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A supply chain management is the procedure, which start from the placement of the order from the customer through the raw materials stage, material supply, production and marketing & distribution of that particular product to the customer or end user. Every organization has supply chains of varying forms. The way the organization manage their supply chain depends upon the industry, organization structure, size, type of product manufactured.
Supply chain management (SCM) is the combination of the chain of proceedings associated with the movement of goods from raw materials to the ultimate customer (Mentzer et al. 2001). Supply Chain Management has been described as the assimilation of business procedure that span the spectrum from the raw material extractor to the end user to provide product, information, and services that add value (Cooper, Lambert, and Pagh 1997). Furthermore, firm's can attain their operational and strategic efficiencies thorough cooperation among internal and external function (Rodrigues, Stank, and Lynch 2004; Stank, Keller, and Closs 2001). Moreover, Supply chain Management "involves integration, coordination, and collaboration throughout the supply chain"
There is some author they describe supply chain management and logistics is same and the purpose of discipline is facilitate the total system of any organization.
Logistics is the . . . "process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements."
------------------------Council of Logistics Management
Supply chain management . . . "encompasses every effort involved in producing and delivering a final product or service, from the supplier's supplier to the customer's customer. Supply Chain Management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer."
-------------------------The Supply-Chain Council
Forum Logistics involves . . . "managing the flow of items, information, cash and ideas through the coordination of supply chain processes and through the strategic addition of place, period and pattern values."
---------------------------MIT Center for Transportation & Logistics
Though there has many definition and approach to attain and establish supply chain management in the organization. The elements and process of supply chain depends on the organization, industry nature and some other crucial factor but there are some common elements to a supply chain.
Production: Production is the key strategic decision for developing supply chain in a particular organization. In this stage organization takes into consideration what product they are going to produce and hoe many amounts they want to produce and to whom they produce. What is the procedure of the production and what, if any, parts should be produced at which plant or it should be outsourced to the capable suppliers. These sort of strategic decision are taken in this stage and its must focus on the capacity, volume, customer needs and satisfaction.etc.
Supply: An organization must decide what their facilities and facility is capable to produce, both economically and efficiently, while keeping the quality high. But in reality most companies cannot produce all components by providing the higher quality and production efficiency. In this regard outsource is one of the best alternative. So, here company should have to be aware to select the suppliers for those components or raw materials.
Inventory: Further strategic decision focus on inventory, inventory control. This is one of the crucial part of supply chain management because in this stage an organization decide how much product they should in house, how much raw materials they need for smooth production, how frequently they order for the raw materials and other accessories to produce their product. They also has to consider some other specific data to meet the customer demand like what is the pick time of business and what will be the inventory level, what is the production and raw materials safety level etc.
Location: Location decision depends on various factors: like market demand, industry location, population, human resources, facilities etc. In this section strategic decision must focus on the placement of production plants, distribution facilities, stoking facilities and placing them in prime location to cover the market.
Transportations: Transportation decision is closely related with the inventory decision and customer wants. Using air transportation obviously gets the product quicker to the customer but it will cost more money to the customer but the cost will be lower if the same product is shipping by boat or rail. In this regard, this sort of decision are taken by considering various factors like what is the product, nature of the product, durability, how urgent is the product to the customer.
Information: Effective supply chain management requires obtaining information from the point of end users, and linking information resources throughout the chain for speed of exchange. To facilitate the whole process, nowadays, most of the organization is start using various supply chain supported software to enhance the operation of supply chain management.
Supply chain becomes the value chain: According to Martin Christopher (1998) , in the last two decades many changes has been taken place in the field of management thinking , most of the changes emphasis on the value creation in the eyes of the customer. In this regard to a extent of credit must go to the famous thinker, Michael Porter. In his book competitive advantage (1985), he tried to draw value chain and its relation with some other important factors.
