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Supply Chain Management, an advancement of RMG growth in Bangladesh

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Supply Chain Management, an advancement
of RMG growth in Bangladesh
S.H. Sakib , MD. Shahidul Islam ,

Department of Industrial & Production Engineering, Shahjalal University of Science & Technology, Sylhet.

ABSTRACT: The Ready-Made Garments sector has been the major export sector in Bangladesh over the
years. This paper aims to identify the influence of supply chain management for better advancement in
this sector. Unique features like business, wage, time frame, supply chain, and compliances are included
in the export-oriented RMG sector which makes it distinct from other businesses. Without appropriate
supply chain management, the prospect of growth for any business is extremely low. Data for this study is
collected from secondary sources. In our study, we try to emphasize how RMG aligns with supply chain
strategies and collaborates with the supply chain partners and logistics. According to proper SCM
procedure, our study tries to conduct the problems, analyze, eradicate and modify the technologies. The
outcome of the study may not be generalized as the data we are going to use from secondary sources.

Keywords: Supply Chain Management, RMG, BGMEA, sustainable development, Least Developed Country, Free of
Charge, Bangladesh

Introduction|

In terms of foreign currency earning RMG sector is the leading one in our country alongside employing a large number of people.
Though the COVID epidemic causes a huge fall in other business sectors, RMG stands tall and contributes 84% of the overall
country's export. In the immediate past 2020-21 fiscal years, the export grew by 10% to $30.86 billion. With apparel export
earnings of $15.91 billion, Bangladesh reclaimed its second position as an RMG products exporter from Vietnam during the
January-June period of 2020-21. The Five basic items are shirts, trousers, jackets, T-shirts, and sweaters. Together they make up
more than 70% of total readymade garment exports. Germany, US, UK, France, and Spain all these countries buy these RMG
products.

Conversely, supply chain management deals with customer satisfaction regarding manufacturing and services. It is the
management of an interconnected business network to provide service to the customer who lies at the bottom end of a supply
chain. All these key points are most valuable for the RMG sector. Supply chain management is the centralized administration of
the flow of goods and services and it encompasses all processes that transform raw materials into finished items. So RMG
industries can emphasize decreasing costs and delivering items to customers by optimizing the supply chain. Consequently, supply
chain management can be an enormous factor in the RMG sector of Bangladesh. A structured supply chain management system
can enhance the sensibility as well as the serviceability. Several benefits including compressing the lead time and elevating the
productivity will be accomplished by implying supply chain management.

From the origin of supply to the source of demand, supply chain management extends all the efforts and acquirement of raw
materials. According to this scenario, no doubt supply chain management is presenting a new standard in this sector. Supply chain
management optimizes the efficiency of the industry by increasing the responding capability to customers. In the meantime
productivity and profitability rate is also grown by reducing operational cost, cycle time, and inventory cost. The structured
practice of SCM in the garment sector can lead to a quality alliance of manufacturers, suppliers, and distributors. To meet health,
social and environmental acquiescence and to maintain low cost as well as high quality within a minimal time, simple
management activities cannot go hand to hand. This will lead to inactive, insufficient, and incompetence in the international
market. Hence such an important sector needs to be sustained by proper supply chain management.
Literature review

Raw materials are heavily reliant on imports in the RMG industry. To create clothing for export, over 90% of woven
textiles and 60% of knit fabrics are imported (Rashid, 2006; Rahman & Anwar, 2006). Besides the rudimentary
application of information and communication technology (ICT) and inefficient port management limits its ability to
respond quickly to market change, which is very essential in the fashion market (Abdullah, 2008). As a consequence,
this industry executes orders with the shortest possible lead time (Hege, 2004; Nuruzzaman, 2008; Kabir, 2007; Siddiqi,
2007). For similar products, the lead time for garment export in Bangladesh is 90-120 days, but it is 19-45 days in Sri
Lanka, 40-50 days in China, and 50-70 days in India (Rahman & Anwar, 2006; Kabir, 2007). The strengths and
weaknesses of Bangladeshi textile garment supply chains were explored by Lam and Postle (2006). They claimed that the
Bangladeshi clothing industry is largely unaware of the notion of SCM and that industry standards should be used as a
benchmark for both manufacturing and retailing in Bangladesh. Islam (2013) used an efficient supply chain process to
analyze apparel supply chain matters such as new orders, raw materials supply, production processes, and logistics
related to finished goods delivery. He also stated that Bangladesh's garment industry improvement is desired in reducing
the supply time required to produce and fulfill orders placed by foreign companies. His studies suggest that adopting
contemporary, quick, and efficient machinery can cut the time it takes to deliver an order in half. Gupta (2014) noted the
huge challenges of globalization and demanding customers as requiring RMG enterprises to increase quality,
responsiveness, and customer happiness while making diligent efforts to decrease costs while working as supply chain in
charge of Regency Garments Ltd. As a result, garment manufacturers must concentrate on proper supply chain
configuration to maintain excellent serviceability. Saiful and Noorul (2013) investigated how to take the Bangladesh
garment industry's supply chain management seriously. Because end-users in the apparel fashion business are becoming
more time-conscious, a reduction in lead time, in addition to quality and cost criteria, is required to win more orders from
customers. Increased lead time and costs due to disruptions in goods procurement and shipment (Nuruzzaman, 2009),
lack of linkages and coordination among related industries in the value chain and reliance on imported inputs, and limited
variety of finished products (Quashem 2002; Ahmed 2011), and a drop in order due to the global economic downturn
(Chowdhury 2012) are all major concerns for Bangladesh's RMG supply chain.

