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Insights of apparel supply chain operations: a

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322 Int. J. Integrated Supply Management, Vol. 5, No. 4, 2010

Insights of apparel supply chain operations:

a case study

Kamrul Ahsan*
Department of Management,
Faculty of Business and Law,
Auckland University of Technology,
Private Bag 92006, Auckland 1142, New Zealand
Email: kamrul.ahsan@aut.ac.nz
*Corresponding author

Abdullahil Azeem
Department of Industrial and Production Engineering,
Bangladesh University of Engineering and Technology,
Dhaka 1000, Bangladesh
Email: azeem@ipe.buet.ac.bd

Abstract: Considering the important role of apparel manufacturers within the

global chain, we conduct a research on the Bangladesh garments industry and
focus on several important supply chain operational issues. The objectives are
to analyse apparel supply chain matters such as new orders, raw materials
supply, production processes and logistics related to finished goods delivery.
We collect data for trade statistics, conduct structured interviews and send
survey questionnaires to garment manufacturers. Analysis shows apparel
manufacturers are striving for sustainable business growth. Manufacturers are
working towards minimising longer lead time and focus more on issues such as
environmental friendly manufacturing, child labour and health and safety in the
workplace. We identify related supply chain practices influencing the industry,
set guidelines for improvement and offer recommendations for sustainability.

Keywords: supply chain management; logistics; Bangladesh; apparel industry.

Reference to this paper should be made as follows: Ahsan, K. and Azeem, A.

(2010) Insights of apparel supply chain operations: a case study, Int. J.
Integrated Supply Management, Vol. 5, No. 4, pp.322343.

Biographical notes: Kamrul Ahsan is a Senior Lecturer of Management in

the Faculty of Business and Law, Auckland University of Technology,
New Zealand. He holds a PhD degree in Industrial Engineering and
Management from Tokyo Institute of Technology, Japan. His current research
interests include apparel supply chain, reverse logistics, project performance
analysis, project contract modelling, and healthcare system management. His
publications have appeared in peer-reviewed journals such as International
Journal of Project Management, International Transactions in Operational
Research, Asia Pacific Journal of Operational Research, Journal of Health
Management, International Journal of Industrial Engineering, and Japan
Industrial Management Journal.

Copyright 2010 Inderscience Enterprises Ltd.

 Insights of apparel supply chain operations 323

Abdullahil Azeem is an Associate Professor in the Department of Industrial

and Production Engineering in Bangladesh University of Engineering and
Technology, Bangladesh. He obtained his PhD degree from the University
of Western Ontario, Canada. His publications have appeared in many
peer-reviewed journals such as International Journal of Production Economics,
International Journal of Advanced Manufacturing Technology, International
Journal of Machine Tools and Manufacture, and International Journal of
Quality and Innovation. His research interests include supply chain
management, healthcare management, production management, and
manufacturing system.

1 Introduction

The apparel supply chain consists of a succession of processes from distribution of

raw materials, garments manufacturing, finished product distribution, to retailing. The
process is often relatively long with a number of parties involved (Jones, 2000). The
downstream or demand part of the chain consists of large, powerful high-street retailers
with multiple and often internationally located outlets (Stengg, 2001). Further back down
the chain on the upstream side, the manufacturing sector of the industry consists of large
numbers of small companies. Upstream or supply side is the most vulnerable part of
the chain and usually consists of raw material suppliers and fabric and garment
manufacturers, with the majority located in the developing part of the world.
The apparel industries in developed countries are experiencing increasing import
penetration in almost all apparel categories and most are from developing countries (Sen,
2008). To take advantage of reduced labour cost, outsourcing seems to be an unavoidable
trend for developed countries apparel manufacturers (Kim, 2003; Teng and Faramillo,
2006). These countries are outsourcing the apparel manufacturing to low labour cost
countries (Jin, 2004).
The apparel industry is mostly labour intensive and has been a major example where
developing countries have been able to significantly increase and diversify exports with
positive effects on income, employment and poverty (Brenton and Hoppe, 2007). It is the
typical starter industry for countries engaged in export-oriented industrialisation, and it
played the leading role in East Asias early export growth (Gereffi, 1999). However,
traditional apparel supplying countries (such as Taiwan, Hong Kong, Singapore and
Korea) are losing their market share as retailers seek cheaper and quality sources of
apparel production in countries like China, India, Pakistan, Indonesia, Vietnam and
Bangladesh. The international apparel market is also limited by international policies and
politics. For instance, since quotas were lifted in the beginning of 2005, China made
considerable gains in the US import market for jeans. In the same way, Bangladesh,
absent from the 2003 list of top suppliers, now appears on the current list (Weil, 2006).
Bangladesh, a South Asian country, has a GDP per capita of US$ 260.4. The apparel
sector is the number one export earning sector and comprises about 78% of total export
earnings for the country (BGMEA, 2009). Around 2.5 million people, 85% of them
women, work in this sector. In 1983, there were about 143 garment factories in the
country. By 2008, this number had jumped to around 4740. Exports have increased from
a meagre US$ 31.57 million in 1983 to US$ 10.699 billion in 2008. Most trading partners
are located in the USA and EU countries. It was around the early 1990s when consumers
324 K. Ahsan and A. Azeem

