How Bangladesh should respond to global apparel industry changes
I read an interesting article the other day about a cotton spinning company based in Manchester, England. Although the company, by Bangladesh's standards, produces high volumes of product, it has established a niche for itself in the UK and Japan with customers who appreciate both quality and locality of resource.
The article highlighted a growing trend in Europe and US with buyers wanting businesses to develop their products either domestically, or at least somewhere closer to home.
The example of the English spinning company is just one of many. The re-emergence of knitwear and jersey factories in Leicester, England, the growth in manufacturing of products in Portugal and the North Coast of Africa for some of the biggest brand names in Europe, Donald Trump's election pledge of reinvigorating US manufacturing companies, all point towards a shift happening in the current apparel supply chain model.
The advantages to western buyers and to local entrepreneurs undertaking these ventures are many. Companies taking over redundant sites in the West are being encouraged by their governments to do so through various incentives and attractive purchase price of business premises.
Purchasing products from the Far East carry with it risks of unfavourable currency exchange rate fluctuations, particularly with the shadow of Brexit looming over Europe which is affecting the exchange rate of both the Pound Sterling and Euro.
Local end consumers in the US, UK and Europe are attracted by "Made in" tag of domestically produced items and are even willing to pay a premium to purchase them.
Finally, buyers are always looking at ways to reduce lead-times from order deliveries. Having a supply base closer to home allows greater flexibility in ordering as well as the opportunity to respond quickly to changes in market demand and emerging trends.
The question that we must now ask is, "How should Bangladesh respond to these changes?"
It is no longer optional to rely solely on the fact that the country can offer lower prices for products due to cheaper labour and raw material costs. Increase in labour costs will soon be upon us. Moreover, the majority of Bangladeshi manufacturers have produced apparel with six weeks lead time till now—whereas retailers could easily place an order closer to home and receive their goods sooner.
Therefore, it implies that Bangladesh needs to reconsider its current production process and find an alternative approach to the whole apparel production cycle.
The reshoring trend signals new challenges for Bangladesh's apparel industry—if not immediately, then surely within 10-15 years from now. To transform this challenge into an opportunity, while we must strive to continue on the path of developing our products with integrity, developing new innovative techniques throughout the production cycle—from fabric and trim purchasing, to product development, production and finishing and finally, shipment of goods to customer—must be combined with concerted efforts to reduce development and shipping lead times, as well as the need to shake off the long-held obsession of chasing volume driven business. Instead, concentrating more on developing smaller quantity premium products that earn higher prices is needed. This will also serve us better to adjust to the growing globally trend of online shopping.
Unlike old-fashioned retailers, most online based marketing companies are looking for and placing orders of smaller quantities while looking for high quality products.
This makes the time ripe for us to rethink our over dependence on apparel export to traditional markets such as the EU and the US. We need to explore and expand access to Asian markets that are closer to home like China, India, Japan, South Korea, etc. where more than half the world's population is based.
Bangladesh, being a major apparel producing country, must take the latest changes in the textile industry seriously, not only to defend itself from external shocks, but to also proactively pursue whatever opportunities that may arise.
Mostafiz Uddin is Managing Director of Denim Expert Limited, and Founder & CEO of Bangladesh Apparel Exchange (BAE).
Email: mostafiz@denimexpert.com.