"Competitive advantage cannot be understood by looking at a firm as a whole. It seems many discrete activities a firm in designing, producing, marketing. Delivering and supporting its products. Each of these activities can contribute to a firm's relative cost position and create a basis for differentiation. ''
Figure: The Value Chain (Source: Porter M.E, Competitive Advantage, The free Press, 1985)
Value chain activities are divided in to two parts- Primary activities , consist of inbound logistics, operations , outbound logistics, marketing & sales and service and support activities are consist of firms infrastructure , human resources management , technological development and procurement.
2.2Integration in the supply chain:
With supply chain management, information, systems, processes, efforts, and ideas are integrated across all functions of the entire supply chain. Supply chains become more complex as goods flow from more than one supplier to more than one manufacturing and distribution site. The possibility of outside sources for functions like assembly and packaging are also options in the chain.
Managing the connections is where the integration of the supply chain begins. Any improvement in or disruption to the supply chain linkages affects the entire chain. A wide variety of events occurs in the supply chain that is largely unpredictable. Suppliers can make early or late deliveries. Customers can increase, decrease, or even cancel orders. New customers can place large orders. Machines or trucks can break down. Employees can get sick, go on strike, and quit. Supplier shipments or manufactured products can have quality problems.
Internal integration is defined as integration within the firm's boundaries across firm functions (Chen, Daugherty and Roath 2008). The goal of internal integration is to develop a process-oriented focus that discourages sub-optimization of specific functional areas in order to develop a more effective overall process solution. It focuses on coordination across functional areas and can be examined by the extent to which logistics activities interact with other functional areas within a firm (Stock, Greis, and Kasarda 1998). Integration illustrates "how harmoniously different departments of an organization work together and how tightly coordinated their activities are" (Barki and Pinsonneault 2005, p. 166). Previous research has found a positive relationship between internal integration and organizational performance. For example, Stank, Daugherty, and Ellinger (1999) found a positive association between frequent collaborative integration within marketing and logistics and firm performance. Stank, Keller, and Daugherty (2001) found that internal collaboration had a positive impact on logistics performance. Further, Germain and Iyer (2006) found that logistics performance is predicted by internal integration; in turn, logistics performance predicts financial performance. Stank, Keller, and Closs (2001) found that internal integration was associated with overall performance improvement. Finally, Sanders and Premus (2005) found that internal collaboration has a direct and positive impact on firm performance.
External examines integration that occurs across supply chain partners (Chen, Daugherty, and Roath2008). External integration may involve governing backward integration with first-tier suppliers, forward integration with first-tier customers, and/or complete forward and backward integration (Fawcett and Magnan 2002). External integration focuses on coordination and collaboration efforts that occur among supply chain members (Gimenez and Ventura 2005). Forging external collaborations becomes a viable strategy to compete in a dynamic global environment (Al-Khalifa and Peterson 1999; Morgan and Hunt 1994; Simonin and Ruth 1998) as it can increase a firm's capability-based efficiency through resource pooling, exploitation of complementary skills, and information sharing. Previous research shows that external integration positively impacts performance. Gimenez and Ventura (2005) found external integration had a positive and direct effect on performance. Stank, Keller, and Closs (2001) found that customer integration was a critical competency that impacted overall firm performance. Stank, Keller, and Daugherty (2001) found that external collaboration had a positive impact on logistics performance. In a related study, Daugherty et al. (2005) found that formalized collaboration could provide superior long-term performance. Corsten and Felde (2005) found that supplier collaboration increased financial performance.
