Opportunity Analysis of Establishing Sewing Thread Manufacturing Industry in Bangladesh
Sewing Thread is the out put product of yarn manufacturing industry, mostly known as spinning industry .In fact it is a backward linkage industry of Ready Made Garments (RMG) industry .The RMG industry is highly globalise industries because of its low technology and labour-intensiveness. This industry migrates from high-wage to low-wage countries like a “flying goose”. Any slow down in this sector will slow the economic progress of Bangladesh. The recent changes in global environment had adversely affected the RMG industry in Bangladesh. The nature of competitions has changed. As yarn is a fundamental raw material of garments industry so any beneficial findings on polyester yarn marketing could play a positive role in RMG industry.The future of this industry is now threatened by a number of factors. The phasing out of MFA has become a matter of concern. Bangladesh is struggling to formulate strategies that will enable the country to retain its good position in the global export market of readymade garments during the post MFA era. So an attempt to study on the above-mentioned topic is a very important topic in present situation.
Importance of the Study
Sewing Thread is the prime accessories for garments industry. The quality of the finished apparel is partially depends on the quality of Sewing Thread. So Sewing Thread marketing plays a vital role in the garments business fields.Bangladesh had a glorious past in the field of production of quality fabrics. Its muslin was once considered as the finest fabrics in the world. Export oriented knitwear and ready-made garment (RMG) industry with their phenomenal expansion is a big success story of Bangladesh. It is the largest manufacturing sector contributing about 5% to our total GDP and around 67% of total export earning of country.From the modest beginning in 1978 as an insignificant in significant non-traditional items on export facing only US$6.4 m in 1981, garments sectors of Bangladesh has Now became a US$2.0 billion foreign exchange earner enjoining the status of fifth largest garments exporters to both USA ,and EU. However, total thread demand of the countries export oriented industries in 2003-2004 was around 10.3 million cones per dozen. Out of this only 70-75% our local producers supplied thread and rest of the quantity was imported from abroad.The demand of 100% polyester yarn for RMG industry is growing up. There are lots of 100% polyester yarns manufacturing companies in Bangladesh. Among them Coats Bangladesh Ltd., Dhaka Beijing, Unlima Yarn, K.D.S., Well thread, B.H.T., Apex Thread, Etafil Thread etc. are the major competitors in the thread manufacturing market. So it is required effective marketing plan for fight with competitors in thread market. So, by studying the market demand of thread manufacturing I think that it is possible by someone to play an important role in thread marketing.As Bangladesh has been entered into the global market and our garments industries now in front of a great challenges and opportunity so we must have to analyze the situation with a great prudent. In the mean time our competitors has been reorganize themselves with this changing business environment so there is no better alternative in front of Bangladesh to take the decision so that these industries can survive in this competition. Either our economical and social stability must be fallen down into a deep frustration
Objective of the Study
a) Broad Objective
To analyze and to evaluate the opportunity of establishing sewing thread industry in Bangladesh.
b) Specific Objective
- To determine the export trend of Sewing Thread as a accessories item of apparel goods.
- To determine the requirement of thread for garments industry.
- To determine the market share of different sewing thread factory.
- To provide the best service to the buyer.
- Analysis of the production cost of different count of sewing thread
- Reduce the production cost price by introducing modern technology.
- To determine the future production facilities in connection with future demand.
- To determine market characteristics and present demand.
- To analyze the marketing function of thread industry.
- To fulfil the partial requirement of Evening MBA program.
a) Data Sources
01. Secondary Data Sources:
- Companies Statistics
- Official sources
- Company’s own record
02. Primary Data sources
- Market survey, Consumers( Field experiments)
- By interviewing company executive
b) Data Collection Technique
- Review and analysis of relevant reports, studies and documents.
- Discussion with concerned officials.
- Interviewing the relevant personnel following a questionnaire.
c) Data Processing Method
- Comparative study.
- Tabulation, Classification, Analysis and interpretation.
- Trend analysis.
- Analysis market situation through questionnaire.
Limitation of the Study
I have to contact with various personnel and organization to complete my report. Sometimes I got very warm co-operation and in many cases I faced many unexpected situation during collecting data. In a brief the types of problems that I faced can be underlined as below:
- Time was limited for the study.
- Data recording system of various organizations was found disorganized so their actual business figure was not found accurately.
- From individual organization level of cooperation of their personnel was not appreciateable.
- Up to date data was not found in the hand of relevant organization.
- In maximum cases officials told that they are too busy to talk. So not today please come later.
