Merchandising of Men’s Shirt in Bangladesh – A Case Study

The garments industry occupies a unique position in the Bangladesh economy. It is the largest exporting industry in Bangladesh. Merchandising is one of the most important parts of the garments trade. Without merchandising this trade never be fulfilling.

Merchandiser deals or handles all the things from buyer to production. He/she is the center for all the tasks. After getting an order, the merchandiser calculates all the things, what he needs to complete this order & make a nice plan by which he can do the shipment in time with the buyer’s requirement. At the factory level, the merchandiser makes all the orders for accessories needs for an order like; fabric need, sewing thread, button, washing if necessary, carton, polybag, shipment arrangement, etc. Actually, merchandisers make look at the whole progress.

Normally, the production people are always trying to do work in delay, thus many trouble can come for the shipment. But, the merchandiser always makes a good follow-up to work in time with the right quantity & right quality. On the other hand, the merchandiser deals with the buyers about order approval & comments. The activities involved in garments merchandising are normally done by a dynamic & expert person called merchandiser.

The function of a Merchandiser is known Merchandising. The term Merchandising has been derived from the word Merchandise which means goods that is bought and sold. At last, we can say that, merchandising is the heart of garments trade. Without this garments trade is valueless. So this part is more important in our future life.

Bangladesh’s position in Ready Made Garments (RMG) Industry

Clothing is always a basic requirement for human beings. Bangladesh is one of the leading producers & exporters of knit Ready-Made Garments (RMG) products. There are around 5000 garments factories in Bangladesh. The garments factory started to produce and export in the year 1980. Since then it was history and at present nearly 82% of our foreign currency is earned through RMG exports. Over the years the RMG sector achieved great expertise in the area of product development and more than 60 types of garments items are now being produced and exported. Some of the important export destinations are Germany, the UK, the USA, Japan, Canada, the Middle East, Australia, and many other countries in the Globe. An important advantage of our export is the cheapest labor cost.

The RMG business in Bangladesh started in the late 70s with merely a casual & cursory effort. The first shipment of woven was made in 1977. In 1981-82 the contribution of woven garments to total exports was about 1.10% whereas the agro-based then economy received much of her foreign earnings from Jute & Jute products famously known as the Golden Fibre. But with the passage of time from agrarian to manufacturing transformation Bangladesh developed significantly in areas of poverty alleviation, employment, women empowerment, industrial growth, and economic diversification – thanks solely to the labor-intensive RMG sector.

Following the trends in Bangladesh, the government continuously supports the industry in terms of rationalization of tariffs and taxes on imports of capital machinery, raw materials, dyes, and chemicals, and reduction of interest on long- and short-term loans. As a forward-looking attitude, at present, the Bangladesh government offers lucrative incentives for encouraging the use of local fabrics in the export-oriented garment industries. To encourage textile export, companies can import capital machinery duty-free. Cotton also may be imported duty-free. Moreover, the government recently has implemented several policy reforms to create a more open and competitive climate for foreign investment in the backward linkages of the industry.

Bangladesh’S Export Overview

The exports of Bangladesh have dramatically changed recently due to the diversification of items. Traditionally, Bangladesh was known as jute, tea, leather, and frozen fish exporting country. These products are primary agricultural products. More than 60% of the total export share was contributed by jute in the early eighties. This scenario is now totally changed. Non-traditional items, such as ready-made garments, leather goods (shoes), knitwear, handicrafts are now dominating factors in the exports of Bangladesh.

More than 60% of the export share is now contributed by ready-made garments. Due to the advent of containerization multimodal transport has created a new era in international trade. It has two advantages;

1. Door-to-door service and
2. Just-in-time service.

Exporters of Bangladesh take the MT as a strategic logistic tool. With the help of MT, they reduce their inventory cost in the port area, and at the same time they deliver their goods just in time to the buyer’s desired place. Bangladesh has two seaports; Chittagong and Mongla. 80% of the total trade and 90% of the export of the country are now going through these ports. In 1987, with the help of the railway, the country’s first inland clearance depots (ICD) were established in the Dhaka region, because 90% of the manufactured goods exporting industries are located in the Dhaka region. This ICD links with Chittagong port.

Exporters have already shown their keen interest in using ICD. For minimizing the transport cost, Govt. of Bangladesh has a plan to establish another ICD in the Dhaka region with the help of inland waterways. After the completion of this inland container port, the competition will rise between the railway and inland waterway, which is ultimately favorable for the exporter giving a better choice of mode of transport.

