Does Bangladesh Apparel Industry Ready to Reap the China Plus Opportunity?

We often discuss that there is a ‘China Plus Opportunity’ in the world apparel market as the Chinese are shifting from apparel to high-tech products. But how can we reap this opportunity? Are we walking on the right track at present? 

Let me first elaborate what the ‘China Plus Opportunity’ actually mean.  Low-cost manufacturing made China the second largest economy in the world. But rising labor costs, rapid socio-economic progress, and improvement of the people's living standard led the global giant to take its strategic policy of preferring capital-intensive industries. Made in China 2025 is a blueprint for Beijing’s plan to transform the country into a hi-tech powerhouse that dominates advanced industries like robotics, advanced information technology, aviation, and new energy vehicles. China’s transition is opening space for other countries where China dominated. China is still now the largest apparel exporter in the world occupying about 37 percent global apparel market share. For apparel, the top contenders to become the ‘Next China’ are Vietnam, Bangladesh, India, Indonesia, and Cambodia.

According to the 2017 McKinsey CPO survey, the three next largest apparel exporters -- Bangladesh, Vietnam, and India -- still lag far behind China.

Moreover, the “One Belt, One Road” initiative -- which involves infrastructure investments worth $2 trillion -- will give Chinese garment manufacturers fresh relevance. For example, new rail links will shorten transport times to Europe, and the initiative will increase China’s access to Africa’s growing consumer markets. As Chinese apparel manufacturers ramp up their outbound investment in countries such as Vietnam and Ethiopia, they may enhance their role in global apparel sourcing, producing on a larger scale beyond their home market.

Finally, the Chinese garment sector is leading the push for greater efficiency with adoption of digitization and automation. This will get further impetus by the Chinese government’s Made in China 2025 initiative, which puts a strong focus on automation.

As one participant at McKinsey’s 2016 Apparel Sourcing Roundtable put it: “Digitization will be the next sourcing country.” What that means is that retailers, brands, and sourcing professionals are moving away from just chasing the ‘lowest labor cost’ country as the most important sourcing decision criterion. There is an increasing need being felt to improve the overall efficiency and flexibility of the end-to-end process and take a more ‘customer-centric’ operating model.

Digitization of sourcing processes also ranks among the top three focus areas for almost half of the sourcing executives surveyed and 21 percent pinpointed it as their most important topic. It will be essential to enabling greater efficiency, flexibility, collaboration, and speed across apparel supply chains. Digitization can unlock progress go beyond replacing manual processes. For example, advanced analytics -- whether applied in capacity planning, country, and supplier selection, or spend intelligence -- will help achieve the right balance between speed, agility, and cost. Analytics can be a powerful tool to drive accurate decision making on batch size, volume flow, and replenishment sourcing based on real-time data from the demand and supply sides. If digitization takes place in close partnerships with suppliers, it can also enable automatic ordering and re-ordering. For compliance, environmental, and social sustainability, digitization can enable increased transparency from the factory floor -- including direct worker feedback and tracing materials from cradle to shop floor.

While the potential is exciting, there is a huge gap between the existing and the desired level of digitization maturity in Bangladesh apparel industry. The biggest barriers to overcome are legacy system architectures, interfaces with suppliers and data quality. This is not surprising, given the widespread use of e-mail and excel sheets in managing the apparel value chain, both with internal and external partners. Where more advanced tools are used, these are seldom integrated across product development stages, thus limiting their full potential. Another significant barrier we have is the lack of tech skills of our human resources. So, for Bangladesh reaping benefits from the ‘China Plus Opportunity’ will much depend on how we embrace technology and innovation within our apparel industry.

Mostafiz Uddin is the Founder & CEO of Bangladesh Apparel Exchange (BAE) and Bangladesh Denim Expo. He is the Managing Director of Denim Expert Limited. He can be reached at mostafiz@denimexpert.com.