vii

READYMADE GARMENTS(RMG)

INDUSTRY OF BANGLADESH BASED ON A (2014) STUDY OVER INTERNET

11/5/2014

ii

Report On

READYMADE GARMENTS (RMG)

INDUSTRY OF BANGLADESH

BASED ON A (2014) STUDY OVER INTERNET

Prepared for

Arafat Rahman

Assistant professor

IBA-JU

Prepared by

S.M. Aminul Haque

ID-1814

IBA-JU (23rd batch)

Submission on: November 5, 2014

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iv

Letter of Transmittal

November 5, 2014

Arafat Rahman

Course Instructor, BUS-104

Institute of Business Administration Jahangirnagar University.

Dear Sir,

In attachment please find the precise report on the “Readymade garments industry of

Bangladesh: Based on a (2014) study over internet” that you proposed us to prepare as one of the requirements for our Business Communication course. The report has been prepared focusing on readymade garments industry of Bangladesh, its contribution, limitation

and possibility. The report is furnished with several recommendations that are recommended to be incorporated to make the industry more efficient.

I am thankfully acknowledging my satisfaction that you have chosen myself to submit the report.

In presenting this report, i have tried my level best to include the relevant information and to make the report informative and comprehensive. It was very inspiring and encouraging for me to get involved in preparing this report as it has given us a scope to have an in-depth review

to get relevant information about the garments industry. My report writing skills have also improved significantly while preparing this report.

Please feel free to call me for further clarifications regarding this report if required. Yours sincerely,

S.M. Aminul Haque ID: 1814

IBA-JU (23rd Batch)

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ACKNOWLEDGEMENT

A lot of efforts and study was made to bring this report to a reality. This would not have been

possible without the selfless support and assistance provided by the people whom I

approached during the various stages of writing this report. Although space and time

prevented me to mention all their names, I am nevertheless thankful and grateful for their

help.

I would like to thank Arafat Rahman for assigning us and giving me the opportunity to work on

such an interesting topic. This has provided me with the chance of working with realistic

aspects, which helped me to acquire clear insights about the subject knowledge and practical

issues of the readymade garments industry.

Last but not the least; I am thankful to the IBA seminar library authority and all my classmates

for continuous support, assistance, and inspiration.

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TABLE OF CONTENTS

Sl Title Page No.

Chapter1

Executive Summary viii

1.1 Introduction 1

1.2 Origin of the report 1

1.3 Scope of the Report 1 1.4 Objective of the Report 1

1.5 Methodology 1

1.6 Limitation 1

1.7 Acronyms 1

Chapter2

2.1 Literature review of RMG sector of Bangladesh 2

2.2 Overview of RMG industry of Bangladesh 2

2.2.0 System of production 3

2.2.1 Management system 3

2.2.2 Major competitors 4

2.2.3 Impact on society 5

Chapter 3

3.1 Prospect In Bangladesh 7

3.1.0 Export performance 7

3.1.1 Contribution to economy 8

3.1.2 Contribution to GDP 8

3.1.3 Reasons behind success 9

3.1.4 Opportunities 9

3.1.5 Future prospect 9

3.1.6 RMG vs other sectors 9

Chapter 4

4.1 Problems of RMG Sector in Bangladesh 10

Chapter 5

5.1 Recommendation 11

5.1.0 Enhancing workforce 11

5.1.1 Economic and political stability 11

5.1.2 Infrastructure and Communication Development 11

5.1.3 Improvement of product quality 11

5.1.4 Online Marketing 11

Chapter 6

Conclusion 12

Reference 12

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LIST OF ILLUSTRATES

LIST OF TABLES

TITLE OF TABLES:

1.Bangladesh vs Vietnam in export performance…………………………………………………………………5

2.Export performance of Bangladesh (last three financ ial year)…………………………………………..7

LIST OF FIGURES

TITLE OF FIGURES

1.production process……………………………………………………………………………………………………………..3

2.Urbanization level of Bangladesh………………………………………………………………………………………..6

3.RMG export performance of total export…………………………………………………………………………… .8

4.GDP performance for last five years…………………………………………………………………………………... .8

5. RMG vs other sectors contribution…………………………………………………………………………………….10

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EXECUTIVE SUMMARY

The macro economic performance of Bangladesh is heavily dependent on its Readymade

Garment (RMG) manufacturing sector. After the failure of jute sector, the demand of RMG

has dramatically risen. The RMG sector alone does export worth $21.5 billion a year, which is

79 percent of the total export earnings of our country.

