Despite setbacks, garment to rule

Refayet Ullah Mirdha

Bangladesh will continue to be among the top three apparel sourcing destinations over the next five years, despite the recent industrial accidents, a new survey by American consulting firm McKinsey & Co found.

The country’s $20 billion garment sector came ahead of smaller rivals Vietnam and Cambodia in the ranking of countries with the highest potential for future sourcing.
But the twin disasters of Rana Plaza collapse and Tazreen fire did have an impact on the international buyers’ minds: some 52 percent of the respondents ranked Bangladesh among the top three country hotspots as opposed to more than 80 percent in the previous edition of the survey conducted in 2011.

“Nevertheless, Bangladesh remains the number one alternative to China,” McKinsey said on the study, “The global sourcing map—balancing costs, compliance and capacity”.

McKinsey surveyed leading apparel buyers in Europe and the US, who are responsible for an annual total sourcing value of $39 billion, and found that they plan on increasing their sourcing share in Bangladesh through 2020, despite the ongoing debate over safety issues and political developments in the wake of disasters.
Some 86 percent of the survey respondents ranked labour cost advantage among the three most important reasons for sourcing in Bangladesh.

“Capacity, productivity and supplier capabilities are also critical factors—and Bangladesh still has a huge advantage in these new areas over other promising destinations.”

The prospective destinations will have to be able to guarantee potential buyers that they can take on large volumes, are able to deliver against expectations and will provide the long-term investments necessary to secure success.
“Based upon our experience, it is unlikely (in many cases) that promising alternative sourcing destinations would be able to take on any sizeable share of the export market within the next five years,” McKinsey said.

The respondents, who are chief purchasing officers (CPOs) of 29 European and American brands, also said they are devoting more attention to compliance issues in the aftermath of the tragic events in Bangladesh.

“Questions of fire and building safety have replaced infrastructure as the number one key concern of CPOs regarding sourcing in Bangladesh.”
Nearly 50 percent said they will likely or definitely revise their supplier base in the country. And the compliance situation in Bangladesh has also had a broader impact on auditing standards for other low-cost sourcing countries, the study said.
Although many players have already shifted larger parts of their sourcing from China to countries with lower labour costs, it will still remain “the largest sourcing market by far”.

Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association, the garment makers’ platform, said the findings of McKinsey’s latest apparel CPO survey are very positive for the sector.

“But, we have to keep the five ‘Ps’ of power, port, people, politics and place positive to materialise the survey’s findings,” he said, while stressing on the need for a stable political situation.

“We must remember that the garment business came to us in the first place because of violent politics in Sri Lanka.”

The previous edition of the survey tipped the country’s apparel exports to double by 2015 and nearly triple by 2021 to $42 billion. In fiscal 2010-11, Bangladesh fetched $12.59 billion from garment exports, according to data from Export Promotion Bureau.

Meanwhile, Daniel Seidl, executive director of Bangladesh German Chamber of Commerce and Industry, which collaborated with McKinsey for the survey, lamented the lack of a national strategy for the garment sector.
“I personally think the knowledge lies within Bangladesh, but still it could not come up with a national RMG [readymade garment] strategy. There is no transparent communication towards the buyers—I do not see any marketing and communication strategy.”


Monday, September 30, 2013


About Ehsan Abdullah

An aware citizen..

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