Unravelling the ready-made garments industry in Bangladesh

For decades, China reigned supreme as the ultimate destination for apparel sourcing. Its low per-unit apparel costs, highly skilled workforce, and vertically integrated supply chains made it an unrivalled powerhouse. As a matter of fact, China's dominance was so profound that it accounted for a substantial 40% of import volume in both European and US markets back in 2010, as per McKinsey reports. However, there's recently been a seismic shift in the industry landscape. 

Enter Bangladesh, the emerging contender poised to disrupt the status quo in the global ready-made garments industry.

What is the current state of the garment industry in Bangladesh?

According to reports by Nikkei Asia, Bangladesh now proudly claims the title of the world's second-largest ready-made garments (RMG) manufacturer and exporter. But this isn't merely an industrial sector; it's a dynamic force propelling Bangladesh's holistic development. In fact, the coveted "Made in Bangladesh" label has thrust the nation onto the international stage, transforming it into a prestigious global brand. 

Remarkably, despite grappling with resource limitations, Bangladesh has consistently achieved an impressive annual average GDP growth rate of around 5.47% to 7.25%. This transformation is intrinsically tied to the extraordinary strides made in social and human development, a narrative profoundly influenced by the RMG industry. 

Astonishingly, this sector now stands as Bangladesh's single largest export earner. As per provisional data released by the Export Promotion Bureau (EPB), it has brought in an astounding annual export revenue of over US$42.6 billion in the first eleven months of fiscal 2022-23. It even serves a vast clientele spanning more than 150 countries and collaborates with over a thousand retailers. In addition, this thriving industry plays a pivotal role, contributing a remarkable 82% to the country's total manufactured exports and providing employment to over 4.2 million individuals.

What are the types of RMG products made in Bangladesh?

Bangladesh's RMG sector boasts a diverse range of ready-made clothing exports catering to men, women, and children. This includes an array of products such as ready-to-wear shirts, jackets, formal pants, sweaters, and T-shirts, among others. Notably, T-shirts hold one of the top spots with an impressive export value of US$10.8 million in the fiscal year 2022-23, according to the export performance list by The Bangladesh Garment Manufacturers and Exporters Association (BGMEA). And in the same list, formal pants contributed significantly, with an export value of US$14.9 million.

With such a wide range of RMG products and impressive export figures, it raises the question: Why are businesses increasingly turning to Bangladesh for their clothing manufacturing needs?

Why are companies getting their clothes made in Bangladesh?

Given that Bangladesh has emerged as a formidable player in the global apparel manufacturing landscape, it has since secured partnerships with prestigious brands. Its factories are now the trusted production hubs for renowned brands such as Tommy Hilfiger, Gap, Calvin Klein, H&M, Giorgio Armani, Ralph Lauren, and Hugo Boss. 

This surge in confidence in Bangladeshi manufacturing prowess has led to a flurry of global retailers setting up their sourcing operations in the vibrant hub of Dhaka. This has made "Made in Bangladesh" labels a familiar sight across the fashion industry, as per reports by The Business Standard.

But what's the main driving force behind this trend, and why are global fashion giants increasingly turning to Bangladesh for the manufacturing of their garments and clothes?

The five main criteria: Price, quality, capacity, speed, and risk

For decades, European and US apparel buyers have been drawn to low-cost countries in the Far East, capitalising on decreasing purchasing prices and circumventing intermediaries. Their selection criteria have revolved around five key factors: price, quality, capacity, speed, and risk.

When it comes to Bangladesh, it stands out by excelling in these critical areas:

1. Competitive rates

One of the primary reasons behind Bangladesh's allure to global fashion giants is its competitive pricing. The country offers competitive rates and a robust manufacturing infrastructure, making it an ideal choice for cost-conscious companies. As a result, businesses can maintain healthy profit margins while delivering quality apparel to their customers.

2. High-quality standards

Manufacturers in Bangladesh also prioritise accountability. They understand the importance of meeting production deadlines and adhering to high-quality standards. This level of commitment ensures that companies can rely on Bangladeshi factories to consistently deliver on their promises.

3. More capital and human resources

Bangladesh's edge in the RMG manufacturing sector extends to the size of its firms, offering a distinctive competitive advantage. Larger manufacturing firms in the country typically boast greater capital and a more extensive pool of human resources. Moreover, their substantial size equips them with the capacity to absorb risks that might challenge smaller counterparts. On average, a Bangladeshi firm comprises a workforce of 797 employees, a figure significantly surpassing that of some rival nations like Vietnam (426 employees per firm) and China (269 employees per firm), according to the Journal of the Asia Pacific Economy. This ample workforce contributes to the country's robust manufacturing capabilities.

4. Reduced lead times

Bangladesh's apparel industry has embraced modern technologies and practices. This commitment to innovation has allowed manufacturers to streamline production processes, reduce lead times, and improve overall efficiency. The adoption of technology has made Bangladesh an attractive destination for companies seeking a competitive edge in the market.

5. Reduced risks

While maintaining acceptable quality levels, especially in value and entry-level mid-market products, Bangladesh also manages risk levels effectively through meticulous management.

Meeting the global RMG demand: a logistics perspective