Currently some of the leading companies of Bangladesh in garments sector are Ha-Meem

groups, Squire fashion limited, Mohammadi group,Habib group ltd etc. They have some

common departments for smooth functioning their production.

RMG has a tremendous effect in our society. Women empowerment has established and

increased, job sources has been created, population growth rate has been fallen but it has

also promoted child labor.

RMG has improved the economic sectors like agricultural, industry as well as GDP of

Bangladesh. More jobs have been created. More people have been employed and has also

developed the GDP of the country.

The fact that the RMG sector has responded to calls for taking initiatives to improve the

wellbeing of its workers by means of opening up health and recreational facilities is helping to

improve its image as a responsible sector to foreign buyers. It is not only the Scandinavians

who have faith in Bangladesh's potential to become the country of choice for sourcing

different types of garments but also other big guns like USA have facilitated our RMG sector.

Bangladeshi RMG is growing in a vast way. Expanding RMG sector has to face some

competitors.one of the major competitors is Vietnam which is proved a challenging competitor

for our RMG sector.

There are some reasons lying behind our RMG sector’s success. Flexible labor market law,

availability of raw materials, price competitiveness are one of them.

But some of the problems are slowing down our RMG sectors growth just like infrastructure,

political instability, poor transportation system etc.

Here are some personal recommendation for the well growth of RMG sector and eradicating

its problem:

Provide structured in-house training for workers and managers.

Ensure fair wages and incentive schemes.

The long term partnership should be established between the suppliers and buyers.

Investment in education requires broad initiatives.

Page | 1

CHAPTER-1

1.1 INTRODUCTION:

Readymade garments sector is very popular and prospective business among microfinance

sector. RMG sector in Bangladesh is based on different manufacturing units and mostly

located in industrial areas, operated by the workforce. Total number of workforce associated

with the industry stands approximately over 4 millions working in more than 4500 garments.

1.2 ORIGIN OF THE REPORT:

The purpose of this report is to familiarize students with the basic issues of “READYMADE

GARMENTS OF BANGLADESH”. Arafat Rahman, Assistant professor, Institute of Business

Administration, Jahangirnagar University authorized it, on October 15, 2014 and it is

supposed to be submitted on November 5, 2014.

1.3 SCOPE OF THE REPORT:

The report describes about the present situation of Readymade garments industry of

Bangladesh and the future prospects and opportunities available in this sector.

1.4 OBJECTIVE OF THE REPORT:

To be familiar with readymade garments sector.

Impact of RMG in Bangladesh

Contribution of RMG in economic sector

prospect of RMG

Problems regarding this sector

Problem solving way

1.5 METHODOLOGY:

This report is based on secondary data. All data have been collected from internet

1.6 LIMITATION:

Time constraints

Lack of prior experience

Unavailability of data over internet

1.7 ACRONYMS:

1. FY= Fiscal Year. 2. BGMEA= Bangladesh Garment Manufacturers and Exporters

Association. 3. RMG= Ready-Made Garments.

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CHAPTER-2

2.1 Literature review of RMG sector of Bangladesh:

Ready Made Garments(RMG) are mass-produced finished textile products of the clothing

industry. Some common types of RMG are shirt, pant, sweaters ,T-shirt etc. Origin of the

RMG was after 1970 after the decreasing demand of jute industry . It took decades to stand

itself as the leading profit making sector of our country. Today with many public and private

organizers are giving the technological and other facilities for the this sector as a result it is

becoming strong and has shaped thus today.

There are two types of process for producing RMG in our country. They are Knitted and

woven. Among them Knitted is mostly used. Every year RMG earns the most of our

economy. BGMEA is formed for the welfare and maintenance of RMG.

2.2 Overview of RMG industry of Bangladesh:

RMG sector in Bangladesh is comprises with large manufacturing units. It is located in

industrial areas operated by large workforce along with technique for producing goods in

Garments industry complex . The number of workforce associated with the industry stands

about four millions. There are various types of products from RMG.

