China dominated US and European markets for ready-made clothes in the year 2010. This actually accounted for almost 40% of the import volume in each region. According to a survey, it is found that 85% of the CPOs (chief purchasing officers) in leading garment firms are planning to decrease their sourcing levels in China due to diminishing profit margins and restrictions in capacity. A recent survey found that US and European companies that focus on the garment’s value segment are looking forward to expanding their share by opting for Bangladesh sourcing by the year 2020. However, the mid-market brands that generate almost 13% of value in Bangladesh tend to escalate their share by 20 to 25% over the same period of time.
The attractive price is one of the most vital factors behind the reason for purchasing in Bangladesh. Apart from this, capacity is yet another benefit that this country’s ready-made-garment industry provides with. With almost of 5,000 factories employing around 74 million of the total workforce, Bangladesh is totally ahead of Southeast Asian countries. Moreover, it also gives standards levels of quality, especially in terms of value. While Bangladesh has some distinct advantages of sourcing, here are the top 5 challenges for the firms who are seeking to do business here.
Infrastructure
Transportation creates a delay in deliveries of products. Hence, this issue will generate greater problems in the future while sourcing in Asia, as buyers want to get more fashionable products at a shorter span of time. Apart from this, energy supply is also quite poor, but the Government has taken steps to upgrade the power systems over the last two years.
Raw Materials
Bangladesh depends on imports of natural and artificial fibers as it lacks the supply of it. This actually created sourcing risks and lengthens overall production and delivery times. The volatility of the raw material prices over the last few years further worsens the problem.
Suppliers’ Performance and the Skilled Workforce
In order to mitigate the impact of escalating wages, close the bridge with other sourcing countries and to satisfy customers with more sophisticated products, the suppliers’ productivity must improve. However, there are two concerns in Bangladesh sourcing and those are lack of investment in buying new machines and technologies and lack of skilled workforce, especially in middle management.
Compliance
The labor and social-compliance problems are monitored by non-governmental and other organizations. Most US and European purchasing officers said that standards have improved and the suppliers vary greatly in their compliance. Environmental compliance is one such thing that is getting the attention.
Economic and Political Stability
Decrease in political stability will reduce the levels of sourcing in Bangladesh. According to a survey, the political unrest and strikes create obstacles in doing business.
These are the top challenges that markets face while sourcing in Asian countries, especially Bangladesh. But on analyzing the overall growth and opportunity, Bangladesh seems to be a wise option for the leading apparel companies to invest their money.