in the USA and the EU began noticing that almost any T-shirt they picked up at
their local Wal-Mart, Target or JC Penney was made in Bangladesh (Saxena and
Salze-Lozach, 2008). In the post-Multi Fiber Agreement (MFA) era, Bangladesh
apparel exports show potential by successfully competing in a non-protected global
competitive environment. In global competition, the advantage lies in the price benefit of
Bangladeshi products. For example, in the US market, the unit price for a girls cotton
dress from Bangladesh is US$ 41 per dozen as compared to that from China which is
US$ 88 per dozen (Weil, 2006).
Recent trends in apparel supply chain are to position a product in specific markets
and outsource manufacturing processes to third parties. Large companies are trying to
eliminate unnecessary assets and reduce the vertical status of their supply chain (Teng
and Faramillio, 2006). Some retailers are considering outsourcing for large seasonal
orders (Kumar and Arbi, 2008). For certain categories of apparel products, with cost
retailers are emphasising on responsiveness and flexibility in supply. Moreover, public
policy choices and lean retailing facilities are influential factors in apparel sourcing
location. Public policy relates to tariffs and regional trade policies. Lean retailing relates
a quick replenishment and expects supplier to be located close to the market (Abernathy
et al., 2005).
The Bangladesh apparel sector is positioned on the upstream side of the global chain.
Other than local apparel manufacturer, the main players involve are raw materials
suppliers, finished product distributors, buyers and retailers. Buyers are the large retailers
or their representatives and the local apparel manufacturers are their suppliers. Apparel
retailers and buyers are imposing new standards in the apparel product and production
environment. Buyers increasingly require local apparel manufacturer to take responsibility
for fabric and input sourcing, design services, supplier managed inventory, production
flexibility, product development and to provide invoicing on a 90 day basis (Brenton and
Hoppe, 2007).
Bangladeshi apparel firms have moved into a challenging position in the new
millennium. The challenge is now to offer high-quality and low-cost products within a
short lead time and to meet health, social and environmental compliances in the face of
increasingly stiff competition. Like other apparel industries in the developing world,
Bangladeshi apparel manufacturers have faced increased scrutiny by the foreign buyer in
recent years. There have been growing concerns of community impact such as efficient
use of local transport through less traffic congestion, noise, health and safety issues,
minimum wage and child labour issues in the workplace. Apparel manufacturers are
sacrificing working conditions in the factory to reduce manufacturing cost. To achieve
economic performance, these industries are overlooking the natural environment and
societal issues of the triple bottom line (Elkington, 2004).
Research on Bangladeshi apparel supply chain management is rare and to our
knowledge notable citations on Bangladeshi apparel industries in supply chain literature
are Abernathy et al. (2004, 2005) and Weil (2006). Impact of quota removal in the
relation of retail-apparel-textile supply chains is discussed by Abernathy et al. (2004,
2005). Authors predicted that in quote-less world sourcing decisions facing by textile and
apparel manufacturers will be beyond traditional cost and quality component, and the
 Insights of apparel supply chain operations 325

new influential market forces will be like inventory risks, product variety, replenishment
and service. Weil (2006) discusses the impact of lean retailing on the global network of
firms supplying apparel in the USA. According to Weil:
Bangladeshs long-term viability as a source of apparel and textiles rests on
the adoption of public policies that appreciably lower trade costs associated
with the administrative problems and investments in infrastructures that
dramatically reduce the time required to move goods in and out of the country.
Movement along these lines has been very limited in the view of a number of
analysts (Bhattacharya and Rahman, 2002; Rahman, 2002; Rose, 2005).
Focusing on the issues of the global apparel supply chain and Bangladesh apparel sector,
we examine the current situation of Bangladesh apparel chain. Our objectives are to
investigate supply chain and logistics practices such as new orders, logistics related to
finished goods delivery, lead time in ordering and receiving items, and compliance
issues. To fulfil our objectives, a questionnaire survey was conducted among garments
manufacturers of Bangladesh. The outline of the paper is as follows. In the next section,
we discuss global apparel business and the position of Bangladesh, followed by relevant
literature in Section 3. Further, research methods are discussed in the Section 4. In
Section 5, we analyse the survey results, and in Section 6 we analyse policy for
sustainable business. Finally, the conclusion provides a summary of our study and
recommendations for future research.

2 Global apparel business and Bangladeshi products

Due to globalisation effect and advances in transportation and communication, apparel

production is moving from the countries of Organization of Economic Co-operation and
Development to less developed or developing countries. The traditional role of apparel
industries in developing nations is altering owing to the impact of replenishment and risk
shifting in supply channels. It will be difficult for many nations with inadequate
infrastructure, distant location from major consumer markets, or political or even
climactic instability, who will be at a considerable competitive disadvantage for many
apparel products, even if they have low wage rates. Further, for those categories of
apparel where replenishment is not a major factor in sourcing, the presence of a large
number of countries with extensive apparel capacity means more intense competition among
these nations for a smaller market of non-replenishment products (Weil, 2006, p.12).
According to the US National Retail Federation, in apparel supplier selection two
major factors must be weighted against each other: cost versus delivery time. It appears
that China and some other Asian countries are in the middle of the two (Kumar and Arbi,
2008). American Apparel Producers Network Survey shows that up to 80% of retailers
in the USA say they will continue to make apparel in China and other Asian countries
such as India, Pakistan and Bangladesh (Kiley, 2006 cited in Kumar and Arbi, 2008).
Apparel trade statistics for the US and EU-25 market (source http://www.itcb.org and
http://otexa.ita.doc.gov) show that China plays a dominant role; countries like Indonesia,
India, Vietnam and Bangladesh achieved moderate growth, whilst countries like South
Korea and Mexico show negative growth (Figure 1). Due to global economic downturn,
during 20072008, growth of apparel exports to the US market was almost flat for some
countries, and declining for India. In the near future, it is envisaged by apparel experts
that the global apparel market will be dominated by Chinese products and many
emerging apparel manufacturing countries like Bangladesh will face challenge.
326 K. Ahsan and A. Azeem

Bangladeshi apparel business is 100% export oriented and sensitive to global

demand. As part of the global apparel chain, the Bangladesh garments industry plays an
important role in the upstream side of the chain. The apparel supply chain is mostly
buyer driven and orders from retailers come through the export network of buyers. The
apparel trade partners are the USA, EU countries and Canada. Well-known apparel
exports are mainly functional woven and knitwear items such as mens and womens
shirts, trousers, denim jeans and jackets, T-shirts and sweaters (BGMEA, 2007).