His torical ly Bangladesh focused on producing Woven garments but in recent times

Bangladesh is more successful in Knitwear production . Bangladesh is exporting its RMG in

most of the economic developed country. Many foreign buyers come to Bangladesh for

buying its products. Bangladesh exports its RMG in many international brands like H&M,

C&A, GAP, UNIQLO, M&S, Wal-Mart etc. exported RMG products are:

Shirts

Pants

Sweaters

Jeans

T-shirts

Blazers

T-shirts & Polo shirts

Tank tops,

Pajamas,

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Sport wear,

Under garments,

Men’s & Ladies fashion wear

Kids wear

Leading RMG companies of our country are:

Ha-Meem groups

Squire Fashion Limited

Apparel Fashion BD

Mohammadi Group

Habib Group ltd

FORTUNE GARMENTS LTD.

FRIENDS WORLD KNITWEARS LTD.

A & H ENTERPRISES LTD.

3A GARMENTS & HOSIERY (PVT.) LTD.

A J FASHIONS LTD.

2.2.0 System of production:

RMG products are of two major types: Knit garments and Woven garments. Firstly, natural or man-made fabrics

are transformed into yarn through spinning process. Then they are converted woven or knitted fabrics by the

virtue of weaving or knitting process. After that, through cutting and sewing process, garments products are

made. Here is an i l lus t rat ion showing the product ion process:

Figure 1:Production process of apparel or garments

Source: http://www.fairbd.net/Details.php?Id=524

2.2.1 Management system:

Management system of most of our garments are:

Merchandising department:

The term merchandising defines as buying and selling of products. However, there is a

specific meaning for garments merchandising which means buying raw materials and

accessories, producing garments, maintaining required quality level and exporting the

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garments within scheduled time (Nickels, J. M. McHugh; 1986). This department performs a

very significant role in satisfying customers by delivering specified goods of specified quality

on designated date and time.

Supply chain department:

The supply chain department mainly involves in procurement of raw materials, equipment,

design, and distribute among the stakeholders related to production and distribution channel.

Commercial Department:

The commercial department is responsible for maintain of business relationship with the

buyers, buying agents, banks, suppliers. This department performs significant role in handling

following documentations relating to import and export performance;

Production department:

The production department is the key department that ensures the quality, consistency,

design and time bound full production of garments and knit wear products (Nickels et al.).

There are several sub departments under this section that involve in making finish products

starting from cutting of fabrics and stitching of dress

Compliance department:

This department fulfill the rules and procedures for better ways to protect the health, safety,

and fundamental rights of the employees. Also create congenial environment in which they

operate. In general, compliance conforms the rule, such as a specification, policy, standard or

laws (Kotler & Armstrong, 2006). Regulatory compliance describes the goal that corporations

or public agencies aims to in their efforts to ensure that personnel are aware of and take

steps to comply with relevant laws and regulations.

Human resource management:

The term human resource management refers to the process of human resource needs and

then recruiting,selecting,developing,motivating,evaluating,compensating, and scheduling

employees to achieve organizational goals (Nickels, J. M. McHugh; 1986).

2.2.2 Major competitors:

Bangladesh RMG sector is facing tough competition from china, India and Vietnam.

Vietnamese garments companies are strengthening their business in markets, putting more

pressure on the Bangladeshi garments sector. Garment exports from Bangladesh was

12.69 percent to $21.51 billion in 2012-13 from the previous year, on the other hand it was

6.97 percent to $19.9 billion in 2011-12 from 2010-11, according to BGMEA analysis.

Bangladeshi exported garment items worth $17.91 billion in 2010-11 and $12.5 billion in the

year . Now , the number of garment factories in Bangladesh is 5,000 and 2,000 in Vietnam,

according to the McKinsey report.

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Table 1:Bangladesh vs Vietnam as export competitor

Source: http://archive.thedailystar.net/beta2/news/vietnam-a-close-competitor-to-

bangladesh-rmg/

2.2.3 Impact on society:

RMG has changed Bangladeshi society, changed the workplace condition.in the past men

were the mostly worker but with the rise of garments industry the situation has changed

reversely. In RMG sectors, not men, women are the major participants.80% of the garments

workers are women.

WOMEN EMPOWERMENT:

The garment sector is the largest employer of women in Bangladesh. [3] The garment sector

has provided employment opportunities to women from the rural areas that previously did not

have any opportunity to be part of the formal workforce.