2.3Importance of Supply Chain Management in Modern Businesses
Supply Chain Management (SCM) as defined by Tom McGuffey is "Maximising added value and reducing total cost across the entire trading process through focusing on speed and certainty of response to the market." Due to globalization and ICT, SCM has become a tool for companies to compete effectively either at a local level or at a global scale. SCM has become a necessity especially for manufacturing industry when it comes to deliver products at a competitive cost and at a higher quality than their competitors. Here are some of the reason SCM has become important to today's manufacturing industry:-
Competitive Edge through Core Competencies
Today's business climate has rapidly changed and has become more competitive as ever in nature. Businesses now not only need to operate at a lower cost to compete, it must also develop its own core competencies to distinguish itself from competitors and stand out in the market. In creating the competitive edge, companies need to divert its resources to focus on what they do best and outsource the process and task that is not important to the overall objective of the company. SCM has allowed company to rethink their entire operation and restructure it so that they can focus on its core competencies and outsource processes that are not within the core competencies of the company. Due to the current competitive market, it is the only way for a company to survive. The strategy on applying SCM will not only impact their market positioning but also strategic decision on choosing the right partners, resources and manpower. By focusing on core competencies also will allow the company to create niches and specialization of core areas. As stated in the Blue Ocean Strategy outlined by Chan Kim, in order to create a niche for competitive advantage, companies must look at the big picture of the whole process, and figuring out which process can be reduce, eliminate, raise and create.
As an example stated by Chan Kim, the Japanese automotive industries capitalise on its resources to build small and efficient cars. The Japanese automotive industries gain competitive edge by utilising their supply chain to maximise their core competencies and position itself in a niche market. The strategy works and now Toyota Motor Corporation, a Japanese company, is considered to be the number one auto car maker in the world beating Ford and General Motors of the United States.
SCM has allowed business nowadays to not just have productivity advantage alone but also on value advantage. As Martin Christopher in his book, Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service' states, 'Productivity advantage gives a lower cost profile and the value advantage gives the product or offering a differential 'plus' over competitive offerings.' Through maximizing added value and also reduce the cost in the same time, more innovation can be added to the product and process. Mass manufacturing offers productivity advantage but through effective supply chain management, mass customization can be achieved. With mass customization, customers are given the value advantage through flexible manufacturing and customized adaptation. Product life cycles also can be improved through effective use of SCM. Value advantage also changes the norm of traditional offerings that is 'one-size-fits-all.' Through SCM, the more accepted offerings by the industry to the consumers would be a variety of products catered to different market segments and customers preferences.
Building Relationships through Supply Chain Management
One of the critical key success factors in determining the effectiveness of a Supply Chain Management is the approach of negotiation between the buyer and suppliers. The concept of squeezing the suppliers in order to gain a desired outcome can back fire the buyer in the long run. The concept of forcing the suppliers to reduce price is a win-lose relationship in the short term. It can also be a lose-lose relationship if the buyer still uses the same method over a long period of time with the same suppliers. This is because the buyer will lose its competitive edge due to the inferior product delivered by its suppliers and the supplier also will lose due to the decreasing profit margin. In delivering goods or services, each parties involved must learn to negotiate with a win-win attitude. By instilling this positive behaviour, the trust between the supplier's networks will grow and therefore the relationship will mature to a strategic partnership. The win-win thinking does not just focus on quality and cost alone, but also to future collaboration. A win-win relationship also fosters good working environment for both parties as both will benefit in the process.
At the initial stage of any relationship, there tend to be a relationship that has minimal or no trust at all. Vital information such as finance information is kept within the companies and is not shared among its partners. The circulation of information is very limited and therefore hampers the formation of a network among the suppliers. In order to create a successful network of suppliers, the vital information such as financial data and product data must be on an open based communication. Open communication instil trust amongst the suppliers and therefore creates the tendency of suppliers more added value than it is required. By opening up communication also allows problems to be noticed as quickly as possible and countermeasures can be taken immediately. Other advantage of open communication is that innovation and creative ideas can be brought more easily into the supply chain by both sides of the parties involved.
Effective Market Positioning Through Supply Chain Management
The peak era of mass manufacturing where all the managing aspect in delivering a product being done in one roof is no longer a trend. Companies who tend to manage internal process only and squeeze the suppliers for cost reduction will lose their competitive edge. As customers demands rapidly change and products life cycle are shortening, companies now not only need to manage their internal process effectively, they now must also manage their external suppliers more effectively. Managing the supply chain as a whole will create the ability of the company to identify weaknesses and strength in the entire supply chain. To compete, it is not enough by just identifying the company's strength but also identifying what is your supply chain partner's strength as well. By managing the supply chain and eliminating waste processes, the cost reduction will be significant and at the same time value addition to the product.