- Factory personnel told data and records are sent to head office and head office personnel said information are kept by factory management.
- To collect information about factory and business a written permission is required from factory director level who is not available when required.
- BGMEA (Bangladesh Garments Manufacturer & Exporters Association) only responsible body to hold proper information about thread marketing but unfortunately their arrangement and information level is not up-to-date and organized regarding the mater.
- Most of the thread industry is out of Dhaka city so it requires more time to visit maximum factory to collect data. So factory location is a barrier to collect data.
Over View of Thread Industry
Textile policy 1995 envisages establishment of the following number of mills to meet domestic and export needs of the country for knit and woven export by the year 2005. These are as follows:
- 2 multinational factory
- 7 joint venture factory
- 30 small local factory with capacity of dyeing and wending
- Near about 100 factory which provide only wending facilit
To attain self sufficiency in thread (in terms of both domestic and export needs) in 2005, Bangladesh will need to establish additional.
- 10 composite factory
- 50 wending factory
To create these new capacities, an additional investment of Tk. 1,000 core will be required. Obviously, this is a huge amount. It will be too much to expect that Bangladesh entrepreneurs will be able to raise such amount of fund, and take such a high business risk. It will be necessary for the government to arrange some special fund for the development of backward linkage industries in textile-clothing chain. Another way is to invite foreign direct investment.
Cost Competitiveness Assessment
It is necessary to assess critically the cost effectiveness and operational efficiency aspects in detail before making huge investment to develop backward linkage industry. In order to assess the level of competitiveness and viability of new thread projects in Bangladesh, conversion and total manufacturing costs be carefully compared with those of the competitors of Bangladesh, particularly India, China and Pakistan.Sponsored by International Finance Corporation (IFC), Washington, a consulting firm Dr. Martelli Associates (DMA), has recently completed a detailed study (referred to IFC Report). The IFC report has examined all the cost components including cost of fund, cost of improved raw- materials electricity cost, labor cost, depreciation charges, etc. Then they have compared these cost those of India, Pakistan, China and several other competing countries. A major cost component is the cost of yarn, which constitutes more than 60% of total cost of thread. In this component, India, Pakistan and China, the three powerful competitors of Bangladesh. Bangladesh must overcome these disadvantages by reducing conversion costs and improving managerial efficiency and established yarn manufacturing factory.
Market Scenario in Recent Past
With changes in the production location, the composition of major markets has also changed. Until early eighties of the 19th century, the USA was the largest and fastest growing importer. But in the last decade the EU and Japanese imports shot up by about 400%. Loosely, the Triad-USA, EU and Japan have become three “trading blocks” as far as apparel markets are concerned.It is to be noted that rich countries are not only importers, but they also exporter. In fact until 1960 they were major exporters. But because of changes in the production cost the rich countries concentrated only on the capital intensive components of the textile chain. As a result, apparel exports from high cost countries continued to decrease.From the above discussion it can be cleared that to meet this changing apparel business Bangladesh must have to take steps to back-up its backward linkage textile industry i.e. Bangladesh needs to set up more spinning, weaving and dyeing finishing mills rapidly to capture the potential apparel market.
Market Scenario Analysis
Development of Backward Linkages
The success of an industry greatly depends on how effectively its backward and forwards linkages operate. If the manufacturer has effective control over the supply of raw materials, components and ancillary services needed to produce the final product, then the production flow is unlikely to be interrupted. The level of self-sufficiency in input supply is presented for Bangladesh and six of its competitors are stated below:
Source: DMA (Dr. Martelli Associates, IFC Report) 1999. p.38&39.
According to the IFC study, the establishment of additional spinning mills running on cotton imported from India and Pakistan, and using new machinery will not be economically viable in Bangladesh. The cost in Bangladesh will be higher than that in India and Pakistan. Primary reason is that price of cotton buys by spinner of India and Pakistan is lower than the prices Bangladesh spinners are required to pay. Since from the above table it is seen that the conversion cost are almost similar, the cost of raw materials tends to determine the competitive position. Wages in Bangladesh are 30% lower compared to that in India (not show in the table). However, due to the lower labor productivity in Bangladesh’s mills, it is estimated that total labor costs in modem mills are at least as high as in India. Besides, equipment of India and Pakistan is already heavily depreciated, and that Bangladesh will have to use relatively new machinery, depreciation charge will be higher in Bangladesh; therefore, the conversion cost will be eventually higher in Bangladesh. After making all adjustments, the report concludes that the combined raw materials and conversion cost are 16% and 14% cheaper in India and Pakistan respectively. The total cost per unit of yam in Bangladesh eventually becomes 4.5 and 6.2 percent higher than that in India and Pakistan respectively.