CHILD LABOR:

The bitter fact is the rate of success in the RMG sector has also resulted in the worst form of

child labor in many factories, especially in the non-compliant ones. In cases, it assumes the

form of even bonded labor.

STADARD OF LIVING:

RMG has dramatically increased the standard of living in Bangladesh. People with low

income are improving their condition with the money they earn. Though their money is not

sufficient enough but have been able to increase their standard of living.

EDUCATION GROWTH:

Educational rate has been risen as an impact of RMG in society. Garments worker are mostly

women. So, they don’t get enough time to look after their child. As a reason, they get their

children admitted into school. Another reason is improved financial condition of garments

worker.

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URBANIZATION:

A statistical report says that In 1985, urbanization level in Bangladesh was only 13.4% while

it is expected to be dramatically risen 37.3% in 2025.This statistical report proves that RMG

has a sweeping effect for the urbanization in Bangladesh. By urbanization, there has been

major changes in our country.

Figure 2: Urbanization level of Bangladesh

Source:http://ww2.unhabitat.org/habrdd/conditions/socentasia/banglade.htm

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CHAPTER-3

3.1 prospect in Bangladesh:

Prospect of RMG in Bangladesh is facilitated by diversified and supportive retails. They are

given below:

3.1.0 Export performance:

RMG has a significant effect on Bangladeshi export .In 1983 the export was

31.57million $(USD) where total export of Bangladesh was 811 million $(USD), with the

passage of time the export performance of RMG has been grown.in 2013-2014 year, the

money coming from export sector is 24491.88 $(USD) from the total money of

30186.62$(usd) which was the rate of 81.13 %of the total income of the country in export

sight. From the analysis we can simply understand how important RMG sector is in our export

sector. Here is a relevant data as a document of this rising sector :

year Export of

rmg(in

million

US$)

Total export of

Bangladesh(in

million US$)

% of RMG

to total

export

2011-12 19089.69 24287.66 78.60

2012-13 21515.73 27027.36 79.61

2013-14 24491.88 30186.62 81.13

Table 2:Export performance of Bangladesh(last three years)

Source: http://bgmea.com.bd/home/pages/TradeInformation#.VFIPT_Bepd1

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Figure 3:RMG export performance of total export

Source: http://textilelearner.blogspot.com/2014/07/rmg-leading-earning-sector-in-

bangladesh.html#ixzz3Hd759pCW

3.1.1 CONTRIBUTION TO ECONOMY:

The sector contributes 38% of industrial value addition.

It earns about 78% of total export earnings.

It has approximately 4.5 million workforce of which women are the major individuals.

Creates long cliental base for Banking, Insurance etc sectors.

Provides indirect employment for 0.80 million workforces.

Provides 0.2 millions job for waste recycle industry.

3.1.2 CONTRIBUTION TO GDP:

RMG has improved the economic sectors like agricultural, industry as well as GDP of

Bangladesh. More jobs have been created. More people have been employed .Here is a

graph showing the GDP improvement of Bangladesh:

Figure-4:GDP contribution for last five years

Source: http://www.slideshare.net/ShahriarRawshon/contribution-of-rmg-sector-in-economic-

growth-of-bd?related=2

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3.1.3 REASONS BEHIND SUCCESS:

Price Competitiveness

Flexible Labor Market Laws and Regulations

Easy access to skilled labor force

Lower labor and production cost

Strong & Expanding Backward Linkage especially in Cotton items

90% of domestic supply meet total fabric requirement and 75% of the total yarn

Requirement

3.1.4 Opportunities:

The garments business can be developed by ensuring proper use of the following

opportunities.

i) Rising demand and usages of national garments products in fashion industry.

ii) Development of sectors like retail that offers great requirements of garments products.

iii) Developing of domestic sector.

iv) E-commerce and Internet are emerged as promissory distributions channels to market and

sell the garments products.

3.1.5 Future prospect:

The garments industry in Bangladesh has grown in an unplanned manner and a critical

demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the

textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly.

Dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and

finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices.

3.1.6 RMG vs other sector:

RMG is far way ahead than other sectors. A pie chart shows the proof :

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Figure 5:RMG vs other sectors contribution

Source: http://textilefashionstudy.tumblr.com/page/4

CHAPTER-4

4.1 Problems of RMG in Bangladesh:

There are some problems regarding our RMG sector l ike,

Infrastructure:

Infrastructure is the largest issue that obstacles Bangladesh’s RMG industry.