 

Bangladesh is a place for value-adding activities. Labor cost is relatively cheap in Bangladesh. It is one of the advantages of exporters for reducing the production cost. Transportation is another factor for reducing the total cost. In the case of ready-made garments, Bangladesh first imports the fabrics then carry out value-adding activities, and at last exports the finished goods. Time is very important here. “Just in time” receiving the raw materials and “just in time” delivery of the finished goods is essential for achieving the total trade I-off. Only multimodal transport (MT) can provide this type of service.

With the help of MT readymade garment exporters import the fabrics phase by phase and export the goods on a group basis. Storage costs, in that case, are minimal and the productivity of the factory is at an optimized level. For competing in the world market, the export policy has been designed to help exporters to plan their export market and product development work, so firming up the export base of the country on one hand, and to strengthen the product base of export through diversification of product and expansion of export market on the other.

Logistic Strategy of Ready-made Garment Industry in Bangladesh

Ready-made garments depend upon imported fabrics. Unfortunately, Bangladesh does not have enough textile mills to produce the fabrics to fulfill the demand of the ready-made garment industry. So, 80% of the fabrics are imported from abroad. On the other hand, 100% of the raw material of the jute mill i.e. raw jute, is locally procured. So, the ready-made garment industry bears extra import-related costs.

 

 

It has already been mentioned that the ready-made garment industry depends upon imported fabrics. Bangladesh normally imports fabrics from Asian countries; principally Hong Kong, Singapore, Taiwan, Pakistan, and India. On the other hand, the readymade garment exports to the U.S.A. and EU countries. So, the point of origin and the point of destination are two different parts of the world. In the middle, Bangladesh is a place for value-adding.

Transportation is very important here in the total logistic cost because transportation is involved twice in such kind of industry. Firstly, fabrics are needed to be transported transport from the point of origin to the factory, then in the factory, fabrics are converted into garments, and finally, garments are transported to the final destination. Time is very important here. Usually, the procurement time of fabrics is 5-7 days. Value-adding activities occur over 7 days and the final transportation time depends upon the location of the destination and what mode of transport or combination or mode of transport is used. Usually, it takes 30 to 34 days for EU countries and U.S.A, if the main transportation is occurred by sea.

 

 

This industry emphasizes just-in-time receipt and delivery because the industry tries to avoid the storage of raw materials and finished goods. The ready-made garment industry is interested in procuring the fabrics in small lots rather than in larger quantities. Production activities take 7 days. After 7 days another shipment is needed at the factory floor. In this way, the industry saves the storage costs of raw materials. On the other side, after 7 days finished products are ready to export. So, frequent transportation is essential for this type of industry. Multimodal transport can act as a catalyst. With the help of MT, the exporter can minimize the storage cost and receive the imported raw material just-in-time and deliver the finished products also just-in-time.

Transport Cost-Benefit Analysis in RMG Sector in Bangladesh

It is already mentioned before that international transportation is involved twice in ready-made garments. For simplicity, the value considered here is the average value rather than the exact value.

Table 1: Transport cost of imported fabrics

Table 2: Container handling charge

Table 3: River dues

Table 4: Total cargo-related transport cost of imported fabrics through Chittagong port

Table 5: Cargo related transport cost of export of ready-made garments (from Chittagong port to various destinations)

Table 6: Container handling charges

Table 7: River dues

Table 8: Total cargo-related transport cost of export of ready-made garment

Here we are assuming that the factories are situated within a 5 km radius of the port area. So, other cargo-related costs are neglected here. In fact, most of the ready-made garments factories are situated in the Dhaka region, which is by road 264 km, by rail 346 km, and by inland waterways 307 km away from Chittagong port.

Only rail is capable here of carrying a full container load from Chittagong port to the destination i.e. Dhaka ICD. the two other modes are not capable enough of carrying the fully loaded container. However, road haulage is capable of carrying the containers cargo in a break-bulk form, which means, the cargo of one container is carried by two 5 tons’ capacity trucks. Inland waterways are not capable of carrying container cargoes in any form.

The following is a comparison of the cost of road haulage and rail carriage from Chittagong port to Dhaka ICD and visa-versa. One mode is related to multimodal transport and the other is not. For road haulage, import and export freight is the same Road transport cost (For one 20′ container’s cargo equivalent).

Table 9: Freight rates for Import cargo through rail carriage (from Chittagong port to Dhaka ICD)

Table 10: Freight rates for Export cargo through rail carriage (from Dhaka ICD to Chittagong port)

So, regarding cargo-related transport costs using ICD, it is more economical than non-using ICD. If we accumulate all related costs of the ready-made garments, its share of transport costs is within 8% to 10% of the total cost.