Due to the above challenges spinning industry set-up is viable in Bangladesh as per a group namely Development in Democracy (DID) .According to DID spinning projects are may be viable due to
- Energy cost is lower in Bangladesh rather than India and Pakistan because most of the pinner has their own gas generator. Cost of gas is lower than other fuels.
- Yarn quality is better than Indian and Pakistan’s spinners.
- Bangladesh use high quality cotton so high quality fabric also found from Bangladesh’s spinning mills.
- Government incentives on apparel export using local yarn.
So, Bangladesh must have to take many effective steps like managerial skills development, increase labour productivity, developing various types of communication, port facilities, reducing lead time for apparel export etc. to be improved soon to compete with the international competitors.
Facilities for Industry Setup at EPZ
Not all spinning industry is setting up in EPZ area. But if someone establishes thread factory in EPZ area the following facilities can afford from Bangladesh government:
- Land for factory is available on rental basis-
- Electricity , tele -communications, gas and water are provided by the zones authority
- Import & export permit are issued by EPZ within 24 hours.
- Work permit are issued by BEPZA.
- EPZ are secured and protected area.
- “Many recreational facilities are available. A available of food stuff and beverages on payment of nominal tax for foreigners working in EPZ area. Tax holiday for 10 years.
- Duty free import of machines, equipment and raw material and duty free export of goods.
- GSP facilities for export to USA, EU, Canada and Japan.
- No ceiling of foreign investment and many other facilities.
- Foreign investors can return the full profit in their country without any tax payment.
- Price of land is fixed low rate rather than that of out side of EPD area.
- From the above table we have found that shirt export reduces continuously. It means 60/2-count thread consumption reduces. Jacket export for the first 05 years increase but again it reduces. So it means 40/3 thread consumption and filament or 150/D denier thread consumption for first five years Increase then again it reduces.T-shirt or knit export trend is always upward. As a matter 50/2 thread consumption always increases.Trousers export increases rapidly. So we find that 20/3, 20/2 and 40/2 thread consumption increases. Most of the heavy count thread need bleach treatment. So for special bleach treatment thread industry need more specialized persons to keep the best quality.
- From the above table we find the same trend in exporting apparel goods form Bangladesh to abroad for the last 10 years. Trousers export increase rate is very high, which gives us more money but need special or highly expert technical person in dying sector and washing sector. We also need more denim factory in Bangladesh to boost up high value apparel items
- The above table shows how many cones required for making shirt, Trousers, jackets, and T- shirt. Same time the table also shows how many cones produces in Bangladesh for exporting shirt, trousers, jackets and T-shirts. In 1993-94 the garments industry’s thread requirement was 2458962 cones polyester sewing thread. And in 2003-04 the garments industry uses 12982304 cones polyester sewing thread. The table shows very clearly how important the sewing thread market in Bangladesh to the investor. As the export of appeal items increases every year in Bangladesh the sewing thread demand also increasing. Without sewing thread it is not possible to make one single garments.
- The above statement shows the increase trend of sewing thread market in Bangladesh. The most important factor is that not a single year the sewing thread requirement decreases from the past year. This is a very clear picture for the investor to invest their valuable money in this sector.
- The garments industries need different count thread for different type of garments. The sewing thread which uses for making shirt cannot uses for making trousers. Similarly the sewing thread which uses for making trouser cannot uses for
- making jackets. Mostly the sewing threat uses in Bangladesh are 20/2 count, 20/3 count 40/3 count, 40/2count, 60/3 count, 60/2 count 50/2 count, 20/9 count and 150/D count. The table shows how many cones uses in Bangladesh for each count and it also shows the demand trend for each count in Bangladesh for the last 10 years
- The table showing the market share of the major sewing thread company in Bangladesh. Except coats Bangladesh the market share of the different branded sewing thread manufacturer in Bangladesh are almost same. But the most important factor is that still Bangladeshi garments manufactures importing 25% sewing thread from abroad. So there is a big chance to capture this market. This will help the garments manufacture to reduce their cost price and also reduce the lead time to manufacture the garments. It will also help the economy. Another major important part is that the local small manufactures have captured almost 15% market share but they don’t have any modern machinery or technology. As a result they produce less or inferior quality thread compare to branded factory. If the new investors can introduce modern factory with a sound technical persons then they could easily capture this share without fail
- From the above statement, we can have a overall idea of sewing thread price for every count including white or colour thread. In this cost sheet we include all kind of cost. For white thread we don’t need any dyes or chemical cost. Cost price of different count are not same because for different count we use different type of yarn. And different yarn price are also different. Conversion factors of cost price are also differentFor the above reason the market price for different count sewing thread are also different. Market price is 05 to 10 cents higher from the cost price of any polyester sewing thread.So from all the tables and statement we find that there is big demand already existing in Bangladesh and it is growing rapidly day by day, and at the same time market is vary reasonable compare to its cost or production price. As a result we can assure a investor that they can easily invest their money for sewing thread market in Bangladesh which will give them a very good return and by this the garments sector in fact the whole country will be benefited.
