The 4th Industrial Revolution: How It Is Changing the Ready-Made Garments Sector of Bangladesh

From being the unsung hero for the country’s economy in the ’80s to become the major source of export earnings, the ready-made garments (RMG) industry has become one of the crucial industries for the Bangladeshi economy. Today, Bangladesh is one of the largest garment exporters globally, coming third after China and Vietnam. [16]

However, Bangladesh is losing in competition with Vietnam, overtaking Bangladesh as the second-largest garment exporter in 2020. [2] The country remains a substantial exporter of garments to Europe, having a market share of 12.5% in 2020 and a 7% growth rate during 2011-2020. But this growth trend is now threatened as Vietnam entered a new preferential trade agreement with the European Union (EU) in 2020. As for United States exports, Vietnam has been outperforming Bangladesh for over a decade as the preferred sourcing country for U.S. executives. [2] A significant reason behind this shortcoming is that the Vietnamese RMG industry has been a better recipient of 4IR tech compared to Bangladesh.

In each industrial revolution, new technology and inventions contribute to improving industries and human lives. The 4th industrial revolution (4IR) reshapes how people work and live. In the apparel industry, the 4IR is changing the traditional operational methods through automation, artificial intelligence, 3D printing and knitting, robotics & intelligent manufacturing, augmented reality, etc. At the same time, it is also changing the industry itself by introducing new consumer trends. As the RMG sector is becoming increasingly competitive through the adoption of 4IR tech, it is imperative now that Bangladesh embrace & adopt the technological advantages to keep having a larger share of global garment exports.

Current Trends in the Industry

A Shift from Labour-Intensive Low Productivity to High Productivity

Until recently, global fashion apparel sourcing has been following a cost-saving model. [3] This is why ready-made garments took off in Bangladesh – the country could provide suitable quality apparel at a meager price due to affordable labor. Around 37 public and private universities produce textile graduates in Bangladesh every year, adding to the skilled workforce available labor. This helps maintain quality as skilled labor keeps the quality control of fabrics & design in check. [4]

Bangladesh has one of the lowest minimum monthly wages for clothing production, which, coupled with the availability of a prominent labor force, made the country an attractive sourcing hub for clothing. [4]

In recent years, job creation in the RMG sector has de-accelerated due to increased automation. According to the World Bank, this trend will likely continue and accelerate in the post-pandemic era. So, Bangladesh cannot compete globally with low labor-intensive productivity anymore. Instead, firms need to quickly adopt improved technology across business functions, which will result in higher productivity. [6]

From Cost-Based Model to Fast Fashion

As previously stated, global apparel sourcing has followed a cost-efficient trend. In recent years, changes in the fashion industry have impacted the sourcing model, which transitioned into a trend termed ‘fast fashion.’ Fast fashion refers to inexpensive and trendy apparel that is made & sold in the market in record times. The idea of fast fashion is to design, manufacture, and produce high volumes of clothing, replicating any ongoing trend and constantly updating the shelves of retail stores. Lower costs of making garments, streamlined operations, and rising consumer spending are the main reasons behind the growth of fast fashion. [7]

As a result of fast fashion, the average amount spent on clothing by a consumer has increased by 60 percent from 2000 to 2014. And across most apparel categories, consumers are now keeping clothing articles for only half as long as they did 20 years ago. [7]

Now, fast fashion clothing items are updated weekly by fashion brands such as Zara, H&M, Topshop, etc. Before fast fashion came globally, clothing was made on a seasonal basis. So, new clothes would be released in fall, winter, spring, and summer. In contrast to fast fashion, seasonal clothing takes about a year to go from a concept to the hands of a customer. It takes about 6 to 8 months to conceptualize a design and prepare the clothing articles for production. Then, it takes another 2 to 3 months for the finished clothing to reach the hands of a customer. This 1-year lead time is inefficient for today’s consumers, as fast fashion requires trendy clothes to reach customers within weeks. [3]

So, being cost-efficient is not the only requirement anymore. Faster production and reduced lead time are needed to stay on top of the industry. Digitalization and automation are crucial for the ready-made garments industry to keep up with the ever-changing market. For example, the lengthy design conceptualization, sample-making, and prototyping process can be replaced by a photo-realistic virtual simulation of design concepts. By incorporating technology in automating various manufacturing steps, the requirements of fast fashion can be met.