Figure 1 Relative position of countries in the US apparel market (see online version for colours)

25,000 4,500
China Vietnam Mexico
Bangladesh India Indonesia 4,000
20,000 Thailand 3,500
Trade volume: China

3,000
(US$ million)

(US$ million)
15,000

Trade volume
2,500
2,000
10,000
1,500
5,000 1,000
China
500
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year

From Figure 2, the relative export volume of Bangladeshi apparel items can be seen
for the last ten years. Data show that demand for knitwear items (mainly T-shirts and
sweaters) are increasing while demand for woven items like shirts is on the decline.
Furthermore, we can see that compared to woven products, knitting exports are
outperforming in dollar volume.

Figure 2 Export volume of apparel items from Bangladesh (see online version for colours)

3000 SHIRTS JACKETS

T-SHIRT SWEATER
2500
Export volume (US$ million)

TROUSERS

2000

1500

1000

500

0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Year
 Insights of apparel supply chain operations 327

Export markets for Bangladeshi apparels differ considerably in terms of market access
conditions and product composition (Razzaque, 2005). EU is the largest destination of
Bangladeshi apparels and 80% of the countrys total garments were exported to EU
during 2007 (BGMEA, 2008). From Figure 3 (data source: BGMEA, 2009), it shows
that during the fiscal year 20062007 Bangladesh exported to the EU countries around
US$ 4614 million garment products which accounted for 57% of its total garments
exports. In the EU market, apparel products have had a continuous strong demand until
2007. The end of quotas for China from 1 January 2008 brought downward pressure on
prices in the EU clothing market and required suppliers to become more competitive. The
Bangladesh garments sector also faces challenges in EU market due to the global
financial crisis and recession. Furthermore, the market has regulation of two-stage
EU-GSP criteria. According to the Generalised System of Preferences (GSP) criteria, to
get duty-free access to EU market, least developed countries exporters require significant
local value additions ensuring that fabric of garment are produced in the sourcing
country. The GSP enables exporters in developing countries to benefit from preferential
tariffs in the markets of industrialised countries.
The second-largest market of Bangladeshi apparels is the USA. In the post-MFA era,
Bangladesh is holding its previous position in most of the apparel supplier categories for
the US retailers. From Figure 3, it can be seen that during the fiscal year 20072008
Bangladesh exported around US$ 3355 million garments products to the USA, i.e. about
31% of total exports. From US import statistics, we can also see that Bangladeshi
garments export has 7.2% apparel market share in the USA. It is remarkable that, during
2008, export of Bangladeshi apparel products to the US market shows an increase despite
the economic crisis. The reasons behind growth of Bangladesh export products are
mainly because products are mostly functional, less costly compared to competitors and
offer a good value for money. Bangladesh registered a 12.5% export growth in woven
products and 25.9% export growth in knit products to the US market at a time when
US imports of these items actually shrank by 3.6% and 1.6%. (Murshid et al., 2009). In
the USA, Bangladeshi apparel products do not enjoy any preferential duty-free or quota-
free benefits. Moreover, disadvantageous geographical distance further increases
logistics cost as well as lead time.

Figure 3 Apparel exports as a percentage of total exports of Bangladesh (see online version
for colours)

16000
Total Export
14000 Total Apparel Export
12000 Apparel Export in US market
Export volume (US$ million)

10000 Apparel export in EU-25 market

8000
6000
4000
2000
0
0

8
7

00

00

00

00

00

00

00

00

00
-9

-9

-9
96

97

98

-2

-2

-2

-2

-2

-2

-2

-2

-2
99

00

01

02

03

04

05

06

07
19

19

19

19

20

20

20

20

20

20

20

20
328 K. Ahsan and A. Azeem

Overall, Bangladesh apparel sector is rising; it shows consistency in the post-MFA era
and performs quite well even in the global economic downturn of 20082009. Though
Bangladesh has bested the worst of the predictions, with the continuous increase of
apparel exports, growth does not compare to China as shown in Figure 1. The apparel
sector adds value mainly in manufacturing and related services and relies heavily on
imported textiles. This places the sector at a cost disadvantage against China. Particularly
since the lifting of safeguards against China in 2008, Bangladesh and other competitors
face more challenges.

3 Review of relevant literature

Before analysing the current supply chain situation of Bangladeshi apparel sector, we
analyse the existing apparel supply chain literature and use relevant information in our
survey questionnaire design. With a brief supply chain process map we investigate current
trends in apparel supply chain. We focus on identifying the role of middleman. Further,
we look at issues like supplier selection criteria, global logistics indicators, manufacturing
and fabrics ordering lead time issues, supply chain partnership and compliances issues.

3.1 Apparel supply chain

It is common practice for retailers to deal with manufacturers, with centralised buying
and considerable negotiation on prices, quality and delivery schedules (Bruce and Moger,
1999). However, the current trend in apparel supply chain is buyer driven (Gereffi and
Memedovic, 2003). Buyer-driven chains are those in which large retailers, marketers and
branded manufacturers play the pivotal roles in setting up decentralised production
networks in a variety of exporting countries, typically located in developing countries
(Gereffi and Memedovic, 2003). Retailers that fit the buyer-driven chain are manufacturers
without factories, such as Wal-Mart, Sears and GAP (Gereffi and Memedovic, 2003). In
buyer-driven chains, buyers are the suppliers for retailers and act as intermediaries
between retailers and manufacturers. The intermediaries act as a significant figure and
addition of the intermediary has come about as a result of increasing globalisation within
the industry (Popp, 2000). Sometime buyers provide assistance for material sourcing for
their manufacturer, the handling of logistics for delivery to the customer (Jin, 2004).