After developing the product marketer has to think how he can sell the product to the potential buyers. Many activities have to furnish to make a successful selling. A brief discussion has been stated as below regarding the matter:
This is the prime job for a marketer. The product of yarn manufacturing industry is spanned “Yarn”. Its potential buyers are export oriented knit and woven garments that supplies garments to the foreign buyer. So, first, it has to be cleared that what will be the product character. The following major things must have to consider during taking manufacturing decision of yam:
- Count of yarn.
- Quality of yarn i.e. yarn strength, CV% of count, imperfection, hairiness etc.
- Type of raw material used.
- Purpose of end use of the product.
In Bangladesh, most of the cases polyester yam count is used 20/2,50/2,40/2,20/3,60/2,60/3,.for preparing garments. In some cases blended (cotton+ polyester) yarn also required for making garments. Any way, marketer has to analyze the market requirement before taking product decision.
Price of the Production
Pricing is the value that buyers exchange for a product in the marketing transaction. Before establishing prices, marketers must decide their pricing objectives. Survival is the most fundamental one; firms will tolerate losses and others difficulties if needed for survival. Besides survival, firms use price to increase sales and market share, boost profit, achieve a return on investment, and maintain their present position in the industry.For export market, thread is being sold by L/C and currency is US dollar . However, the market is open and pricing has been fixed on cost-oriented- pricing strategy .The price of purchasing raw materials (yarn) plays a vital role for pricing decision. So, firm to firm price of yarn vary a little (up to S-10 cents per kg) due to purchasing cost variation of raw materials. Rests of the cost are almost same for maximum factories. Polyester yarn is a by product of petroleum so as a result yarn price is mostly depend on the prices of petrol.
Channel of Distribution
A marketing channel is a group of inter related organizations that direct the flow of products from producers to ultimate buyer. The channel organizations that provide the link between the producers and the consumers are called marketing intermediaries.
Depending on the needs of the target market firms utilize many different types of marketing channels to distribute products. Generally channels for industrial product are different from channel for consumer product.
A typical marketing channel for industrial product (thread is an industrial product) is shown below
A. Producer ———————-> Industrial users or garments owner
- B. Producer —-> Buying house —–> Industrial users or garments ownerIn Bangladesh, both types of channels are seen in doing marketing function. Some factories are seen marketing their product by their own sales personnel and there are some factories who market their product through local distributors. So, it is a major task to take decision what will be the marketing channel of the “company.
The communication of favourable, persuasive information about a firm or product in order to influence potential buyers is called promotion. Before buying a product consumer must know about availability of the product, its characteristics or benefits and where it can be purchased. Promotion Consisting of advertising, personal selling, sales promotion and publicity .Most of the company’s promotional objectives are informing about their product, increasing sales, stabilizing sales, positioning the product among their customer mind. Due to the above purpose company followed the advertisement media as direct mail, Professional magazine, out door display (Trade Fair), especially they emphasized on personal selling mostly.
So, analyzing the overall situation the marketer has to select the appropriate promotional tools for successful selling.
Various types of procurements are involved in yarn manufacturing industry Most of the buying responsibility is on marketing people. Some major area of procurements is as below:
- Purchasing of raw materials i.e. raw yarn purchasing from abroad.
- Purchasing of machineries and parts of machineries.
- Accessories purchasing.
- Generators parts and fuels purchasing. .
- Purchasing of various tools and materials for workshop.
- Purchasing of yarn packaging and carton making materials.
- Maintain satisfactory inventory level in store of factory .etc.