From ‘Fast Fashion’ to ‘Accurate Fashion’

As established before, fast fashion has risen due to low-waged production. Thanks to overnight production of the always-fluctuating consumer needs, this fast-fashion model is now evolving into ‘accurate fashion.’ [8]

Accurate fashion refers to correctly matching the ever-fluctuating trends of the fashion industry. It includes following all the nuances of consumer demands and making apparel that perfectly fits the nuances and trends. For example, accurate fashion can be driven by global sporting events, such as the Olympics, or major fashion events, like the Met Gala. Undoubtedly, flexibility is required to match the accuracy, as the demand for clothing may depend on the result of a football match. Another consequence of this trend is that the average manufacturing lead time has now gone from 120 to 90 days. [8] [9]

This new accurate fashion model has brought forth at least four different trends – near-shoring, automated production & digitized designs substituting manual labor, less time spent on transporting goods, and a nuanced, accurate apparel supply. [8]

Reshoring and Near-Shoring

As fast and accurate fashion requires in-season reactivity and quick entrance to the market, a trend of reshoring or near-shoring has risen. Reshoring refers to taking back production from offshore areas, and near-shoring refers to moving production near the market for less transportation time. In today’s market, the marginal cost saving by offshoring is often beaten by the agility to introduce on-demand clothing within days or weeks. This challenges the traditional supply chain of the global garments industry. The following figure from McKinsey & Company portrays the savings on a pair of jeans from nearshoring –

Another trend related to this is the increased awareness of the environmental impact of the traditional linear global supply chain. According to McKinsey & Company, environmental sustainability will become a key apparel purchasing factor by 2025. Companies need to invest in automation, nearshoring, and sustainability to address the linear supply chain and increased need for quick transportation. [10]

This brings us to the question – how much automation is enough to prompt companies to reshore? Research suggests that adding one robot per 1000 laborers in offshoring apparel manufacturing is linked to a 3.5% increase in reshoring activity. [11] Another way of measuring the tipping point for reshoring is labor reduction. On average, six workers are replaced by one robot. One example of reshoring is Adidas, which relocated its factories in the United States and Germany, employing 160 people instead of 1000 in a similar factory in Asia. [11] So, a certain point in labor reduction justifies reshoring or nearshoring.

Green Industrialization

According to the World Bank, the global fashion industry is responsible for 10% of the yearly global carbon commission. This figure will grow more than 50% by the next decade at the current growth rate. The industry is also a significant source of water consumption and wastage. Ninety-three billion cubic meters of water is used by this industry annually – which is enough to meet the consumption requirements of 5 million people. Furthermore, about 20% of the world’s total annual wastewater is produced from fabric treatment and dyeing.[12] The rise of fast fashion has exacerbated the industry’s negative impact on the planet. It is now a challenge for cloth makers to find a sustainable way to grow and operate without being an enemy of the planet.

With these challenges in mind, the Bangladeshi RMG sector has made a robust initiative to adopt ‘green manufacturing’ practices – using innovative technology to bring solutions to saving energy, water, and resources. Technology has been bringing in alternatives such as waterless dyeing, bio fibers, conversion of waste to new fabrics, etc. [3]

Currently, Bangladesh has the greenest RMG sector in the world, with over 150 apparel factories meeting the standards of Leadership in Energy and Environmental Design (LEED) certification made by the US Green Building Council (USGBC). [13] Of the ten highest-rated LEED-approved global garment factories, 6 are located in Bangladesh. [14] The number of LEED-certified factories is higher than any other country, making Bangladesh the leader in green manufacturing.

Green factories can cut down energy use by 40% and consumption of water by over 30%. They also emit less carbon dioxide compared to traditional factories. Alongside green practices, workplace safety has also been given priority in the construction of green factories. [13] All of these efforts have added a higher value to Bangladesh’s RMG products, which gives the country preference from foreign buyers and investors in the RMG sector. [14] A survey by McKinsey has found that  87.5% of the respondents have listed sustainability and transparency as their largest concerns for apparel sourcing. [15]

Major Caveats the Industry Has In Light of 4IR

Unproductive Labor

With the adoption of new technology and automated processes, it is to be expected that the labor force will face unemployment or less growth in employment generation. Introducing machinery in operations has a higher probability of impacting unskilled and semi-skilled labor than skilled labor. A significant drawback of the industry is that most workers are unskilled, and these people will lose out the most due to the adoption of 4IR technologies. [17] According to Asian Productivity Organisation (APO) 2020 databook, Bangladesh’s labor productivity is one of the lowest among South Asian nations. [18]

Automation will also create some jobs in the service sector, but these jobs will require a skilled workforce. Some of the laborers whose jobs will be lost will be diverted to these new jobs, but they will require education and training to be eligible for this. [17] The key reasons behind the unproductive labor of the country are attributed to the –

• Low wages,
• Insufficient training,
• Deficiency of nutritious food,
• Lack of a proper work environment,
• Inadequate education, and
• Unhealthy living conditions.