Figure 4 Buyer-driven apparel supply chain

Departmental
Textile supply Apparel stores
(yarn, synthetic fibres, manufacturers Buyers
fabrics)
Discount chains
Suppliers Manufacturers
Branded
apparel
companies Catalogue stores

Trading
companies Factory outlets,
mail order, etc.

Export network Retail outlet

 Insights of apparel supply chain operations 329

A brief buyer-driven apparel supply chain diagram is shown in Figure 4 (adopted from
Appelbaum and Gereffi, 1994). Within the upstream of the chain, there are suppliers for
cotton, synthetic fibres, fabrics and other apparel accessories. The next tier consists of
apparel manufacturers, followed by buyers and finished product distribution network.
The last tier is related to retailers and end customers. The information travels from the
retailers down to the manufacturer through buyers or trading companies, then on to
the fabric supplier in a straightforward lateral movement. On the other hand, apparels
move in the opposite direction towards the retailers. Bangladesh apparel supply chain
is mostly buyer driven; according to the local term it is dominated by buying houses,
i.e. representative of foreign buyers.
Apparel supply chain consists of two contrasting production systems characteristic of
buyer-driven chains: the assembly and Original Equipment Manufacturer (OEM) models.
The assembly model is a form of industrial subcontracting in which manufacturers
provide the parts for simple assembly to garments sewing plants. The OEM model is a
form of commercial subcontracting in which the buyer-seller linkage between foreign
merchants and domestic manufacturers allows for a greater degree of local learning about
the upstream and downstream segments of the chain (Gereffi, 1999). Bangladeshi apparel
industry is more like doing the assembly model. Local apparel manufacturer or apparel
supplying firm makes a product according to a design specified by a buyer and buyers
assist in logistics.

3.2 Apparel supplier selection criteria

Globalisation of supply chain makes the products hybrid with multiple country affiliation.
A product may be designed in one country, manufactured in another and parts or
components sourced in yet another (Ruamsook et al., 2007). Globalisation of the textile
and clothing supply chain is also intensifying and affecting apparel business. In modern
apparel business, retailers no longer have warehouses full of apparel products ready for
the customer. Many retailers are either sourcing materials from overseas or moving
manufacturing facilities to countries with lower labour costs (Jones, 2000). They have
become lean retailers, owning just the products on the selling floor (Abernathy et al., 1999).
In apparel business, with product quality and manufacturing cost, logistics cost and
time are the criteria for the buyer to select the sourcing country or a particular overseas
supplier. According to Ruamsook et al. (2007), these criteria are corresponding to key
aspects of product, time, quality, situation, process and cost related. Cost has been a
crucial factor for traditional order winning criteria, but these days it is not the only
deciding factor. Proximity to market, provision of basic infrastructure, quota, taxes,
duties and labour and environmental regulation should be also considered (Jin, 2004).
Among the order winning criteria, product-related measures are product quality
standards; time-related measures are on-time delivery, cycle-time length and consistency;
quality-related indicators are accurate quantity of shipment, accurate invoice and delivery
damage; situation factors are communication infrastructure, business customs and
practice; and cost factors are product price, transportation cost and safety stock level.

3.3 Apparel logistics and global logistics indicators

The efficient logistics challenges are currently faced by the entire international apparel
industry. For attracting and sustaining more apparel supply orders, it is important to
emphasise or maintain an efficient logistics services. Research shows that quality, time
330 K. Ahsan and A. Azeem

and cost performance of logistics services differ markedly across countries and they may
have a significant effect on trade competitiveness. These variations in time and cost
across countries stem from differences in the quality and cost of infrastructure services,
as well as differences in policies, procedures and institutions (Hausman et al., 2005). In a
study, Subramanian and Arnold (2001) identify that the differences in logistics
performance are driven only in part by poor quality of physical infrastructure services
such as road, rail, waterways, port services and interfaces. Instead, the inadequacies often
are caused by policy and institutional constraint such as procedural red tape, poor
definition and enforcement of rules of engagement, delays in customs, delays in ports and
border crossings, and pilferage in transit.
Researchers identify a number of global logistics indicators from the 80 economies
(Hausman, 2004; Lee and Whang, 2005). The indicators are total time and cost for trade-
related procedures, total time for document processing, total number of documents per
trade transaction, number of signatures per trade transaction, time to resolve customs
appeals, shutdown of port due to natural disaster and labour dispute, vessel turnaround
time and percentage of container inspected. Hausman et al. (2005) examine the time and
cost of importing and exporting a typical 20-foot full-container-load container with
medium-value products. For measuring performance of trade logistics services, they use
four key indicators such as cost of processing a typical import or export transaction, the
average time required to process a typical import or export transaction, the variation in
time for completing an import or export transaction and the complexity of transactions.
The complexity of trade transaction may be caused by red tape and bureaucratic variables
such as the number of documents required, the percentage of containers inspected and the
criteria for inspection.