- Purchasing of chemical and dye staff
A marketer must be sincere regarding the above things for smooth production and marketing the product. In practical, it has been found that most of the factories do not organize the purchasing and procurement systematically. As a result, they face many problem like raw material shortage, failure of timely delivery of yam to the customer, shortage of accessories. So, machine idle and break down time became increase etc. In a nutshell, factory productivity has been fallen down.It is also seen that a few no. of factories maintained proper procurement policy as a result their productivity is higher and market reputation is appreciate able.
Transportation mainly includes the arrangement that related with moving the goods from one place to another place. Generally, two ways this transportation function has been done in the thread industry. Firstly, the major part is carrying the raw materials i.e. raw yarn transportation from growers to users. Most of the grower’s location is Africa, CIS countries; Pakistan, China, India, Australia and USA etc .Bangladesh has to import raw yarn from these countries. Import of yarn has been done 100% by using ocean vessels from exporting country ocean shipyard to Chittagong sea port. Latter yarn bales are carried by truck from Chittagong to factory location. Major transportation costs are related in this line. Secondly, transportations are involved to transfer the spun thread from thread factory to garments factory .This transportation is ensured mostly by thread mills authority .But sometimes it can be done by thread buyers i.e. transportation decision depends on buyer and seller bilateral discussion.
Thread factory is a vast processing industry .A lot of things are required each and every time. Specially, it need smooth supply of raw materials, accessories. However, a minimum level of inventory of packaging materials, spun yarn and other things that are directly related with processing must has to maintain to keep the production smooth. Basically yarn demand is fluctuate over the year. Generally demand of yarn is highest in betweenOctober to February and rest of the time a normal demand is found in market. It is called peak seasons and off season. During odd season the surplus production (Thread) has to store in the warehouse and by this surplus production later companies could meet access of peak season.In practical, it was found that most of the factories have no good warehouse. However, they have no good production and marketing plan. As a result they are facing problem to marketing their product and they are failing to build up loyal relationship with potential customers.
Standardisation & Grading
There are some important marketing impacts of standardization. If widely used, uniform raw material and final product quality grades and standard Call, potentially, contribute to both operational and pricing efficiency in the industry .Some important market potentiality is stated as below:
- Grades and standards allow marketing by description, rather than inspection.
- It can avoid personal meeting and inspection for buying and selling.
- It can lower the marketing cost.
- Grading can contribute to market competition and pricing efficiency.
- Uniform grades and standards also can contribute to market
- Development in the form of greater consumer satisfaction and increased producer returns.
- Grading can affects both domestic and foreign sales.
In practical, it has been found that raw materials of spinning industry i.e. raw yarn are maintained highly standards and grades. According to grades yarn are familiar like as follows:
- GM ( Good Middling)
- SM ( Strict Middling)
- SGM( Strict Good Middling)
- M ( Middling)
- LW( Low Middling)
- SLM (Strict Low Middling) etc.
One the other hand produced spun yarn is also standardized by its popular
count. Such as:-
- 24/1 count
- 20/1 count
- 26/1 count
- 30/1 count etc.
Yarn grading is known on its quality level. Such as high quality yarn means low or minimum CV% of count, less variation of mass per unit length, low level of thin and thick place per unit length etc.
Thread manufacturing industry is a matter of big investment. Minimum 100 core tk. is required for setting up thread factory with capacity of 1000 spindles. However, its operating cost, maintenance cost, salary , wages, bank interest, annual general report, bill paying for various purchase, accounts for bill payable and bill receivable etc. huge no. of financial activities are involved into this business. In a broad sense the total financial activities can highlights into three major categories:
A. financial activities involve with procuring materials and machineries involve with procuring materials and machineries i.e. up to start processingThis involved from the purchasing the raw yarn to reach the material to mill premises. Basically, yarn is being purchased from the international market. Besides, import various machineries; spare parts, auxiliaries etc. has been imported from abroad to keep run the industry .It is the major cost of this industry .Business payment is performed by L/C. It requires huge amount of dollar to purchase raw materials. Here Banks and others financial institution plays vital role. About 70% money can get through credit from bank with getting necessary government facilities. However, many leasing company also can lend money regarding this matter. But in most cases companies are prefer to take bank loan rather than leasing company
B. Financial activities involved with production & marketing:In this field major costs are involved in production. Executive’s salary, workers wages, maintenance costs, incentives, bonus etc. are the major cost creating area. Banks and other financial institution provides loan to meet this requirements. For marketing the product, there are several costs such as packaging cost, cartooning the yarn, transportation cost for moving the finished goods, paying commission to distributors, promotional cost and cost of attending various fair and exhibition in home and abroad.