Methodology

This study is based mostly on secondary data. A few amounts of primary data were also added to the study to improve
the generalization. Different books, journals, publications, BGMEA and BKMEA reports, newspapers, and RMG
websites are the major sources of the data used in this study. Different publications on the internet are also reviewed for
the motive. Primary data comes from different interviews with industry professionals and merchandisers of the RMG
sectors.

Data analysis and visualization are done by a prominent programming language (python).

As we rely mainly on secondary data we merely go for the fieldwork but for the interviews we had to visit several
industries and collect their opinion and some primary data for the study.

Objectives

 Highlighting the supply chain management in RMG.

 Perceiving the work-on-part of the supply chain in the RMG industry.

 Ascertaining the problems towards sustainable RMG growth from a supply chain perspective
Hypothesis

Hypothesis Test Result(Expected)

H1 Vertical integration of SCM has less activity Not Rejected.

and international competition in the RMG
sector.

H2 Horizontal integration comes to fill the Not Rejected.

drawbacks of vertical integration.

H3 The logistic chain network has less Rejected

corruption and crumbling in the RMG sectors
of the country.

H4 RMG industry growth is to be sustained by Not Rejected.

improving Supply Chain Management and
strategies.

Overview of the study

Bangladesh and its garments Industry

Readymade garment (RMG) industry is the backbone of Bangladesh's economy and a driving force behind the
country's development. Bangladeshis are proud of the sector, which generates billions of dollars in export
revenues and employs millions of people in the country. In that decade, the repeal of the quota system by
industrialized countries importing garments, as well as growing labor costs, hampered the expansion of this
industry in East Asian countries while creating new prospects for Bangladesh's sector (Rashid, 2006). Since the
1990s, the sector has played the most important role in Bangladesh's ever-growing export sector (Bajlul &
Naznin, 2006). From 1982 to 1983, the RMG industry accounted for 1.1 percent of overall exports. This
increased to 79.63 percent in 2012-13. It accounts for 10% of GDP (Mahmud, 2012), and 14-15 percent when
combined with complementary industries. This industry generated $21.1 billion in export revenue in 2012-13.
8528

Source: Bangladesh Garment Manufacturers and Exporters

The RMG sector is the country's largest employer and is regarded as the country's backbone. There were 50 garment
companies in the country in 1980, employing a few thousand people (Kabir & Mahmud, 2004). In 2012, the country had
5400 factories, employing about 4 million people, 85 percent of whom were women (Mahmud, 2012). As a result, this
industry is known as the country's single largest employer of women. This application of rural low-income women has
gained economic independence and improved their economic involvement.

Source: Bangladesh Garment Manufacturers and Exporters

Source: Bangladesh Garment Manufacturers and Exporters

SCM at RMG Industries

The supply chain process for manufacturing and service industries started with suppliers, manufacturers, distributors,
retailers, customers and suppliers, service providers, customers, and ends with consumers respectively. The customers
are the most vital focal point of the supply chain since the primary purpose of the existence of any supply chain is to
directly or indirectly satisfy customer needs. The basic supply chain of the readymade garment industry in Bangladesh
involves suppliers, manufacturers, ultimate buyers, and service providers. The basic diagram of the supply chain in the
garment industry can be shown as follows:

The basic diagram of the supply chain (Nuruzzaman,2013)

Domestic and export clients are the two primary kinds of customers in Bangladesh's textile sector. Bangladeshi textile
items may be easily distributed to end consumers with the use of logistics and distribution hubs, as seen below:
There is a significant link between the company's value chain and the supplier chain in the RMG industry. The buyers,
who control the industry, are typically in command of the supply chain. The RMG sector's supply chain is made up of
several distinct operations. The supply chain is being structured as an integrated production system, starting with raw
material procurement, design, and production, and ending with the client. The following diagram depicts the supply
chain activities in Bangladesh's RMG industry.