3.4 Lead time in ordering and receiving items

Quick response and accurate responses are two sought-after criteria in apparel supplier
selection. Accurate response means supplying the right quantity of products at the right
place and the right time at expected quality level. The fundamental objectives for
achieving quick response are considered to be reduction of lead times in supplying
fabrics, reduction of lead time in producing a garment and innovative relationships with
the distributors (Forza and Vinelli, 2000).
Lead time is one of the key factors for a retailer in deciding an outsource country or
supplier. Levy (1995) conducted an insightful exploratory study on international supply
chain and he suggests long lead times may amplify common disruptions in the supply
chain. It creates problems due to custom delays, time zones, culture and language
differences, and lack of face-to-face communication. This leads to unexpected costs and
does not support the desired supply chain integration. Customer order lead time in
apparel supply chain consists of various components such as contractual agreement of an
order, production process, quality check and packaging, delivery of finished product and
order received (Kumar and Arbi, 2008). For apparel production, process takes more time
if the fabric is not available domestically. According to the global supply chain
organisation at the American Apparel Producers Network in Atlanta, it takes
approximately 21 days to get designs made and delivered from Central America; the
number is 43 days if US material is used (Kiley, 2006). In China, India, Bangladesh and
Pakistan, that time can stretch to 90 days if fabric is available domestically and between
120 and 150 days if materials have to be imported into these countries (Kiley, 2006). For
 Insights of apparel supply chain operations 331

the USA, Asian countries are a cheaper source compared to the neighbouring Central
American sources but the supply chain lead time is longer (Kiley, 2006). According to
Kumar and Arbi (2008), for the US markets, large seasonal orders outsourcing could be a
big cost saver. For short-term market demands or innovative items, lead time of the entire
apparel supply chain could be improved if certain controllable factors, such as order
processing capability building, could be made an efficient way.

3.5 Supply chain partnership and integration

Although it may be argued that partnership agreements exist in the apparel chain, it is
questionable whether these are actually partnerships with benefits for all parties or
whether these are a means by which the retail sector is able to exert power over the
smaller suppliers in order to push down prices (Bhamra et al., 1998). Partnership means
long-term relationships through trust. There is much emphasis paid on speed, quality and
cost while the element of trust is generally overlooked. One bad relationship can lead to a
missed on-time delivery, lost customer and possibly even market share (Borneman,
2005).
Supply chain partnership brings integration among members of the chain. Teng and
Feramilo (2006) emphasise on integration of US apparel supply chain with South
American suppliers. This study provides an illustration of South American small and
medium-sized companies in the apparel industry concerning supply chain management
such as quality, logistics, forecasting techniques, lead time, inventory management and
integration of supply chain. Authors recommended that continuous improvement and
determination to implement aggressive strategies are important to become future partner
of US companies.

3.6 Compliance issues in apparel chain

In todays apparel business, apart from consideration of product cost and quality,
customers are increasingly aware of country of origin and raw material sources of the
product they buy. There are also concerns about factory working environment such as
child labour, minimum wage and occupational health and safety issues. A recent survey
shows over half of the UK consumers think the ethical production of the clothes they buy
is important. Consumers want retailers to buy responsibly and address their concerns
(Ecotextile, n.d.). Purchasing managers of apparel retailers have found themselves faced
with the challenge of ensuring that their merchandise is produced under humane,
equitable conditions, even though suppliers may be located in distant markets outside the
corporate umbrella (Emmelhainz and Adams, 1999). In response, many world class
companies have started to focus on environmental and socio-economic issues of product
and production. On the other hand, companies that have not considered customer
concerns of socio-economic issues have suffered setbacks. For example, Gap disavowed
Indian sweatshops tied to child workers but retailers held back US Christmas clothing
sales. Nikes revenue dropped in 1998, largely due to sweatshop press.
332 K. Ahsan and A. Azeem

4 Research methods

Scope of the study is to investigate supply chain practices of Bangladeshi apparel

manufacturers. We focus on practices related to buyer-driven supply chain, particularly
the value added part that is located in Bangladesh. Literature shows that strength of
Bangladesh apparel sector is its low-cost advantage. From the questionnaire survey, we
investigate the perception of apparel supply chain within the industry, way of receiving
the orders from buyers or retailers, criteria need to fulfil to ensure new orders, current
competition, problematic logistics issues such as processes relating to receipt of raw
material supplies and distribution of finished goods, total lead time and its components,
and lastly the compliance issues that are essential or required to fulfil.
For the purpose of fulfilling our study objectives, a questionnaire survey was used to
collect data from apparel manufacturers of Bangladesh. Questionnaire survey is undoubtedly
the most commonly used research design in operations and supply chain management.
Measures included in a questionnaire survey can be designed to target specific factors or
attributes which may not be directly observable (Boyer and Swink, 2008). Survey-based
research also has limitation such as difficulties with respondents interpretations of
measures, low response rate and potential lack of knowledge. One method to reduce
the risk of low response rate is to contact potential respondents, obtain a commitment
to complete the questionnaire and then distribute the questionnaire (Flynn et al.,
1990, p.260).

4.1 Questionnaire design and component questions

The questionnaire consists of 46 questions in different areas of supply chain and logistics
management. Development of questions in the survey was carried out by using a number
of sources mentioned in the literature review, for example Hausman et al. (2005), Teng
and Faramillo (2006), Appelbaum and Gereffi (1994), Hausman (2004) and Lee and
Whang (2005). Survey questionnaires were formulated based on several criteria, such as
general background information of the apparel industries, current supply chain and
logistics operational practices, and socio-economic and environmental issues. General
background questions are focusing on identifying the primary business area, ultimate
business customer and purchasing country, and company ownership status. Current
supply chain and logistics operational questions include questions related to familiarity of
the term supply chain, means of new orders, local value addition, fabrics purchase
ordering lead time and total lead time, criteria to confirm an order from foreign retailers,
export and import related processes, and barriers for successful logistics activities. Socio-
economic and environmental issues are existing health and safety measurements and
policies, employee welfare activities, environmental targets and policies, and factors that
will help to achieve sustainable growth.
The questionnaire was pre-tested with the three colleagues, who are an expert in this
area. They teach and conduct active research in supply chain and operations management
area at university level. We also took opinion from five apparel factory managers.
Changes were made to the questionnaire based on pre-test feedback.
 Insights of apparel supply chain operations 333

4.2 Sample characteristics

The survey was conducted anonymously and in English. The names and mailing
addresses of the companies were initially gathered from the BGMEA website and
verified using personal contacts in the apparel industry. The list was scrutinised to
include only those industries that operate within the capital Dhaka. The final list focused
on 150 individual apparel companies. All the companies manufacture apparel products
and a few companies manufacture apparel as well as make fabrics. Most of the apparel
companies are locally owned and their main business is apparel export.

