Posh Garments is a leading readymade garments manufacturer and exporter from Bangladesh, which started its operations from a small manufacturing unit in Tejgaon, the industrial area in capital Dhaka in 1984, to grow into a renowned name in the realm of apparel manufacturing over the years.
Apparel Resources caught up with Wasim Zakariah, Director, Posh Garments Limited,toknowhow the company is dealing with these changed and challenging times, subsequent to the outbreak of the COVID-19, and what he thinks needs to be the ideal strategy to deal with the contingencies going forward. Here are the excerpts…
How has been the business since the industry resumed operations after coronavirus-induced shutdown?
Wasim Zakariah: Business has been very difficult since reopening. First, we had to implement strict preventive measures against COVID-19 to ensure workplace safety. Constant screening and educating workers and staff still remain a very tedious activity. Secondly, we had to negotiate with our buyers/brands to reinstate the cancelled orders; the orders that are reinstated are now being delivered at a deferred delivery date under new payment terms and conditions, which has also increased cost for the manufacturers.
Third, we had to take loans from the Government to make payments to our suppliers and pay salaries to our workers and staff employees which were no easy tasks either. Last but not least, we now require orders to fill our production capacity to generate revenue to pay back the loans.
However, orders are not easy to come by and prices offered by buyers are difficult to sustain a profitable garment manufacturing business.
Under these circumstances, what are the various changes that you had to bring in terms of business approach, production procedures and operational aspects to remain viable?
Wasim Zakariah: With the pandemic in the backdrop, we all now have to be very vigilant, responsive, proactive and think out of the box. We have to deal with getting orders with shorter lead times, import raw material from alternate sources, transform to lean manufacturing, do small size orders with quick changeover in the production line and all the while try maintaining a high level of efficiency as well.
Any changes you may have witnessed in terms of buyers’ sourcing strategies and practices?
Wasim Zakariah: The changes I’m witnessing are like buyers are keeping the order quantity per style to a minimum and placing orders with shorter lead time at a very low price; payment terms and conditions are renegotiated and suppliers are being asked to reduce the price of their materials.
Given the situation, we are trying to cut costs and increase efficiency to breakeven, or in some cases, trying to make profit if we can. We now also have to respond to buyers’ queries and make decisions faster, accept changes that are demanded, and adapt to new ways of working for sample development, material sourcing and all necessary pre-production activities prior to starting garments production.
Any paradigm shift from the buyers’ end that you foresee, keeping in consideration the contingencies that are in hand?
Wasim Zakariah: I feel, going forward, buyers will be more cautious in terms of sourcing garments. They will remain watchful for any further outbreak of the COVID-19 virus which can seriously disrupt the supply chain or accumulate a large inventory.
Besides, any abnormalities, say unusual weather or sudden change of Government policies, may have an adverse effect on sales as well. Buyers are not only placing orders with shorter lead time, but also restricting the order quantity to a level where they sell out with zero-stock in inventory; if sales are good, they are placing repeat orders.
At the outbreak of the pandemic, there were massive order cancellations/hold-ups, which were later said to be reinstated. What is the overall scenario in this respect?
Wasim Zakariah: We have successfully reinstated all our cancelled orders. However, we have accumulated a huge amount of debt by taking loans from the Government stimulus package to pay our suppliers and our employees. But we need orders from our buyers/brands so that we can run our production in full capacity to generate enough revenue to pay back our loans.
What is the current status of order bookings (first half of the current financial year)?
Wasim Zakariah: Since the reopening of our factory in May, we have reduced our production capacity by 27 per cent due to which, we had a good production run in July. But we had a slump in the month of August and the first week of September as we had a low booking.
However, we are now fully booked till October and receiving orders for November and December. We are hopeful that we’ll be able to fill up our production capacity as the peak season is approaching (from mid-November ’20 to mid-April ’21).
Overall, the export figure for July is a positive indicator for our RMG sector, but then again, there was a relatively lower export in August. It is too early to compare the order bookings with last year, as we are yet to complete the first quarter of the current financial year.
Given this changed milieu, going forward, what you think would be the major challenges and areas of opportunity from the industry’s perspective?
Wasim Zakariah: The major challenge will be to build back the financial resilience of the RMG industry, reduce the dependency on importing raw material from China, transform to lean manufacturing, increase efficiency in garment production and build the expertise to do small orders with shorter lead time.
However, the opportunities will be to have highly productive manufacturing units, increase product range and maintain a high level of workplace safety.
There were also a lot of assumptions on businesses (orders) moving out of China, and Bangladesh touted to be the beneficiary of the same. What are your views on this?
Wasim Zakariah: If there’s any business shift from China, then Bangladesh should be a beneficiary. After all, we are the biggest manufacturer in denim and one of the biggest in knits… in terms of labour cost, the number of factories, expertise in producing basic items in large volumes and in the level of compliance.
Bangladesh is still in an advantageous position. It is too early to tell right now how much business has been diverted after the spread of COVID-19 has abated. It is to be seen as to what strategy the retailers/brands formulate, what new trade agreements are made by member countries of the European Union in the coming months and how the US Presidential elections play out in November.
What are your views on China granting duty-free access to 97 per cent of Bangladeshi products? How would this affect the RMG sector?
Wasim Zakariah: China’s move to grant duty-free access to 97 per cent of Bangladeshi products will not only benefit the RMG sector, but also the Bangladesh economy as a whole. This will reduce our current trade deficit that we have with China.
As per APTA (Asia Pacific Trade Agreement), a garment manufacturer was allowed to export a certain category of garments to China, provided there is a 30 per cent value addition in garments. Under the new duty-free access scheme, a garment manufacturer can export all categories of garments but with a 40 per cent value addition in garments.
Also Read: Face masks creating ripples in Bangladesh
Due to the pandemic, global demand for PPE and face masks has increased significantly, thereby opening new windows of opportunity for Bangladesh. What do you think of this?
Wasim Zakariah: There are two categories of masks – medical and non-medical. A medical mask requires a very specific type of material, a specially set-up manufacturing process and certification. Currently, we do not have such resources or set-ups to produce medical masks in mass numbers. However, for non-medical masks, we have a huge potential in Bangladesh.
More than 30 factories are currently manufacturing and exporting such types of masks where the supply has surged in huge percentage as compared to the same period of last year. Some mills in Bangladesh have also started producing fabrics with the anti-viral and anti-bacterial finish and spun bond non-woven fabric. Technical know-how is not much difficult.
Owing to the pandemic, expansion and investment on technology/automation seem to have taken a backseat. Your views?
Wasim Zakariah: COVID-19 has affected every industry in every country. Bangladesh, or in particular, our RMG industry is not any different. The pandemic has thwarted the automation and expansion projects for a while. But the manufacturers who have invested will not sit back and would be rather anxious to bring their projects back on track quickly.
As a manufacturer, what is your opinion on Government and the BGMEA’s role and efforts towards mitigating the garment makers’ challenges?
Wasim Zakariah: Our Government, under the leadership of HPM Sheikh Hasina, and our association BGMEA, under the stewardship of Dr. Rubana Huq, have worked tirelessly to mitigate every problem/challenge we have faced, and I am confident that our leaders will leave no stone unturned to bring back a resurgence in our RMG industry.