As the exports of RMG products grew in the last four decades, the authorities have not taken subsequent steps to increase worker productivity.[19] As most people working in non-managerial roles in the industry are not highly educated, training them to operate automated machines will be a challenge. 

Concentrated Production & Export Destinations

One of the reasons Vietnam has overtaken Bangladesh is that the country’s RMG sector has a much more diverse product basket than Bangladesh. The top 5 products, trousers, men’s shirts, y-shorts, women’s shirts, and sweaters, mainly made of cotton, make up about 73% of the total apparel export of Bangladesh. [20] Among these, the cotton t-shirt is the iconic export product of the country, accounting for one-fifth of total RMG exports to Europe in 2019. Bangladesh supplied 59% of all imported cotton t-shirts in Europe. [2] The global apparel market trends have changed, so Bangladesh’s cotton dependency lags the industry behind. The global market of cotton fiber apparel went from 75% to 25% in recent years. Consequently, the demand for cotton in the industry has decreased. [20]

Bangladesh is also overly dependent on Europe (62% of total exports)  and the US (18% of total exports) market as export destinations. As stated in the article’s opening, Vietnam has entered into a preferential trade agreement with the European Union. In addition, Vietnam also trumps Bangladesh in exports to the US. In 2020, Vietnam exported RMG products about 2.5 times as much as Bangladesh. [2] So, Bangladesh needs to diversify its export basket to keep up with the competition. Bilateral and multilateral agreements with export destinations can also help in this regard.

Lack of Financing

The early adopters of automation in the RMG industry of the country are large apparel factories. These factories employ many laborers, have their factories and premises to operate on and get steady export orders. New technology has boosted efficiency, which helps the factories meet the demands quicker and bring diversity to their product basket. [21]

In contrast, small and medium factories are falling behind as they cannot afford expensive automation. These factories depend on sub-contracting. Because of low bargaining power, they often take export orders at lesser prices. [21] In a survey conducted by the Financial Express, about 50% of SMEs attributed the lack of financing as the key barrier to technology adoption. [6] As a result of being unable to ride on the wave of automation, many small & medium factories are now struggling to operate at least at the break-even point. [21] Hence, a more robust financial sector and support from the government are needed to foster automation in small to medium garment factories.  

Decrease In Female Employees

The percentage of female workers in the industry has slowly decreased. The total percentage of female employees in the garments sector went from 64.7% in 2015 to 59% in 2020, registering a decrease of -0.7% per year. [23] This is because women workers are concentrated in low-paid jobs in the ‘production’ sector. 97.1% of women and 80.8% of men are employed in the production sector. Moreover, most of the higher-level positions in the production section were men. There are seven salary grades in production, grade 1 being the highest-paid and grade 7 being the lowest-paid. A survey by the International Labor Organization has revealed more men in grade 1 and 2 level positions, and more women than men made up the lower-level positions (grades 3 to 7). [24] As automation led to job losses, women workers in lower-level positions became victims of job loss. As a shift to more skilled work is happening, men are preferred over women for these roles. [22]

The Way Forward

Invest in Human Capital

Labor is what made the RMG industry what it is today. As the unproductivity of labor and job loss are the two biggest concerns of the industry in light of 4IR, it is pivotal that steps be taken to upskill and reskill the weak labor force to turn it into a semi-skilled or fully skilled one. Many plans have been made to address this elephant in the room, but very few have been impacted. Apart from training needs, the low wage keeps the labor unproductive as workers do not make enough to maintain a balanced diet.

Undoubtedly, need-based and institutional training is needed for upskilling & reskilling. [19] Government, as well as industry-owner initiatives, such as the activities of the National Productivity Organization (NPO), Skills for Employment Investment Program (SEIP) project, the National Skills Development Authority (NSDA), the BGMEA University of Fashion & Technology (BUFT), etc. all, have to focus on providing future-forward training that falls in line with the adoption of an automated technology. While developing any curriculum focused on upskilling & reskilling, the average education level of garment workers should also be considered to create training programs and curricula that are genuinely effective. 