Minimising Risk Using Supply Chain Management
A supply chain is a system which needs a certain amount of control and management. Like any other system, it is prone to outside disturbance that can cause numerous effects to its system. One example of disturbance in the supply chain is the Forrester effect. Forrester effect is the distortion caused by demands from the retailer that causes fluctuation of inventory from the distributors, warehouses up to the factory. Other such distortion that can bring impact to the supply chain is the failure of any parties to deliver its good to other partners in a specific time period that causes major disruption to the overall supply chain process.
In mitigating this disruption, Supply Chain Management allows certain risk to be shared or delegated among its partners. Activities that carry the highest risk can be done by either the buyer itself or outsource to several reliable partners. The activities that hold the lowest risk can be outsource to new partners as to gauge the supplier's performance before migrating them into a higher level. The strategy of managing this risk should be handled effectively by all partners in the supply chain. Identifying capability of internal and also external processes must be done with thorough risk analysis and mitigation strategy.
2.4 Problem of implementation of supply chain
SCM's main features include long-term relationships between supply actors, a customer orientation, mutual benefits and/or sharing of information, profits and risks (Arlbjom 2002). Kopczak and Johnson (2003) call this a 'supply chain management effect' that shifts business focus from crossfunctional to cross-enterprise. This effect may help to increase a firm's competitiveness or organizational effectiveness relative to competitors by lowering costs and increasing profits and customer satisfaction (Elmuti 2002, Tan 2002, and Wisner 2003).
A key problem is how to identify the start and end of such interwoven supply chains. Ganeshan et al. (1999) limited the scope of a supply chain to inter-connected activities in planning, coordinating and controlling materials,and finished goods from supplier to customer concerned with only two distinct flows, material and information, through the organization. They also raised a responsibility problem, i.e. who is responsible for the supply chain? This issue of who is in control, either as a legitimate 'channel captain' or as an actor with inordinate power, is also important for determining how much influence any one firm has throughout the entire supply chain? (Grant 2005). The potential power of an individual actor to change a given supply chain set up leads to questions such as 'who is in charge of SCM?' or 'what, where and how much of SCM can be used?' (New 1997; Bretzke 2005; Gudehus 2005).
In this chapter, I focus on Bangladesh, its international business cooperation and the business environment. Then I illustrate deeply about Bangladesh RMG sector, development and post effect of Bangladesh RMG sector after phase out MFA. In the end of this chapter, I tried to provide an example organization which practicing supply chain in the RMG sector.
Overview of Bangladesh
Bangladesh is an independent and sovereign Republic known as the Peoples Republic of Bangladesh. The country emerged as an independent state on March 26, 1971.
Figure : Map of Bangladesh
Geographical Location: Between 20°34' and 26°38' north latitude 88°01' and 92°41' east longitude.
Boundary: North: India, West: India, South: Bay of Bengal, East: India and Myanmar
Area: 56977 SQ. Miles or 147570 SQ. KM
Territorial water: boundary12 Nautical Miles
Official Name: Peoples Republic of Bangladesh
Capital City: Dhaka
Major Administrative Units: Dhaka, Chittagong, Khulna, Rajshahi, Mymensingh, Comilla, Barisal, Sylhet
Standard Time: GMT+6.00 Hours.
Language: State language Bangla. Second language English
Demography: Population: 141.34 million, Annual Growth rate: 1.48%, Density: 928 per sq. km, Religion: Muslim 88.3%, Hindu 10.5%, Buddhist 0.6%, Christian 0.3%. Secularism is ensured constitutionally.
Climate: Sub-tropical. Three main seasons: Winter
(November-February), Summer (March June), Monsoon (July - October). Climatic variations: Winter temperature average maximum 29°C, Winter temperature average minimum 11°C, Summer temperature average maximum 34°C, Summer temperature average minimum 21°C, Monsoon average rainfall 1194 mm to 3454 mm.