C. Annual Financial Statements:Almost all thread industry is a private limited company. So, they have to prepare annual financial statements for their share holders. In the financial statements all types of financial transaction has been presented. So, only analysis the financial statement it is possible to know the company’s financial condition. In practical, I fond that a higher portion of the company did not prepared their annual. financial report for share holders and stock exchange commission not yet been too strict to them. But very recently they are become aware to the matters.
Each business has risk. As thread is being used for making garments and garments is an exporting item for Bangladesh so thread manufacturing industry and its marketer has to faced challenged from both internal environments as well as external environment. Internal uncontrollable environment consists of following things:
- Internal competitors.
- Government Policy.
- Political Situation.
- Legal factors.
- Economic condition
- Law and order situation.
- Uncontrolled business operating cost. etc.
On the other hand, external uncontrollable challenging factors are consists of as bellows:
- External competitors.
- International politics.
- Legal factors.
- Global economic condition.
- Various international business contracts.
- Influences of various pressure groups. etc.
In fact the real internal challenges of this business in Bangladesh is political instability , improper government policy, hartal, instable state policy to the business, insufficient port facility , inadequate infrastructure facilities, smuggling, the weak governance etc. And the probable external risk may be SAARC cumulation , elimination of quota in USA Pressure from EU in respect to asp facilities, pressure of Aid group, World Bank, Asian Development Bank, etc. in respect of low level law and order situation in the country.
Problems of Sewing Thread Manufacturing Industry
There are a lot of problems in this sector. I will discuss in a short that are directly related with marketing function. These are stated below:
Problems Related to Product Selection
Bangladesh still produces only some ordnary count that are mainly using in producing knitting garments and plain type woven garments. But in world garments market are now using fancy yarn, core yarn, and slubby yarn etc. modern types of yarn for making more attractive apparels. But Bangladesh still now doesn’t introduce this high technology in their product manufacturing system. As a result Bangladesh is losing to create new potential market.
Problems Related to Product Pricing
It is true that cost of our local yarn is higher than that of our competitors. For an example, 1 kg of 26/1 carded yarn price in India is US$2.90, Pakistan US$2.95, Sri-lanka US$ 3.00 and in Bangladesh US$ 3.45. Bangladesh import 100% raw material from international market where as Pakistan, China and India both has 100% self sufficiency in growing raw materials. So, Bangladesh has to face uneven price competition with its competitors in international market.
Problems Related to Distribution Channel
As yarn is an industrial product and our yam is being marketed to our local garments manufacturers who are sold their fabric both for local market and for export market. Marketing channel is very short. Most of the cases it is marketing directly by the manufacturer own sale people. Normally this channel is for export market. In some cases there are some distributors. This channel is for local sales. For local buyer sometimes they are bound to purchase yarn paying high price. Its happened due to this market is controlled by only a few no. of sellers (oligopoly). Most of the spinners selling their product for export market sharing with L/C. So, create perfect competition in local yarn market it is necessary to increase more company into local market. It is possible only developing proper distribution channel.
Problems in Promotional Activities
Bangladesh yarn manufacturers are very weak in promotional aspect. To familiar the product in international market and create and enter new potential market regular seminar, symposium, participation in international fair, advertising in respective international journals etc. should be must for a marketer. However, physical travelling in abroad for seeking market is also essential. A special handsome promotional budget is required regarding the matter. But most of the company has no such preparation. As a result our textile business has been depends on only a few countries.
Problems in Procurement Section
Not only textile spinning industry successful procurement systems is the key to any processing industry .Timely procure the raw materials, maintain economic inventory level of machineries and spares parts, keeping the safety level stock of final product to maintain a continuous supply to the market etc. are must for a success company. F or doing the jobs it is necessary to develop a separate department who will take all responsibility of procurements. Trained up staffs and necessary budget is to be provided to maintain the system and furnish the jobs. But most of the factory did not give importance on the matter. So, their productivity is not high in respect of their international competitors. However, due to lack of proper inventory their fund distribution is also imperfect. As a result their overall business performance is. found poor.