4.3 Survey method

The authors conducted the survey over a 160-day period (January 2008April 2008).
Initially, companies were telephoned to determine those interested to complete the
questionnaire. The respondents were given an opportunity to discuss or clarify any
survey questions with the authors. Further, we were contacted by 18 companies for a
structured interview with the questionnaire. Company management were very
enthusiastic about the survey; we explained the research background information and
conducted the structured interview. The whole interview process took around an hour.
We also mailed and personally dropped 150 questionnaires to interested parties.
Including this 18 structured interviews, we received feedback from 48 companies.
Among the respondents companies, 45 are locally owned and three are joint venture
companies. Our survey respondents were a factory manager or company merchandiser.
Factory managers deal shop floor operations as well and supply chain issues. They know
the total picture of the chain and have business degrees. Merchandiser usually deals with
logistics operations. They are also well educated and have minimum Bachelor degree and
have at least three years experience in apparel supply chain.

5 Results analysis

The assistance of statistical evidence is essential to draw conclusions from empirical data
or to generalise them. There are many statistical techniques for empirical research such as
descriptive statistics, t-test, chi-square test, F-test, regression or correlation, path analysis,
cluster analysis and factor analysis. Of the techniques, descriptive statistics is useful for
small or large sample size and to make data more intelligible for the purpose of
describing industry practice (Flynn et al., 1990, p.264). To identify apparel industry
practices in Bangladesh, we selected 25 questions out of 46 that were relevant to the
research objective. We conducted a descriptive statistics analysis of data and summarise
the results as follows.

5.1 Impression on supply chain issues

Bangladesh apparel manufacturers are playing an important role in the global supply
chain; however, supply chain management methods are not widely practiced in the
industry. We have asked the companies to know whether current supply chain
management procedure is defined in their company. Overall result shows that about 15 of
the 48 companies (32%) mentioned they have no defined supply chain methods in the
334 K. Ahsan and A. Azeem

companies, with the remainder having some defined method but only to a limiting extent.
The most widely practiced supply chain elements are production planning and
scheduling, inventory management, purchasing, warehousing and sales forecasting. Local
manufacturers are in an uncertain situation in predicting demand forecast. Forecasts are
largely based on previous year demand and are developed by customer group.

5.2 Obtaining new orders

The main gateway of this business is to obtain new orders from potential customers.
Major trade partners of the Bangladesh apparel industry are the retailers from the USA,
the UK and other EU countries. Among the types of retailers, most product orders come
from catalogue stores, clothing chains, supermarkets and discount chains. The relative
frequency of ways to get new orders can be seen from Figure 5. The survey shows that
only about 25% of the companies receive orders directly from the retailers. Only a few
companies use an e-market platform to obtain new orders. Unfortunately, most orders are
coming via buying agents (locally known as buying houses) which play a vital role in
negotiating new orders. The role of the buying agent is like that of a middleman and acts
as a medium of communication between parties. These buyers have good knowledge on a
local market and they ensure and negotiate with the garments manufacturers about the
product cost, quantity, delivery due date and other product-related technical aspects.
Buyers are shopping for low cost and quality sources. As business is based on a short-
term relationship, the uncertainty makes it difficult for local manufacturers to predict
future demand and plan accordingly.

Figure 5 How apparel companies get new orders (see online version for colours)

92%

Order receiving sources

25% 23% 23%

6%

From buyers Directly from Personal contact Trade fair E-market

retailers

5.3 Criteria must satisfy for an order

Details of the criteria ranking for wining an order are shown in Figure 6. Companies
identify price as the most important sought-after criteria in attaining new orders. As
buyers are shopping to find the right product at low cost there is a price competition
among the manufacturers. According to importance, other vital criteria are service level,
timeliness of delivery, accepting flexible volume of orders and having required
compliances. It shows that with other traditional order winning criteria (such as time, cost
and flexibility) in supply chain, compliance issue has been included within the top five
criteria for new orders. Compliance means fulfilling criteria on health and safety
regulations, child labour issues and minimum wage issues.
 Insights of apparel supply chain operations 335

Figure 6 Ranking of necessary criteria to acquire new orders (see online version for colours)

Price
5.00 Ranks
4.48
4.00
Financial soundness Successful previous orders
3.00 4.25
2.00
1.83 1.00
Ability to supply different
0.00 Timeliness
products 1.75 4.23

1.33

3.23
2.85
Logistics and infrastucture Flexible volume of orders

Compliance

Figure 7 Average time taken to export standard cargo shipment of apparel goods (see online
version for colours)

Duration in Days
8 Cum percentage 1.2
7
1 1
6 0.9 0.95
0.85
Processing time in days

5 0.75 0.8
0.65
4 0.6
0.5
3 0.4
0.35
2
0.2
1
0 0
Conclude sales Assemble and Port- Terminal Packing goods Pre-shipment Arrange Inland Port- customs
contract and process handling activities inspection and transport; waiting transportation to inspection and
secure letter of documents clearance for pickup and port of departure clearance
credit loading on local
carriage