Topography: Over 85% of the country is flat, alluvial and plain.
Principal rivers: Padma, Meghna, Jamuna, Brahmaputra, Teesta, Surma and Karnaphuli (Total 230 rivers including tributaries).
Economy: Agriculture Based.
Principal Industries: Jute & cotton textiles, garment making, tea processing paper, newsprint, cement, chemical fertilizers, light engineering, sugar.
Principal Minerals: Natural gas, lignite coal, limestone, ceramic clay and glass sand.
Principal Exports: Ready made garments, raw jute, jute manufacturers, tea, fish, hides and skins, newsprint.
Road Transportation: Road transportation facility with quality transport and reasonable fare. Bridges on almost all of the major rivers. The bridge over Jamuna (4.8 km) is the 8th longest bridge of the world.
Sea: Chittagong and Mongla
Inland River: Dhaka, Chandpur, Barisal, Khulna, Baghabari, Sirajganj, Sharishabari, Narayanganj, Bhairab Bazar, Ashuganj.
International: Dhaka, Chittagong and Sylhet
Domestic: Dhaka, Chittagong, Jessore, Ishwardi, Sylhet, Comilla, Cox's Bazar, Thakurgaon, Syedpur, Rajshahi and Barisal.
2. AN OVERVIEW OF THE BANGLADESH READY-MADE
time line and development of Bangladesh RMG sector
The ready-made garment (RMG) industry of Bangladesh started in the late 1970s and became a prominent player in the economy within a short period of time. The industry has contributed to export earnings, foreign exchange earnings, employment creation, poverty alleviation and the empowerment of women.The export-quota system and the availability of cheap labour are the two main reasons behind the success of the industry. In the 1980s, the RMG industry of Bangladesh was concentrated mainly in manufacturing and exporting woven products. Since theearly 1990s, the knit section of the industry has started to expand. Shirts, T-shirts, trousers, sweaters and jackets are the main products manufactured and exported by the industry. Bangladesh exports its RMG products mainly to the United States of America and the European Union. These two destinations account for more than a 90 per cent share of the country's total earnings from garment exports. The country has achieved some product diversification in both the United States and the European Union. Recently, the country has achieved some level of product upgrading in the European Union, but not to a significant extent in the United States. Bangladesh is less competitive compared with China or India in the United States and it is somewhat competitive in the European Union. The phase-out of the export-quota system from the beginning of 2005 has raised the competitiveness issue of the Bangladesh RMG industry as a top priority topic. The most important task for the industry is to reduce the lead time of garment manufacturing. The improvement of deep-level competitiveness through a reduction in total "production and distribution" time will improve surface-level competitiveness by reducing lead time. Such a strategy is important for long-term stable development of the industry, but its implementation will take time. In contrast, the establishment of a central or common bonded warehouse will improve surface-level competitiveness by reducing lead time, but deep-level competitiveness will not be improved and long-term industry development will be delayed. Therefore, granting permission to establish in the private sector such warehouses with special incentives, such as the duty-free import of raw materials usable in the export-oriented garment industry for reducing the lead time in garment manufacturing, is a critical issue for Bangladesh. Second, Bangladesh needs to improve the factory working environment and various social issues related to the RMG industry. International buyers are very particular about compliance with codes of conduct. Third, issues related to product and market diversification as well as upgrading products need to be addressed with special care. Moreover, the Government of Bangladesh needs to strengthen its support. The development of the port and other physical infrastructure, the smooth supply of utilities, a corruption-free business environment and political stability are some priority concerns for the Government to consider in its efforts to attract international buyers and investors.
The RMG industry of Bangladesh has expanded dramatically over the last three decades. Traditionally, the jute industry dominated the industrial sector of the country until the 1970s. Since the early 1980s, the RMG industry has emerged as an important player in the economy of the country and has gradually replaced the jute industry.