Problems in Transportation
Bangladesh has been export the raw cotton 100% from abroad. So, its major transportation cost depends to import the materials i.e. on ocean freight, cost of freight forward and finally truck fair from Chittagaong seaport to factory destination. Most of the factory location is near to Dhaka so these factories have to do nothing but paying the cost. This transportation costs is almost nil of our international competitors. So, they are in forward position in view of cost competitiveness of raw material cost. Political instability and various political agitations like hartal, dock workers strike etc. harms seriously this industry .Due to hartal and strike sometimes imported raw material can not be transferred from port area to its destination. As a result, factory production may be stopped due to lack of raw materials
Problems in Warehousing
Most of the factories have no proper warehouse to stock raw materials, accessories and surplus production. In fact from survey I came to know most of the factorydid not use their full production capacity through out the year. As a result they are failing to create loyal relationship with the customers. It is true that for utilizing factories full capacity factories needs more raw material, more financial support and strong marketing network to sell the product to the customers. But there is a remarkable no. of spinners who are in crisis of sufficient cash in their business. As a result they are facing problems to maintain proper warehousing of their product. It is also seen that there are some factories that are doing well in warehousing management. Location of warehouse is also an important thing. It is seen that warehouse location is not the proper place into the factory area. It happened due to misaligning. So, access time and labours are required for internal transferring the materials.
Problems Related to Standardisation & Grading
Standardization mainly related with yarn count and there is no problem. Because it is internationally recognized system. But problems are found in cotton grading. Cotton grading normally done considering its fibre maturity, colour, degree. of yellowness and fibre thickness. Year of crops is also important. Because fibre strength varies on it. In cotton marketing sometimes cotton growers blend the previous year crops with new crops as a result fibre quality has been deteriorated. It is a high risk for cotton buyers. So, it requires expertise knowledge to identify the problems. Either factory can incur loss for purchasing bad quality fibre.
Problems in Financial Field
Thread businesses need high capital. Company itself can not afford all the money. So, they have to get loan from public and private bank, arrange money from share market. Sometimes they borrow money from various money lending company. There are some spinning industry where international banks invest their money and provide loan. Facts are bank interest in Bangladesh is too high near about 14%. One the other hand business-doing-cost in Bangladesh is higher than its international competitors. Besides, Bangladeshi entrepreneurs are doing well and they are telling that fund is not their main problems. They urge to government for implementing friendly policies, political stability, and prudent international business contact etc.
Problems of Risk Taking
Each and every business has a more or less risk. Textile is a global business so its risks and opportunities are more than any other business. The last two decades Bangladesh actually gains huge opportunity from this business due to American quota. From Jan 2005 quota has been abolished but Bangladesh export more quantity of apparels in world market. It happens because Bangladesh overcomes its primary level of this business. Our entrepreneurs, workers are now more skilled than before and their level of performance is competitive to our international competitors. However, our government continuing 15% cash incentives on export, government established separate EPZ; duty free access of raw material and machineries etc. incentives has been offered from the beginning. Besides, Bangladeshi garments exporters are facing tough challenge in international marker in view of price competitiveness, lead time problems, Shipment problems and problems of higher business operating cost and overall Bangladesh facing its image problems internationally. It is obviously a business risk. So, if government takes the steps like port problems, lowering bank interest for investment this field, taking steps to improve country image internationally and help this business community with the changing global situation then the rest of the business risk can overcome Bangladeshi entrepreneurs successfully.
Sufficient Backward Linkage
Bangladesh still depends on imported yam and fabric for its garments export. So, it requires immediate steps to set sufficient number of spinning and weaving industry to meet the excess demand of this industry. Either only depending on importing raw material the business will not cost effective.
Competitiveness in Bangladesh
Bangladesh and its others competitors level of competitiveness in respect to labor, .power depreciation rate, capital interest etc. are same but now Bangladesh has only one competitive advantage to increase its management efficiency for higher productivity .In respect of raw material Bangladesh position is not worthy than its competitors.
Problems Related to Banks
Problem in banking sector for exporting:
- Force/Demand loan
- Back to Back p .A.D/ Force loans.
- Overdue F.B.P.
- Exporter cannot open L/C due to clear the liability .
- Stock-lot problem cannot permit BB L/C open.
- Banking irregularities.
- Bangladesh bank doesn’t provide enough money for cash incentive.
- Need the separate bank for garments industry.
- Export goods against stock lot.
- Documents negotiation time.
- L/C acceptance charges of the commercial bank.
- Fresh law.
- Procedure of making down payment for rescheduling loans.
Exporters may face these challenges of total globalization competitiveness in the quota free regime from 2005. Such problems like:
- Illiterate workers involved in textile industry and garments.
- Gender quality.
- Problem of child labor.
- Political instability.
- Duty free market access for all product export.
- Leakage from bonded warehouse.
- SAARC Cumulation.
- Central Bonded Warehouse.