1 3 7 2 4 5 6 8
Procedure

5.4 Logistics across borders

The apparel business handles logistic activities relating to receipt of raw material
supplies and distribution of finished goods. The medium of transportation used by
companies is road and sea. Mostly, distribution of finished goods is conducted by a third
party whereas distribution of raw materials is conducted in-house by the company. The
procedures involved in exporting a standardised shipment of apparel goods (adopted
from Hausman et al., 2005) in Bangladesh are detailed in Figures 7 and 8. Pareto analysis
(Figure 7) shows the longest procedural time is taken in opening letters of credit and
processing export documents. Further, a significant portion of time is taken in the port for
336 K. Ahsan and A. Azeem

terminal handling activities. Survey result proves the statement logistics performance are
driven only in part by poor quality of physical infrastructure services, instead the
inadequacies often are caused by policy and institutional constraint (Subramanian and
Arnold, 2001). For Bangladesh, authorities, particularly the government, should take
initiative to ease goods handling and reduce bureaucratic process. In the long run, this
will reduce lead time and make the local apparel industry more competitive in global
business.
Comparing data with other countries from the World Bank report (Doing Business in
2006, 2006), we can see from Figure 8 that Bangladesh apparel industries require less
documents and signatures for exports and imports compared to both the Bangladesh
average and the regional average. The reason behind the fewer signatures is due to the
governments recent initiative of fewer processes for terminal handling activities in
export and import of garments-related products. However, compared to OECD countries,
the process is more bureaucratic and needs further improvement.

Figure 8 Importing and exporting process for developing vs. developed countries

40
Survey result Bangladesh *
35
Region* OECD*
30 * Data source: World Bank 2005
25
20
15
10
5
0
Documents for export Documents for import Signatures for export Signatures for import

5.5 Lead time in ordering and receiving items

The total average lead time (contractual agreement to the delivery of finished product)
for Bangladesh apparel products is about 90 days. If there are succeeding orders of
similar type then the lead time comes to around 70 days. Components of the total lead
time are shown in Figure 9. The main factors related to the lead time include fabrics
purchasing, apparel manufacturing and finished goods packaging and shipment.

Figure 9 Total lead time in Bangladesh apparel industry

Contract agreement Fabric ordering Apparel Packaging and

(design, and receiving: manufacturing: shipment to
specifications, 3050 days 2030days customer: 1015
price, volume, days
payments): 10 days
 Insights of apparel supply chain operations 337

The survey shows that 67% of respondents use less than 50% of local fabrics and other
inputs. Most of the apparel manufacturers need to buy fabrics from overseas. Those
companies revealed that they purchase fabrics from abroad because customer-specified
fabrics are not locally available, sometime available but of poor quality, and available but
at high cost. Within the apparel value chain, the most time consuming part of apparel
manufacturing is the fabrics buying process. Usually manufacturers purchase customer-
specific fabrics from overseas. For a new fabric purchase order usual lead time is around
50 days and for succeeding orders of similar type the lead time comes to around 30 days.
Hence, the process consists of placing an order for the fabrics, receiving confirmation
from buyers or retailers, making final contract with the fabric manufacturers,
manufacture of the fabrics and receiving the imported fabrics. Due to poor infrastructure
and increased dependency on importing raw materials and garments machineries, the
purchase order to delivery cycle (or lead time) of the garment industry is at least one
month longer than in major competing countries, for example China. This problem has
become more critical in these days since the industry now needs to compete with much
smaller margins.
Other issues that arise in having such a long lead time include natural and man-made
uncertainties. Among natural uncertainties flood is the main issue. Due to floods, supply
network is often disrupted. Man-made uncertainties also occur quite often and are mainly
due to political turmoil and breakdown of law and order situation in the country. Other
like situations include labour strikes within the factory and at the port. There are
numerous impacts of a long lead time. Companies miss deadlines and lose market and
market share. When the due date is very close, emergency alternative shipment by air
becomes necessary, which is expensive and ultimately reduces the profit margin. Longer
lead time also creates liquidity crisis and causes problems of payments to employees.
Bangladeshi companies are doing well in business, have been enjoying continuous
growth, and consider China as number one competitors (34 respondents), followed by
India (19 respondents) and other South Asian countries (12 respondents) as their major
business competitors. China is the number one competitor, as they have shorter lead time
and a very supportive backward linkage in the industry. Competition is also coming from
India, as the country has good backward linkage, cheap labour cost and infrastructure
facilities. Many companies (20%) identified their main competitors from these countries,
challenging mostly in terms of product cost.

5.6 Quality and sustainability compliances

In the apparel business, nowadays it is important to satisfy various compliances in the
areas of product quality, health and safety, environment, social accountability, labour
issues, etc. Customers want retailers to ensure these compliances in the products they are
going to buy. Retailers press buyers and suppliers to fulfil these requirements. Realising
the necessity, Bangladesh apparel companies are trying to attain compliances on several
issues. Apparel companies are under pressure to make sure that they follow ILO
convention regarding labour standard, practice and pay. They have to ensure that there is
no child labour within factories and childcare facilities exist within the factory complex.
About 70% of companies claimed that they have childcare facilities within the factory.
The number is not reassuring; it should be closer to 100%, as most of workers in the
garments industry are women and mothers of young children. Apparel manufacturers
need to satisfy a range of local and international requirements and to follow various
institutional controls related to quality and sustainability.
338 K. Ahsan and A. Azeem

Although companies seem concerned about environmental issues, not much is being
done in practice. From Figure 10, we can see that many companies (around 25) impose
targets to focus on renewable energy consumption and green production, whereas only a
few companies are considering incorporating waste recycling. Current energy supply and
demand situation is not favourable for companies. Due to inadequate electricity supply,
most factories are using private generators for electricity. Increasing energy costs
increase production costs and constantly erodes profit margin. It is important to find
alternative economic sources of energy and companies should also practice optimal use
of energy.
Apparel industries are practicing health and safety issues within the workplace. We
found 25 surveyed companies having health and safety management certification issued
by a recognised independent authority. Only 22 companies have ISO 9000 quality
standards or equivalent. The survey identifies that most of the companies have
incorporated or started to incorporate health and safety and labour standard issues within
their policies. They also have regular health and safety inspections within the
manufacturing plant. Almost 32 companies buy group accident insurance policy and
38 companies provide general medical care facilities for their employees.
Overall, we identify some evidence of health and safety and labour standard practices
with the industry. In most of the places, it is only tick-mark practices. The sufficiency
and adequacy of the doctors, nurses or facilities are not within the scope of the survey.
However, we presume that existing resources and facilities are not sufficient to ensure a
healthy and safe working place and environment. Frequent local and international media
reports on workplace fire hazards and accidents also raise concerns about current health
and safety practices. Health and safety issues should be a companywide culture and a
matter of everyday practice. To ensure labour standards, environmental and health and
safety compliances, top level management should initiate the policy and then implement
it through documenting everyday practices, creating awareness among employees and
continuously developing practices to attain sustainability.

