The corona-virus, which has already killed hundreds of people in China and is now making its way across the globe, will inevitably cause significant disruption to apparel supply chains during 2020. The question is, to what extent, for how long, and how will Bangladesh be impacted?
Already, we are seeing that the virus is impacting China's polyester and textile supply chains. With Central China at a virtual standstill, and the transport system not operating, it is claimed by some that passing through the Yangtze river—stretching from one end of China to the other—has become impossible. With land transport limited, if the virus spreads further, more parts of China could see a similar lockdown, creating a logistical nightmare and huge disruption to the textile industry.
Leading global apparel brands are already taking a significant hit due to store closures in China as a result of the coronavirus outbreak. H&M has announced that around 45 store closures hurt sales in January while other brands have also noted major disruption in their Chinese operations. Gap, Uniqlo, Hugo Boss, Ralph Lauren, Nike, Levi Strauss and Adidas have all gone public with the announcement of store closures in central China as the impact of the virus continues to leave large parts of the country on lockdown.
I point all of this out because there are major implications for Bangladesh here. It is a story our whole industry will be watching closely.
I know from conversations I have had that the coronavirus has already caused business disruption to garment suppliers in Bangladesh. The reason for this is that, for raw materials such as fabrics and yarns as well as other inputs such as trims, labels etc., we are still heavily dependent on China. In fact, more than 50 percent of Bangladesh's textile and textile-related goods, including garment accessories, are imported from China. In addition, about 40 percent of capital machinery and spare parts for the textile and garment industry come from the country.
For all the strides made by our RMG sector in recent years, this lack of vertical integration—the fact that we only carry out one part of the supply chain process—remains a major source of vulnerability. It is an Achilles Heel for our industry.
The coronavirus, then, can be viewed as a wake-up call for the Bangladeshi RMG industry and also for the apparel industry globally. This heavy dependence on China is unhealthy in many ways as the disruption to supply chains by an epidemic such as the coronavirus can be devastating; there is a real risk that some businesses may never recover from the problems this causes.
To fulfil orders, many Bangladeshi factories now face having to look beyond China for raw materials and other product intermediaries. This will not be a straightforward task and, with supply of such materials being squeezed globally, prices will likely be higher in what is a seller's market. This could potentially increase the cost of apparel being produced by Bangladesh (although whether brands will accept this increase is another question).
For now, our industry will have to deal with the challenge at hand, but we must learn from it and never again leave ourselves exposed to supply chain disruptions.
The lessons here are simple and obvious. Our RMG industry in the long-term needs to become more self-sufficient and less dependent on imports. There is no reason why much of what we import from China should not be produced within Bangladesh, creating extra jobs and adding to gross domestic product in the process. But we can only do this if we develop our industry upwards as well as sideways.
Developing our own supply chains for raw materials and fabrics is a must for Bangladesh, even if this means incentivising foreign investors to partner in the building of the required infrastructure. I believe a number of fabric mill investors are already eyeing Bangladesh so we need to give them the push they need to choose us and not a competitor.
The thing is, we can do vertical integration. To offer one example, the vertical manufacture for T-shirts has added a lot of value to the Bangladesh proposition already.
But other products have to now follow.
We also need proper research to find data on the gap between demand and supply of every raw material. For example, how much cotton fabrics do we need for the annual production of cotton-based apparel? How much man-made fibre or yarn do we need? How much accessories such as metal button or zipper do we import every year and how much are we producing locally?
We need better industry infrastructure, and more investment into supply chains, in order to become more self-sufficient and better placed to take on large and complex orders. The whole apparel industry has been caught out by the coronavirus, but we cannot say we were not warned and we must all now recognise that we have become dangerously dependent on China. Such a scenario can never be allowed to happen again.
Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). Email: email@example.com