Impact of the supply chain on the RMG industry's growth

Consumers place higher importance on excellence and delivery time in today's highly competitive global marketplace.
Manufacturers have begun to place a higher emphasis on quality and delivery time, and businesses must use supply chain
management to expand their competitive perimeter and enhance profitability by decreasing costs, improving quality, and
enhancing delivery. The system in the supply chain can be products, funds, information, or even a supply of business
(volume of business). A single missing or delayed component can jeopardize the entire order. A single order delivery
failure puts the entire production plan in jeopardy. The inventory level is increased by unplanned and early material
importation.

When materials are delayed in-house, a line gap occurs. Both conditions have had hurt a negative impact on finances. If,
on the other hand, the final goods are not transported on time owing to a lack of approval, the manufacturer will be
forced to pay back-to-back (BTB) L/Cs (letters of credit) against its bank loan, which would result in a high-interest rate.
As a result, the manufacturer makes every effort to avoid late shipments, even if it means working extra, which doubles
production expenses. When overtime work fails to solve the problem, they resort to illicit subcontracting. Excessive
overtime work and unapproved subcontracts are both examples of noncompliance, which is an unavoidable element of
the industry. All segments of the supply chain in the RMG industry are decentralized, including manufacturers, suppliers,
and purchasers.

Goals and objectives at various stages of the supply chain are at odds. Conflicting goals and objectives can be reduced by
carefully utilizing existing information and integrating the supply chain it would be able to deliver finished items on time
from suppliers to customers if supply chain management was well implemented. Supply chain management solutions aid
in the reduction of inventories, operational expenses, order cycle time compression, asset productivity enhancement, and
increased market response. Aside from these advantages, efficient supply chain management strategies can help the
apparel business respond quickly. Quick response is a notion that entails teamwork and information exchange among
manufacturers, suppliers, and distributors for them to respond more quickly to client requests. If SCM or procedures are
properly implemented, they can help the Bangladeshi garment sector reduce its catalogs, which will result in lower
operational costs, shorter order cycle times, more efficiency, and increased market responsiveness. Improved or superior
SCM also leads to a quick response which is a concept of the collaboration and sharing of information among
manufacturers, suppliers, and distributors, permitting them to act in response more swiftly to the requirements of the
clientele. Raw materials, divisions, ginning facilities, spinning and extrusion operations, e. processing sector, f. weaving,
and knitting factories, and g. garment (and other stitched and non-stitched) production supplies a large distribution
channel. In terms of raw materials used, technologies used, and products generated, this SCM process is arguably one of
the most diversified. The supply chain company can use different supply chain strategies for different products, such as
responsive supply chain strategy for pioneering products and efficient supply chain strategy for purposeful products,
thanks to the division of product strains into functional and revolutionary products. Garment SCM is useful for properly
generating orders and shipments (from beginning to end) under the factory's and the buyer's obligations. Garment SCM
is useful for correctly generating orders and shipments (from start to finish) in compliance with the factory's and buyer's
obligations. Apparel buyers all over the world demand products that are exactly what they want, when they want it, and
at the best price possible, therefore the supply chain may be able to help solve this problem in practice.

Significance of SCM on RMG

Raw materials, divisions, ginning plants, spinning and extrusion operations, e. processing sector, f. weaving, and knitting
factories, and g. garment (and other stitched and non-stitched) production supplies a large distribution channel.
Customers put a higher importance on excellence and delivery time in today's increasingly competitive marketplace.
Manufacturers have begun to place a higher value upon delivery and quality time, and businesses must aim to expand
their competitive perimeter and increase profitability by decreasing costs, enhancing quality, and improving supply chain
management delivery assistance. It might be commodities, funds, information, or even business supplies in the supply
chain system (volume of business). A single missing or delayed component can jeopardize the entire order. A single
shipment failure puts the entire production plan in jeopardy. The inventory level is increased by unplanned and early
material importation. When supplies are delayed in-house, a line gap occurs. Both conditions have a negative financial
impact.