2. AN OVERVIEW OF THE BANGLADESH READY-MADE
The RMG industry is the only multi-billion-dollar manufacturing and export industry in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country's total export earnings in 1976, its share increased to about 75 per cent of those earnings in 2005. Bangladesh exported garments worth the equivalent of $6.9 billion in 2005, which was about 2.5 per cent of the global total value ($276 billion) of garment exports. The country's RMG industry grew by more than 15 per cent per annum on average during the last 15 years. The foreign exchange earnings and employment generation of the RMG sector have been increasing at double-digit rates from year to year. Some important issues related to the RMG industry of Bangladesh are noted in table 1.4 currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 per cent of those firms are locally owned with the exception of a few foreign firms located in export processing zones (Gonzales, 2002). The RMG firms are located mainly in three main cities: the capital city Dhaka, the port city Chittagong and the industrial city Narayangonj. Bangladesh RMG firms vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association (BGMEA) data, Mainuddin (2000) found that in 1997 more than 75 per cent of the firms employed a maximum of 400 employees each. Garment companies in Bangladesh form formal or informal groups. The grouping helps to share manufacturing activities, to diversify risks; horizontal as well as vertical coordination can be easily found in such group activities. Ready-made garments manufactured in Bangladesh are divided mainly into two broad categories: woven and knit products. Shirts, T-shirts and trousers are the main woven products and undergarments, socks, stockings, T-shirts, sweaters and other casual and soft garments are the main knit products. Woven garment products still dominate the garment export earnings of the country. The share of knit garment products has been increasing since the early 1990s; such products currently account for more than 40 per cent of the country's total RMG export earnings (BGMEA website). Although various types of garments are manufactured in the country, only a few categories, such as shirts, T-shirts, trousers, jackets and sweaters, constitute the major production-share (BGMEA website; and Nath, 2001). Economies of scale for large-scale production and export-quota holdings in the corresponding categories are the principal reasons for such a narrow product concentration.
Post and pre effect of MFA on Bangladeshi RMG sector and Why Bangladesh needs backward linkage in textile and RMG sector?
( from RM literature review)
Backward linkage to Clothing export of Bangladesh:
In This section I am trying to give a general idea about the prospect of establishing the backward linkage industries in the textile and clothing of Bangladesh. Moreover, I also tried to relate backward linkage with the different pertinent factor of supply chain management. In the later stage ,I would incorporate concepts of backward linkage in the textile industries ,compatibility of standard theory of Bangladesh textile and clothing sector with specific example, different vertical stages of the chain ,examining the horizontal factors linked to every stage in the sector, related backward issue in general , sorting out the possible steps to be taken at every such stage.
Concept of Backward linkage and Forward Linkage.
Dr. Carole E Scott1 presents an excellent definition of forward and backward linkage in his article "Economic Growth"
Linkage refers to the economic connection between a firms operations and other sector of the economy. It is called a forward linkage when a firms output is used as an input by the other firms , so by providing necessary inputs , its existence creates an opportunity for entrepreneurs to creates firms in downstream industries. A company demonstrate backward integration when it controls subsidiaries that produce some of the inputs used in the production of its products. For example, an automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product.
(Diagram of Backward and forward linkage)
Downward supply chain in the RMG sector of Bangladesh
Downward Supply Chain in RMG sector of Bangladesh
Raw material sourcing is one of the three most important factors for RMG business in anywhere in the world. These are: raw material sourcing, production and delivery to the buyer. As Bangladesh is a developing country with comparatively low economic resources we do not have a strong backward linkage in terms of RMG sector despite a unanimous consent of its importance for Bangladesh. Recent investments are only satisfying a small portion of the huge demand in backward linkage support for RMG industry. Due to shortage in our economic and physical resource Bangladesh mostly depends on China for the raw material support. For cotton import Bangladesh depends on Africa, USA, Brazil and Middle Asia. Detail aspects of raw material sourcing in RMG sector of Bangladesh is given below:
For garments business cotton is the first raw material in the production chain. Cotton produced in Bangladesh is not suitable for mass production of quality RMG product. This is because local cotton's fiber length is very short and its production quantity is very low. Based on this, almost 100% of the export oriented factories import cotton from outside. Most common sources of cotton for Bangladesh are: China, USA, African countries, Uzbekistan, Turkmenistan, Kazakhstan, Brazil, India, Pakistan etc.
