency has been discussed well in Textile Today April 2018 issue. The practical example shows small changes could help save an amount equivalent to the total salaries of a garment factory. As a labor-intensive industry importance of production efficiency is well accepted. Bangladeshi apparel manufacturers now keep industrial engineering departments at their factory. But there is no doubt still the companies have a lot others to do.
Management is a top down approach and culturing accountability and openness to continuous improvement. The strategies, vision, goals, and ways to achieve the goals should be decided and analyzed at the top most level of the company. An effective communication culture should prevail within the organization. This is the time for textile and apparel companies here to invest more in improving management efficiency than any other things.
However, for any effective improvements in production efficiency, efficient management is a must. A proper efficient management is much more important than production efficiency. While the efficiency of Bangladeshi workers is 77% (considering Chinese 100%), the management efficiency is definitely much lower. A bad and belated management decision affects much more than a lethargic less motivated workforce.
Management is a top-down approach and culturing accountability and openness to continuous improvement. The strategies, vision, goals, and ways to achieve the goals should be decided and analyzed at the topmost level of the company. An effective communication culture should prevail within the organization. This is the time for textile and apparel companies here to invest more in improving management efficiency than any other things.
Increasing management efficiency not only means sending the next generation for pursuing education abroad and then waiting for him or her to come back and take the responsibility of an inefficient plant. Or it doesn’t mean hiring a foreign employee and depending on him. Or it also doesn’t mean purchasing the most sophisticated and costly management automation software.
A proper effective management means it itself will create experts and leaders but the system will run smoothly without leaders. Textile and Apparel company owners should not be fear of the fact that the people behind whom they will invest and if they leave they will lose everything. This is a wrong thinking. Companies should invest in developing a system which is established by men and women and at the same time can sustain itself and create alternatives within. Truly investment has to be behind the human, but it itself will not depend on any individual human only. A human system should be taken care of and cultured.
However, decision making for investing in effective management is not been easy for company owners. They have seen many failed cases. There are examples where high paid charismatic managers left the company leaving the company owners in difficulties; they also saw how huge investment behind management software simply bounced back.
A careful visionary look and plan is needed in proper strategy taking in setting an efficient management. The system should have in-built capacity to save every waste, at the same time it should culture the practice of spending lot for taking out breakthrough ideas. Knowledge management and innovation system within the companies are must for being vibrant, adaptable and progressing.
It is true that investment behind innovation requires careful risk study. But for Bangladesh textile and apparel companies, it is not at that sophisticated level. It is more like common sense innovations. The business models and marketing also has to be aligned with the system. Game-changing ideas in design, process and product alteration should be encouraged. Besides innovation in process and organization build up is a must.
A culture of continuous learning has to be developed. Knowledge has to be produced and disseminated within the companies. Companies have to be connected with external knowledge hubs.
What Textile Today can offer?
At this crossroad of the industry, the importance of an effective innovation hub should be well understood. Companies and professionals should come forward to strengthen such knowledge platform.
Figure 3: Three major area of work of Textile Today that can keep competitive advantage of Bangladesh textile industry mitigating major challenges it is currently facing.
Textile Today is working relentlessly to establish such an effective hub. With a motto and slogan ‘Driving Business with Knowledge’, Textile Today could eventually prove itself as a trusted and responsible partner of the industry.
Currently, Textile Today is working in three main streamlines: 1. Transforming Human Capital, 2. Branding Bangladesh Textile and Apparel, 3. Promoting Sustainability. Training programs and knowledge workshops are to help the sector in transforming its human capital, which is the core of any changes whether it is small savings or an upside down change of the game. Factory Tales initiative is incorporating a great team to help Bangladeshi Textile and Apparel companies in setting and implementing a branding strategy. Besides Textile Today wants that Bangladesh becomes a sustainability ambassador in the textile world. And so Textile Today with all its activities and events is promoting sustainability is creating an industrial base that is strong reliable trustworthy and sustainable.
Herewith the Textile Today team presents another issue of Textile Today magazine representing the hard work of the team and all men and women within the sector. We welcome all owners and professionals of the industry to subscribe and to be associated with Textile Today by all possible ways.