If, on the other hand, the manufacturer is unable to export the finished goods on time owing to a lack of approval, it will
be forced to pay back-to-back (BTB) L/Cs (writing of credit) against its source of finance, which will incur a high-
interest rate. As a result, the manufacturer makes every effort to avoid late shipments, even if it means working extra,
which doubles production costs. When shift work isn't enough, they turn to unlicensed subcontractors. Extended shift
work and unapproved subcontracts are both examples of noncompliance, which is an unavoidable element of the
industry. All phases of the supply chain in the RMG industry are decentralized, including manufacturers, suppliers, and
purchasers.

Objectives and goals at various stages of the supply chain are at odds. Conflicting goals and objectives can be reduced by
carefully making use of existing information and integrating the supply chain. The effective implementation of supply
chain management would allow for the delivery of final products from suppliers to customers. Supply chain management
solutions aid in the reduction of inventories, operational expenses, order cycle time compression, asset productivity
enhancement, and increased market response. Aside from these benefits, the apparel business can respond quickly thanks
to efficient supply chain management strategies. Quick response is a concept involving collaboration and information
sharing among manufacturers, suppliers, and distributors, allowing them to respond more quickly to client requests. If
Supply Chain Management or processes are implemented properly, they can help the Bangladeshi garment sector reduce
its catalogs, which will result in lower operational costs, shorter order cycle times, more efficiency, and increased market
receptivity. Enhanced or excellent SCM also leads to quick reaction, which is a notion including integrated information
exchange among producers, distributors, and wholesalers, allowing them to respond more quickly to customer
requirements. In terms of raw materials processed, technologies deployed, and products generated, this SCM process is
arguably one of the most extensive. The division of product strains into functional and inventive products allows the
supply chain industry to use different supply chain strategies for different products, such as responsive supply chain
strategy for new products and efficacy supply chain strategy for existing products. Garment SCM is useful for generating
orders to shipment (start to finish) under manufacturer and buyer's obligations.

Apparel buyers all over the world demand the product they want when they want it, and at the best available price, thus
the supply chain can help a lot with this issue in practice.

source: Robecco SAM,2013

 Discussion

Our study tries to implement the importance and advantages of structural supply chain management in the RMG
sector of Bangladesh. From the correlation part, it can be concluded that there lies a strong interconnection
between supply chain management with the advancement of RMG industries. The study shows the significance
of RMG industries by its export and employing female workers. While analyzing the data from the source
BGMEA, we intended to manifest how the supply chain can influence the development of RMG industries.

The previous studies that have been done on this subject discussed the dependence on raw materials,
responsiveness, lead time, and also the approach to supply chain management. Whereas, our study emphasizes
finding the correlation between top supply chain management and advancement of RMG industries and
establish some hypothesis for further studies. We also try to compare the approach of average and top SCM in
the RMG sector. We come to have top SCM is very influential rather than average SCM in this sector. We
gathered our data from secondary sources which can be considered a limitation of our study and analysis.

The purpose of our study is to show the significance of supply chain management in the advancement of the
RMG sector of Bangladesh. We analyzed, summarized, and correlated these two parameters. We also state some
hypotheses regarding the issue that carries the positivity of this sector.

As this is an enormous sector to develop, there are always some potential topics to research in the future like
implementing automation on SCM, Supply chain sourcing and logistics on RMG, Integrated Supply Chain on
RMG, etc.

References

Asgari, B. H. (2014). A system dynamics approach to supply chain performance analysis of the ready-
made-garment industry in Bangladesh. Ritsumeikan Journal of Asia Pacific Studies , 32.

Chopra, S. M. (2003). Supply Chain Management-Strategy,Planning and operation, Pearson, India,

4th Edition.

Hossan, C. G. (2012). Recent Unrest in the RMG Sector of Bangladesh: Is this anOutcome of Poor
Labour Practices? International Journal of Business & Management. , 207-219.

Islam, M. S. (2012). Supply Chain Management on Apparel Order Process: A Case Study in
Bangladesh Garment Industry. Asian Journal of Business & Management. , 205-219.

Shahriar, M. F. (2014). A Research Framework of Supply Chain Management in Ready made

Garments Industry of Bangladesh. International Business and economic Research. , 35-45.

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