Recommendation & Results
Evaluating the total study, analysis and problems there are some suggestion that can help this industry to be worthy and strong. The recommendations are stated below:
The SAARC Cumulation rules
The proposal of SAARC Cumulationg rule is opening the textile trade among SAARC countries. Bangladesh must not agree with the proposal because Bangladesh will not be benefited from this accord rather its textile industry will be destroyed in front of Indian and Pakistani industry.
Large scale of smuggling
India is a very big neighbour of Bangladesh. However, India is a textile giant and one of the important competitors of Bangladesh so Bangladesh must be taken -steps to stop any types of smuggling of textile product like yam, fabrics, accessories etc.
Duties & taxes on spare parts, accessories and consumable
Our product cost is normally high due to many reasons. So, to gain more competitiveness it should necessary to reduce duties and taxes on spare parts, accessories and others consumable items.
Low interest rate and bank charge
Bank interest in Bangladesh is still higher than our competitors. Bank interest should to fix up maximum 6% for capital assets. Then this industry might be stronger to face global challenges
Bank loan available and easy acces
- Bank loan should be available and easily access. Bangladesh bank can playa vital role regarding the matter.
:Develop skilled and trained manpower
Labour cost in Bangladesh is cheap it is true but labours productivity, effectiveness, skilled are very low. As a result this cheap labour could not bring profit for the industry .So, steps should to take to train up this unskilled and semiskilled worker.
Setting up training institution
Garments are the chief exporting product that earns almost 68% of our total export. But yet there are no remarkable steps by that the personnel of this trade can be specially trained up. So, immediately some quality level training institute should be established.
Encourage introduce adept professional
From the survey it has been revealed that there is a lot of industry where there is no professional Textile engineer. As a result their produces are inferior quality and buyers claim are common for their product. Introducing professional body factory productivity and effectiveness canbe increased.
Increase productivity and effectiveness
Implementing more modem technology and production methodology factories production and efficiency must be increased. Now there is a lot of software by which production monitoring, measuring efficiency, inventory control, performance appraisal etc. can be done successfully. So, our textile factories should introduce the latest technology for its operational accountability.
Taking initiatives to solve various problems
Besides the above things there are some problems related with marketing functions such as product selection, pricing, distribution, promotion, procurements, transportation, internal warehousing, standardization & grading, financing and risk-taking etc. Proper market research and analysis these problems can be solved.
Agreement with international business partner
Textile is a global business. Its business potentiality is increasing gradually. So, Bangladesh should have made good relationship with its business partners. However it can make various bilateral businesses
Maintaining political stability into the country
Bangladesh is the one of the small country in the world in respect of its land area. But its political chaos is well known in the world. World is becoming smaller and competitive. Bangladesh must have to create political stability for increasing its foreign investment, to increase it export and business.
Increase port facilities in Chittagong seaport
Chittagong is only one seaport by which major export-import has been occurred. But due terminal problems, loading-unloading problems always ship jammed have been happened. As a result importers and international shipping companies are loosing their interest to do business with Bangladesh. So, immediately, Bangladesh must have to solve these problems.
Establish more EPZ for textile industry
It has been proved that establishing textile factory into EPZ area is more safe and profitable for both investors and importers. However, in EPZ area infrastructure facilities, law and order situation are more improved that out of it. So, Bangladesh should establish more EPZ for their textile industries then obviously investment of this sector will be increased
Government policy should be friendly so that textile industry can be build up and sustain facing the global challenges. Government may be change but the industrial policy should not be unfavourable for the industry with the changes of government.
Bangladesh is a very densely populated country but have not enough natural resources. But god has given us plenty of labour resources. For survival we have the only alternative to use the labor force properly. At present we don’t have the ability to establish heavy industry but we have enough opportunity to establish medium and small scale industry which needs huge manpower with less investment and high profit. Garments industry is such a type of industry which needs less investment, lot of quality or skilled people and gives high return. That is why garments industry is increasing in Bangladesh rapidly and contributing to the economy in a big volume. But now after lifting the quota, garments markets become more competitive and at this stage it has been difficult to uphold the trend in garments industry though it is not impossible. Bangladeshi garments industry can fight in the world market if it can reduce or minimise its manufacturing cost. Any finish garments need 25 to 40 accessories items. Among all the items sewing thread is the most important. After studying the whole situation we can firmly say that the demand of the sewing thread will further increase. As a result if we don’t established new modern sewing thread factory then garments owners will have to import the thread from abroad. This will increase the cost price rather than reduce. So, for the betterment of the garments industry as well as our economy we should invest more money in sewing thread industry as early as possible.