Figure 10 Future sustainability targets of apparel manufacturers

52%
48%
40%

27%

3%
consumption

recyling
Clothes from

production

Less waste
generation
Renewable

Waste
Green
organic
energy

cotton
 Insights of apparel supply chain operations 339

The garments sector is almost 100% export oriented and therefore sensitive to global
market demand. Because of the highly competitive market, the USA, the UK and other
EU retailers have reinforced the quick response and the accurate response services within
the supply chain. To ensure these services, garments companies must use resources to
develop an integrated and synchronised supply chain system. For this purpose, use of
appropriate technology plays an important role in providing these services. They have no
defined supply chain management practices within their business. Most businesses are
buyer driven and have little or no connection with the retailers. The industry cannot
forecast demand and most of the time needs to wait for the buyer. Communication
technology is limited to the use of telephone, fax and internet (emails). On the other
hand, these days foreign buyers like Target, Wal-Mart, etc. depend on modern
technology like EDI, e.doc, bar-coding and scanning, RFID, etc. Unfortunately, locally
owned companies are unable to spend huge amounts on technology.

6 Policy for a market-driven supply chain

To adjust with the new global market, it is necessary for apparel manufacturers to focus
on various external and internal soft and hard issues. The industry is stressing the
importance of achieving duty-free access in the international market and of relaxing the
rules of origin to enable facing the post-MFA challenge of global competition.

Figure 11 Important factors of sustainable growth

Backward linkage 1

Quality 2

Political stability 3

Better skilled labour 4

Economic stability 5

Less bureaucracy 6

Relax import duties 7

Transparency in business 8

The survey identifies several important factors for sustainable growth (Figure 11). The
most important factors are to develop backward linkage, maintain quality, political
stability, acquire better skilled labour and attain economic stability in business. Foreign
buyers or companies can provide assistance to local companies for sustainability. Buyers
can help to develop efficient ordering and supply systems, provide training for employees,
assist in introducing new technology, obtain environmental compliances and develop
safety measures in operations.
340 K. Ahsan and A. Azeem

7 Conclusion
Bangladesh apparel sector is growing and consistently showing its presence in global
apparel chain. The sector is working hard towards more local value addition. The main
strength of the sector is low-cost and high-quality products. In addition to the competitive
wage rate, other advantageous factors are the easily trainable workforce, expandable
supply side capacity and continuous governmental policy support. A study by the Harvard
Centre for Textile and Apparel Research shows that Bangladesh enjoys a cost advantage
over China as Bangladeshi garments workers earn 39 US cents an hour, while the hourly
wage for sewing and stitching in coastal China is 88 cents (Mukarjee, 2005). However,
the meaning of low cost does not necessarily mean lower wage rates. The industry needs
to maintain a lower cost advantage in every aspect of apparel business and should find a
proper place to cut costs and become a market leader in quality and responsiveness.
There are many weaknesses in the Bangladesh garments industry. The sector is facing
tough competition in reducing lead time and total production cost, and in ensuring
compliances. Predominant factors of longer lead time are poor logistics infrastructure,
inefficient and disintegrated policies, and weak backward linkage. The reliance of
imported fabrics takes an extra 2030 days in total lead time and the sector is at a
disadvantage compared to China.
The garments industry is hampered by costly logistics infrastructure bottleneck. The
Asian Development Bank (ADB) in its latest quarterly identifies logistics infrastructure
as contributing to the higher maritime cost of Bangladeshs apparel exports to the USA,
compared with China. The port of Chittagong, which handles 85% of trade, has been
described by the ADB as a serious tangle in the supply chain. Chittagong port is facing
serious problems of poor infrastructure, low labour productivity, weak management and
numerous restrictive labour practices (ADB, 2004).
Bureaucratic processes of doing business are also responsible for longer lead time.
Our survey finds that within everyday apparel business undertaking many documents
need to be prepared and a lot of approvals (signatures) are required. Such practices are
unhealthy for any business. The country needs to change the public policy for efficient
logistics system. Bangladeshs long-term viability as an apparel manufacturer rests on the
adoption of policies that appreciably lower trade costs associated with the administrative
problems, integrated supply network system and investments in infrastructures that
dramatically reduce the time required to move goods in and out of the country (Weil, 2006).
The sector relies heavily on imported textiles. Our survey shows almost all
respondents feel the importance of backward linkage within the constraints of local
resources. It seems the backward linkage in the garments sector is vulnerable due to
uncertainties in domestic and international supplies of raw materials (cottons, fabrics and
other accessories) and machineries, transportation infrastructure, natural calamities, the
political situation of the country and other socioeconomic factors. Further, infrastructural
development and development of backward linkages are vital for improving the
contribution in local value addition within manufacturing.
It is also important to develop strategies to respond quickly to the market through
customised products, with less total landed cost, less total lead time and a better service
level. Strategic decisions will help entrepreneurs to incorporate environmental and socio-
economic sustainability practices that are now considered as tick-mark practice. It will be
beneficial to conduct further research to find backward linkage areas and the feasibility
of establishing these linkages. More research and empirical study may also be necessary
to analyse the supply chain issues of the sector.
 Insights of apparel supply chain operations 341

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