International cotton price is quite unstable and requires long term planning, investment and hedging like the oil market. There are also some international politics in action in the cotton business of the world. After the recession price of cotton has increased recently and it squeezed the profit margin of the textile owners of Bangladesh. The recent price hike was mainly because of China and India's sudden increase in demand and comparatively lower international production. Another problem for Bangladesh was the ban on cotton export in India by their government which resulted in supply shortage in local market as Bangladesh is significantly dependant on Indian cotton supply.
The increasing disfavor against cotton of mid Asian countries like Uzbekistan, Turkmenistan, Kazakhstan (CIS cotton) is also negative factor for Bangladesh. This is because textiles from Bangladesh prefer CIS cotton as the quality of cotton from those countries is very good and the price is comparatively lower than other areas. But USA and European buyers are now trying to avoid CIS product because of the campaign against use of child labor and forced labor in CIS countries. So now we are now buying from USA and Africa where the price is higher compared to the quality of the cotton.
To make over the cotton sourcing problem textiles of Bangladesh should focus on Brazil and also Africa. They also should make a favorable deal with Fair Trade organization for lower price and quota facility on USA cotton. Long term planning on cotton purchase is also a necessity by now.
Yarn and Thread
Yarn and thread are the second step in garments production step. These are produced in spinning mills from cotton and synthetic fibers. Yarn is what used to make the fabric through knitting process. Thread is the specialized yarn for sewing the fabric to make the garments. Both thread and yarn can be of different components. There can be pure cotton, polyester etc. or can be mixed like 60% cotton and 40% polyester.
Spinning mills in Bangladesh are totally dependent on cotton import from abroad. The total production of yarn and thread in Bangladesh is not sufficient enough to fulfill the need of RMG sector of Bangladesh. Bangladesh especially lacks the production of specialized thread and synthetic yarn like lycra. These are mainly imported from China.
Fabric (Knitting and Weaving)
Fabric making process for knit and woven fabric is a bit different which needs different machines, process and different quality yarn. Bangladesh can produce all types of knit fabric needed for the country's export. But we have to import huge amount of woven (shirt) fabric because yarn supply is not capable of meeting the demand in Bangladesh. Quite often we see that the quality of woven fabric (shirt) of Bangladesh is not good enough to meet the buyer's standard. So most of the woven (shirt) factories of Bangladesh now have to import woven fabric from the buyer nominated factories for quality and design. These nominated woven fabric factories are mainly operating in China.
To add values here, Bangladesh needs to invest sparingly in woven fabric factories which actually need more investment than a knit fabric factory. The quality problem has to be solved through better quality cotton and thus better yarn.
After the fabric is made it is dyed according to the garments requirement. Often it is just washed to make the color of the fabric lasting. In many cases fabric does not need dyeing since the yarn used to make the fabric was dyed before.
After the dyeing process is completed the fabric is sent to the garments where is cut according to the requirement s of the particular garment.
After cutting the fabric as per the plan parts of body fabric where the printing and embroidery should be done are sent to the printing and embroidery units for finishing those processes. There are different types of printing which use different method and media for the process and need different time and finishing process. Both printing and embroidery process are done before the garment is sewed.
Before the printing and embroidery process are done all the supporting accessories have to be in-housed in the store of the garments factory. The most common accessories are:
Management of accessories is a crucial part for the production of garments and most of the time the source of delay and other problems for the factory.
Downward Supply Chain flow chart for a knit garments factory
Example of a Company who are using downward supply chain management:
The core business unit of Viyellatex Group is Viyellatex Garments Limited which is a knit apparel manufacturing factory. There are separate units for yarn, fabric & accessories as well as printing and woven garments. Viyellatex has recently diversified its business through entering in a new sector last year. It has acquired a tea garden and started selling tea. The group is also planning to expand into ship building in the near future and thus will contribute more to the national economy.
