Abstract
The objective of this research is to explore the demand side and supply side of the
textile-clothing industry of Bangladesh as a background study for further research. In
terms of the demand side aspects, we investigate demand forecasting, product design and
development, order management with distribution, and bilateral relations. For the supply
side components, we identify raw materials sourcing, cutting-making-trimming (CMT), and
delivery. We describe fiber, yarn, fabric, dyeing-printing-finishing, and accessories as the
backward linkages. Using input-output analysis, we discovered that the backward linkage
coefficient of Bangladesh was 1.86, which is 1.37 times smaller than China. Transport and
communication, public services, and port services, etc., can be identified as forward
linkages. The input-output-based forward linkage coefficient of Bangladesh is 1.45, which
is 22% lower than China. Comparatively, China is still unsurpassed among the Asian
textile-producing nations. Although Bangladesh is doing well in terms of contract-based
supply of clothing goods, the demand side needs to be developed. The demand side requires
more concentration from firm owners and government to help it transition from assembly
to full package production.
Keywords : Textile-Clothing Industry, Demand-Supply Chain, Input-Output Analysis, Linkages
1. The Bangladesh Textile-Clothing Industry: A Demand-Supply Review
Previous studies on the textile-clothing industry in Bangladesh have mostly focused
on the supply side. The supply side deals with the cost and time efficiency of production.
Whether production takes place or not, on the other hand, depends on the demand for the
product.
An analysis of the demand side of the textile-clothing industry is very important
because firms in Bangladesh produce clothing based on customer contracts. These
customers are globally recognized brand retailers and distributors. These brand retailers
are responsible for demand forecasting and for the distribution of Bangladeshi products.
Firms in Bangladesh produce clothing with minimal knowledge about the ultimate users’
preferences. Therefore, a thorough discussion of the demand side is indispensable.
The supply pattern of clothing products is not the same as that of other products. This
is why a vast number of research studies have focused on the supply side of the industry
(Ahmed, 2004; Ali & Habib, 2012; Asgari & Hoque, 2013; Berg, Saskia, Sebastian, &
Tochtermann, 2011; Islam, 2013; Kader & Akter, 2014; Mather, 2004; Nuruzzaman, 2013).
The supply side of the clothing industry in Bangladesh is greatly affected by the time and
cost of production (Islam, Begum, & Rashed, 2012; Kaes & Azeem, 2009; Rahman, 2004;
Rahman & Anwar, 2006; Rashid, 2006; Saxena & Salze-Lozac’h, 2010; Tewari, 2006).
Globally recognized clothing retailers choose the suppliers who can offer products at the
minimum cost and maximum speed. Previous studies have mainly shown only the stages
of the supply chain, but the requirements of each stage are not specified.
The main objective of this research is to study the demand-supply chain of the
Bangladeshi textile-clothing industry. The research questions to be addressed are as
follows:
What is the demand-supply structure of the textile-clothing industry in Bangladesh?
What are the backward and forward linkages to the demand-supply structure?
The rest of the paper is organized as follows. In Section 2, we discuss the current state
of the clothing industry, including the industry’s contribution to the national economy,
product mix, product destinations, and emerging markets for the products, etc. In section 3,
we elaborate the demand side of the industry including customer analysis, demand
forecasting, the design of the product, the order confirmation process, and the roles of
intermediaries between the distributors and producers. In section 4, we describe the supply
side of the industry. This section specifies the demand-supply flow of the raw materials and
the CMT activities of the clothing firms. Finally, in section 5, we conclude the paper with a
discussion of the future direction of related work.
- Current State of the Textile-Clothing Industry of Bangladesh
The term Made in Bangladesh is a sign of pride for workers, businesses, and
consumers in the textile-clothing sector (Baumann-Pauly, Labowitz, & Banerjee, 2015).
Bangladesh is the second largest clothing exporter in the world (Masum & Islam, 2014).
The contribution of this sector accounts for 80% of the country’s export earnings (Masum &
Inaba, 2015). This sector accounts for 23% of the country’s gross domestic product (GDP).1
The economy has grown nearly 6% per year since the mid-1990s. This growth has
contributed to a young workforce. Since the arrival of the garment sector in the late 1970s,
the country’s poverty rate has fallen from 70% to less than 25% in 2015.2
There seems to
be a strong positive correlation between clothing export growth and poverty reduction
(Labowitz & Baumann-Pauly, 2015). All these contributions are, more or less, linked to the
country’s clothing industry.