The transportation problem, road congestion, gas scarcity, sea-port inefficiencies

create hurdle for RMG industry.

Government has planned to expand the Dhaka-Chittagong Highway and doubled the

train container capacity

Raw materials:

The dependency on imports are considered as major risks.

High price in raw materials and rapid fluctuation in the price level.

The lack of efficiencies and risk takers may hinder this approach.

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Economic and political instability:

Corruption is the main hurdle in BD.

High interest rates is an obstacle to invest in RMG sector.

Political unrest and strikes are the highest risks in sourcing from Bangladesh.

Governmental intervention may cause political instability

Low wage:

Low wage lessens the productivity of the worker.

Workers are focusing to work more on the overseas country. As a result we are losing

skilled worker.

CHAPTER-5

5.1 RECOMMENDATION:

Some advices for improving our RMG sectors are:

5.1.0 Enhancing workforce:

workers must be trained in order to get better result.

5.1.1 Economic and political stability:

Economic and political stability must be brought for the success of RMG industry.

5.1.2 Infrastructure and Communication Development:

Infrastructure and communication should be developed. Because of it not only handicraft

industry but also other small industries are getting affected. If the communication system can

be developed then the products of rural handicrafts can reach cities and go beyond our

country.

5.1.3 Improvement of product quality:

High quality but affordable products must be produced in order to rule overseas and national

market .

5.1.4 Online Marketing:

Now a days is all about digitalization. People are getting familiar with online .they are

spending much time on the virtual world. So online marketing has become a weapon for the

businessman’s. they are selling and displaying their products in online. Again people are

taking it as a buying source. Now days people want to buy from online stores. So handicraft

products must be marketed online. Because by online marketing products get maximum

promotion. And so people will trend to buy this things. Again by online market ing we can

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display this kind of products to outside world also. Many leading brands tend to find products

online. Thus our handicraft products can get international value.

CHAPTER-6

Conclusion:

In our country the readymade garments area unit primarily regulated by non-technical

persons having little technical data and there is no involvement of textile Engineers (thus

development and quality product is kind of impossible). The employees are primarily unskilled

ladies and youngsters who can develop this sector as a good earning sector to contribute to

our economic system by developing manpower ability. Finally it ought to be useful introduce

our tradition or culture to the world. Efforts area unit a foot through shut collaboration of public

and personal sectors toward product promotion diversification and export selling. However,

there is still the necessity for intensification of efforts at the degree of production and selling

as well as style innovation and adaptation. Our exporters of handicrafts ought to bear in mind

that while creation of export market may be a lot of challenging one obsessed on regular

provides, quality assurance and last however not the smallest amount fulfillment’s of the

patron check and preferences.

References:

1) Kotler P. & Armstrong G. (2006), Principles of marketing, Prentice-Hall of India, New Delhi.

2)Nickels, J.M. McHugh & S.M. McHugh (1986), Understanding Business, (9th ed.), Chap – 9,

Productions & Operations Management. New York: McGraw-Hill Co.

3)Nickels, J.M. McHugh & S.M. McHugh (1986), Understanding Business, (9th ed.), Chap – 11,

Human Resource Management. New York: McGraw-Hill Co.

4) Vietnam-a-close-competitor-to-bangladesh-rmg (2013,October 13):The Daily Star. Retrieved from

http://archive.thedailystar.net/beta2/news/vietnam-a-close-competitor-to-bangladesh-rmg/

5) http://www.fairbd.net/Details.php?Id=524,Retrieved-28/10/2014

6) http://ww2.unhabitat.org/habrdd/conditions/socentasia/banglade.htm,Retrived -28/10/2014

7) http://bgmea.com.bd/home/pages/TradeInformation#.VFIPT_Bepd1,Retrieved -29/10/2014

8) http://textilelearner.blogspot.com/2014/07/rmg-leading-earning-sector-in-

bangladesh.html#ixzz3Hd759pCW,Retrived-29/10/2014

9)

http://www.slideshare.net/ShahriarRawshon/contribution-of-rmg-sector-in-economic-growth-of-

bd?related=2

10) http://textilefashionstudy.tumblr.com/page/4,Retrieved -29/10/2014