Generally the organization operates mainly in RMG sector of Bangladesh. It has presence in backward linkage of RMG such as yarn production (spinning), fabrication (knitting), Dyeing, Embroidery, Printing and Accessories sector. Viyellatex's forward linkage facility includes Washing and Logistics Management Services which is a new extension of business for the company with a lucrative business aspect.
By 14 years this organization has become a US $290 million revenue earning group of companies in Bangladesh with growth rate around 33% this year. Viyellatex now employs more than 13,000 people in its eight units and maintains a congenial relationship with its workers through best compliant environment in the industry concentrating on long term safety and welfare of the employees. It pays 20% higher salary than the RMG industry standard and government regulation and thus helps the workers to have a better lifestyle. Moreover, annual profit sharing scheme with the workers is also put into action and thus the organization celebrates its success with the workers and makes them feel like owners of the company. As a compliant factory, free lunch is provided for all the employees of the group. Viyellatex also spends significant amount of money on worker training and motivation programs. Hence a congenial relationship is maintained with the workers promoting an excellent work environment.
This RMG concentrated organization has a market share of 0.78% in knit export and 0.42% in woven export of Bangladesh. So from a volume perspective Viyellatex's contribution is very low in the RMG export of Bangladesh. But from other perspectives like product quality, product price, buyer category, work environment, compliance policy, technology integration etc. Viyellatex is considered one of the front runners in RMG sector of Bangladesh.
Units of Viyellatex Group
Viyellatex Group has seven textile related SBUs as follows:
Viyellatex Garments Ltd.
The core strategic business unit of Viyellatex Group is the garments unit. Its main product is basic knit wear with other knit garments. Production capacity of this unit is 2 million units of readymade garments every month with full in-house embellishment support.
Departments of Viyellatex Garments
Unlike other traditional readymade garments manufacturing companies, the departments are differently devised. This is because of the use of SAP which defines the traditional "merchandising department" to be split up into three separate departments called the "Sales and Distribution (SD)", "Materials Management (MM)" and "Production & Planning (PP)". However, these three departments are required to work closely in accordance with the specific buyer in order to perform their duties. Thus it forms a matrix and ensures proper collaboration among the departments. Hence, for comparison purpose, these three departments will be referred to as the merchandising department in this report.
Sales and Distribution (SD)
The sales and distribution department is responsible for communicating with the buyer about the orders being placed. They negotiate the prices of the orders. They also are responsible following up on the production process and keeping the buyer updated. Lastly, they ask the commercial department to book containers for the shipment of finished products.
Materials Management (MM)
The materials management department books all the raw materials needed for a specific order. It takes up from SD and makes sure everything is ready and in place for production. For this reason MM needs to work in close collaboration with SD in order to ensure that the raw materials are in house on time for production to start so that shipment of the finished products can be made on time.
Production Planning (PP)
The planning team works alongside the MM team to come up with the production schedule and allocates sewing lines for the specific order. Thus it helps the production to be done on time for the scheduled delivery.
The quality assurance team has a hard work to do. It has to ensure that every piece of garment to be shipped is checked for quality. This is really important as all the buyers are very concerned about the quality of the finished garments.
Quality and Efficiency
Viyellatex emphasizes upon quality product and timely delivery. It also focuses on minimal use of raw materials for production. Viyellatex uses raw material from the best suppliers in the market, employs best workers in the country with 20% higher salary and uses best machines for smooth operation. To enhance efficiency and timeliness Viyellatex has integrated various software in its operational levels. It is also the first readymade garments manufacturer to implement SAP (ERP software) in a large scale. Some of the important software used in Viyellatex's operation are:
Garments SMV and line layout
Dyeing unit management
Human Resource Management
SAP is used all over the group. Use of other software in the different departments is given below.
Figure 4: Organizational chart for the different software uses in Viyellatex Group