Diversifying Products Basket

Dependency on cotton products and a few major export destinations are significant drawbacks to the industry’s growth. Diversifying the product basket and export market is crucial for the RMG industry to stay competitive.

The RMG sector is already trying to introduce more complex products and value-added services. The capacity for producing garments made from synthetic fibers has increased. Complex products such as lingerie, outerwear, and tailored items are also made. In addition to that, new prints, washes, and laser finishings are also being made. Such diversification can help the industry cater to new export destinations and increase exports to the existing ones, eliminating the issues caused by dependency on cotton and a few major export destinations. Entry and growth into these new segments can increase Bangladesh’s integration in the vertical supply chain. [2]

The shift from People-Centric to Process-Centric

Many of the industry’s factories rely on a few key individuals, particularly in the top managerial positions. The reliance is so high that few successful factories even ended up closing after a General Manager or Executive Director resigned. This over-dependence of people needs to be shifted to processes instead. By installing new technologies and adopting new efficiency-improving practices, apparel factories can increase overall efficiency and decrease dependency on individuals at the same time. [20]

Becoming Super Vendors

Super vendors have short lead times, faster order runs, more diverse styles, and high-fashion apparel. Lead time needs to be reduced to handle more style changes, staying in tune with the fast and accurate-fashion industries. Digital transformation also helps reduce the cost of bidding for more orders. Vendors can also offer different technologies such as Assist AI, artificial solutions, creative virtual, etc. [25]. As the competition moves, Bangladesh has to embrace digital transformation and become a super vendor to keep the lion’s share of the pie. 

Despite the hurdles along the way, the future of the RMG sector of Bangladesh is not too bleak as new opportunities are opening up. For example, US-based fashion companies are shifting sourcing away from China due to the US-China trade war, and Bangladesh is one of the best alternatives available. [15] Some of China’s RMG factories have already off-shored and started operating in Dhaka. [6] Furthermore, adopting compliance, transparency, factory & occupational safety, and green industrialization makes it an attractive choice for RMG products. [2] [15] With proper training in the labor force, financing to the SMEs, and the embracement of technology throughout the industry, the RMG sector can once again step up its game to become the hero of the Bangladeshi economy.

Mariam Bint A. Mannan, Content Writer, and Dipa Sultana, Business Consultant at LightCastle Partners, have prepared the write-up. For further clarifications, contact here: [email protected]

References

1. Share in world exports of the leading clothing exporting countries 2019 – Statista

2. What’s next for Bangladesh’s garment industry after a decade of growth? – McKinsey

3. Is Bangladesh’s apparel sector ready for industry 4.0? – The Daily Star

4. What Makes Bangladesh — A Hub Of Garment Manufacturing? – Medium

5. Infographic: Where Pay Is Lowest For Cheap Clothing Production – Statista

6. Improving the manufacturing sector’s productivity is crucial for Bangladesh to boost export: World Bank – The Financial Express

7. Style that’s sustainable: A new fast-fashion formula – McKinsey

8. RMG automation: Implications for Bangladesh – The Financial Express

9. How the death of fast fashion is transforming Asia’s garment industry – Nikkei

10. Is apparel manufacturing coming home? – McKinsey

11. RMG sector’s tipping point – The Daily Star

12. How Much Do Our Wardrobes Cost to the Environment? – World Bank

13. Is Bangladesh RMG industry greenest in the world? – Dhaka Tribune

14. Balancing global and regional value chains for the RMG industry – The Financial Express

15. Fashion’s new must-have: Sustainable sourcing at scale – McKinsey

16. WTO | Trade Statistics – World Trade Statistical Review 2021 (WTSR 2021) – World Trade Organization

17. Automation: A threat for RMG workers or an opportunity for the sector as a whole? – The Daily Star

18. APO Productivity Databook 2020 – Asian Productivity Organization

19. RMG’s low labor productivity a major post-LDC challenge – The Business Standard

20. Innovation necessary for sustainable growth of Bangladesh’s RMG industry- The Business Standard

21. Automation is not hurting RMG employment… yet – The Daily Star

22. Confronting the challenges of the unskilled workforce in RMG – The Daily Star

23. A Survey Report on the Garment Workers of Bangladesh 2020 – Research Gate

24. Understanding the Gender Composition and Experience of Ready-Made Garment (RMG) Workers in Bangladesh –  International Labor Organization

25. What technological changes should the RMG sector embrace? – The Daily Star