Labowitz and Baumann-Pauly (2015) stated that there are about 7,000 (3,200 direct
sourcing and 3,800 indirect sourcing) factories producing clothing for more than 200
foreign brands with a sales volume of 1.57 billion units in 2014. They employ 5.1 million
workers capturing a 5.1% market share3
after China’s 38.6% (Labowitz & Baumann-Pauly,
2015). The country exported $25.5 billion worth of clothing in 2015 with a 49:51
combination of knit and woven clothing. In Bangladesh, 75% of total manufacturing
employment is in the textile-clothing sector, of which 85% are women. On the other hand,
60% to 75% of the benefits of this value added amount goes to retailers and producers
(Oxfam International, 2016). However, the value addition in the country is steadily
increasing in this industry (Quasem, 2002).
The production processes of textile-clothing firms in Bangladesh mainly fall into three
types: i) vertically integrated, i.e., they buy fiber and then process the fiber into finished
apparel; ii) semi-vertically integrated, i.e., they buy yarn and then convert the yarn into
finished clothing; and iii) horizontally integrated, i.e., they buy fabric and then convert
fabric into finished clothing. Textile clothing is an export-oriented industry. The output
includes knit clothing and non-knit/woven clothing, which are mainly described as HS code
61 and 62. Clothing export growth was 12.4% on average over the last 10 years, while knit
and non-knit growth was 12.5% and 12.3% respectively. Table 1 shows that 2010, 2012, and
2015 were particularly shocking when it comes to export growth.
Conclusion
This paper studied the demand-supply structure of the textile-clothing industry in
Bangladesh with backward and forward linkages. The findings showed that the demand
structure of the textile-clothing industry is order-driven, while retailers-distributors create
the order for production. Bangladesh is comprised primarily of branded manufacturers,
but the relationship between retailers-distributors and manufacturers in the demandsupply structure is not direct. There is an intermediary who requires 1–4% of the invoice
value. Many of the intermediaries are controlled by foreign dealers. The profit calculation
statistics show that retailers-distributors benefit more than manufacturers. Bangladeshi
firms are dependent on retailers-distributors for demand forecasting and product design
and development. Initiative at the firm and regulatory level is unsatisfactory in making
the industry forecast-driven in order to reduce dependency on retailers-distributors. On
the other hand, cotton, as the top-tier supply for clothing production, is import dependent.
Bangladeshi firms import 99% of their raw cotton. However, local firms can meet the
maximum demand for yarn, fabric, dyeing, printing, washing, and accessories. The research
also found that labor, as one of the most important components in the supply structure, is
not nourished attentively, although the industry is labor intensive. Production-cost
analysis in the industry showed that 80% of revenue is cost of sales, 63% of revenue is raw
materials cost, and only 10% of revenue is labor cost.
Input-output analysis of the backward linkage of the industry demonstrated that
fabric plays most important role among the industry’s subsectors, with 2.09 times
production repercussions. A comparison of the Bangladeshi backward linkages to some
Asian countries revealed that the backward linkage of China is 37% stronger than that of
Bangladesh. India and Sri Lanka’s backward linkages are also stronger than that of
Bangladesh. The forward linkage of the industry in Asian countries tends to be standard
except for China, whose forward linkage is 1.2 times greater than Bangladesh. The policy
recommendations based on the findings of this research are as follows for sustainable
growth of the industry.
To shift from the existing order-driven industry to a forecast-driven industry, firms
and the government should acquire knowledge about forecast demands and design new
products and marketing activities. Olhager (2012) indicated that forecast-driven firms can
engineer, fabricate, assemble, and deliver the product by themselves. Firms, in their
current financial condition, cannot invest more to become forecast-driven individually.
Some major firms could initiate this change through cooperation and active support from
the government. The initiative may include demand forecasting, new product development,
opening outlets in major world cities, creating one’s own brand, and advertising for the
brand. At the same time, foreign direct investment in the demand side will be helpful for
the industry in the long run, as knowledge and technology will be available to local
entrepreneurs in future
Acknowledgement
This research is supervised by Professor Kazuo Inaba, Graduate School of Economics,
Ritsumeikan University. The author is indebted to Professor Inaba for active supervision
on every step of the research beginning from setting objectives to drawing conclusions. The
author is also grateful to the anonymous referees for their invaluable contributions
References
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