Understanding the Supply Chain to Achieve an Inclusive and Sustainable Ready-Made Garment Industry in Bangladesh

The readymade garment industry has been undergoing a paradigm shift over the last decade after various tragic incidents like the Rana Plaza incident. Maintaining compliance standards is one of them. During the COVID-19 pandemic, the industry showed its resilience with greater dependence on local supply chains of inputs and raw materials. The industry is now dependent on more imported raw materials due to difficulties faced by local suppliers after the COVID-19 pandemic. The industry will be facing daunting challenges when it has to operate in a duty-free and quota-free (DFQF) environment after Bangladesh’s graduation from LDC status in 2026. Efficient supply chain management is one of the key aspects of the RMG industry for its sustainability in the DFQF environment. 

The export-oriented readymade garment (RMG) industry has some distinctive features, which differentiate it from other businesses. Wage, Supply chain, time frame, and Compliances are among the most important features of this business. Each of the four features is interrelated and interdependent. Among the features, effective Supply Chain Management (SCM) is the core. Whatever the wage level or lead time (the period from order confirmation to shipment), without proper management of the supply chain, the business could not be viable and sustainable. Supply chain management is crucial for the industry to continue its growth momentum after the country’s graduation from the LDC status in 2026 when the industry will lose preferential market access in key developed markets, like the EU and the USA. Non-functional supply chain increases production costs and hence, manufacturers need to strengthen the supply chain management in order to ensure a cost-effective, sustainable and efficient production system.

Effective supply chain management (SCM) is important for Bangladesh to maintain its competitiveness with other competitors. The competing countries of the sector like China, India, and Pakistan have their domestic sources of materials. Vietnam and Cambodia are close to China. It takes only one week time from Shanghai to Vietnam/Cambodia by sea. All of our competitors have the advantage in lead time; they are in a better position in supply chain and compliance (Hasan, 2014). Our main competitiveness is low wages. Only wage competitiveness alone does not ensure business growth and sustainability. To meet the short delivery time and minimize stock level and wastage, reduce an extra load on finance and gain customer satisfaction, there is no alternative to an effective SCM system in place. To accommodate shorter lead time, to avoid over/under inventory, to minimize wastage of money, to run the company efficiently, and finally to ensure sustainable growth, there is no alternatives to effective management of the supply chain system.

Against this backdrop, this study intends to capture the existing difficulties and challenges in supply chain management with a view to suggesting the required reforms to ensure efficiency, cost-effectiveness and sustainability in different stages of manufacturing and distribution. 

Objective of the Study

The objectives of the study are: 

i. To identify and analyze different stakeholders in the global supply chain of the RMG industry 

ii. To explore the complexities, weaknesses and challenges of the existing system

iii. To explore barriers and identify solutions for an efficient and cost-effective supply chain for the RMG sector in Bangladesh in the post-LDC environment

iv. To project future trends for the global RMG industry in Bangladesh;

v. To suggest a global good governance model where all stakeholders effectively comply and actively promote decent work and human and labor rights so as to achieve sustainable and inclusive growth in RMG industry.

vi. To suggest solutions to overcome the difficulties and inefficiencies for the sustainable growth of the sector considering the probable coping strategies against any natural shock ( i.e. COVID-19 pandemic) and unprecedented accident

Core Team: Dr. Monzur Hossain (Team Leader); Tahreen Tahrima Chowdhury 

Sponsor: Special Research Program (SRP) of the Bangladesh Government, Ministry of Planning