CHAPTER: 1

INTRODUCTION

Page 1 of 65
1.0 Introduction

Minimizing the sum of quality costs related to limited resources forms one of the
main determinants in a company’s success. In production systems, resources such as
labors inspecting items produced, labors training personnel to prevent items from
erroneous results, labors reworking on erroneous items , labors dealing with
complaints about erroneous products etc. are limited. Hence, it is important to find out
the most suitable mix of conformance and nonconformance costs of products in
allocation of the scarce resources. In literature, the cost of poor quality as a result of
imperfections of a vendor’s incoming input materials and the errors of the
manufacturing process. An optimization model including appointment of the cost of
quality between the two parties as buyers and suppliers models optimizing total
quality costs including each quality cost components has not been studied extensively.
In this study, a generalized optimization model for a multistage production system
based on quality costs as conformance and nonconformance costs has been developed.

1.1 Objective of the Study

1.1.1 Broad Objectives:

The general objective of this study is to determine the present activities of garments

manufacturing and the significance of their role for smooth, efficient and effective

marketing process of garment products overseas.

1.1.2 Specific Objectives:

However the specific objectives of the study may be described as:

 To identify the challenges of Garment Products in the Global Market.

 To sketch the overall condition of the Bangladeshi garments product in the global
market.
 Investigate the obstacles to the efficiency and effectiveness of smooth cost and
production of garment products.
 To give some recommendation how the garment products can face the challenges
and overcome the obstacles.

Page 2 of 65
1.2 Scope of the Study
 The study will give a clear idea about the cost and p production system
 The study will also help us to understand the role of Buying Houses in the
socioeconomic development of the country.
 It will flourish obstacles to the existing roles of buying houses in exporting the
garment products.
 Finally, ways to overcome the obstacles to their existing roles.

1.3 Limitations
The time was one of the major constraints. As our internship program is 4 months
long, it was difficult to cover and collect all the necessary materials for completion of
such a large report within this time boundary.
I also would like to mention that the people of Ratul Knitwear & Fabrics Ltd are
under tremendous workload. Although, they wanted to co-operate me in writing my
report, their busy schedules sometimes did not allow them to do so. On the other
hand, due to secrecy of official information, sometimes they showed unwillingness to
provide me information.

1.4 Methodology
In order to conduct such a study the reports prepare must follow some specific
methods. This report is based on the Primary and Secondary data.
1.4.1 Organization Covered:
This study mainly covers not a particular organization. The relevant data are collected
from the head office of the Ratul Knitwear & Fabrics Ltd and sister concerns.
1.4.2 Analysis Technique & Report Writing (Research Design)
At first, we went to Ratul Knitwear & Fabrics LTD. industry and collect information
from the personnel. In preparing this report, we approached according to the
following procedure:

Page 3 of 65
 Select the topic

Access potential alternatives

Sorting information

Analysis and evaluation of the

information

Report writing and presenting

1.5 Aspects of the analysis:

In the context of Bangladesh, the development of RMG sector can be considered as a
vital instrument to ensure the rapid industrialization. In this paper i have tried to
identify the costing procedure of Ratul Knitewawe ltd . So in this report I will
consider to find out the several aspects.
• Available structural or Environmental factor which leads to the production.
• What are the available meterials and elments that are use to production .
• The cost allocation system of every step of production .
By this analysis I would like to find some recommendation and suggestions to
overcome these obstacles.

1.6 Criteria of analysis:

In this study I tried to findout the several factor of production which leads to incrising
or decresing the production cost .This is basically a primarey and secondary data
based report . Most of the data has been collected from primarey sources. So the
report has been based organizational data which is available in any form such as
financial statement of Ratul kniteware limited, books, journals, magazines,
newspapers etc.
To continue this process I would like to accumulate some information as follows:

Page 4 of 65
 • I picked data from the five Ratul kniteware limited.
• I tried to point out the production factor basically the direct meterials
and its cost .
• Based on primarey data I try to explore the extend of the production.

1.7 Variables
1.7. 1 Dependent Variable: Variables which is dependent on others that mean the
change of an independent variable can leads to change the result of the dependent
Variables. Here the dependent variable is Cost of the kniwteware Sector of
Bangladesh which is depends upon the several independent facto.
1.7.2 Independent variables : Variables which has effect on the result of the
dependent variables that mean due to change of independent variables the dependent
variable ultimately get a change .Here Independent Variables are as follows:
• Fabrics Price
• Neck Rib Price
• Accessories Test Charge
• Accessories Item
 Sweing Accessories
 Main Label
 Size Lable
 Care Lable
 Sweing Thread
 Additional Label

 Finishing Accessories
 Hang Tag
 Price Tag
 Tag Pin
 Gum Tape
 Scotch Tape

Page 5 of 65
  Carton
 Poly
• Documentation Charge
• Print/Embroidery
• Allover Print (Rotary Print)
• Stone (Motive)
• Zipper
• Snap Button/Normal Button/Special Button
• Drosting/Twell Tape/Herring bone tape
• Elastic

1.8 Source of data:

All the relevant data regarding this study are collected from two sources. These
Are:

 Primary data: It includes the following sources of data. In-depth ask the
question of the employee.

 Secondary data: I need much information for the report, which we get from
secondary data. These are:

 Ratul Knitwear & Fabrics Ltd.

 Ratul Knitwear & Fabrics Ltd sister concern.
Different types of document of Ratul Knitwear & Fabrics Ltd.
World Wide Web

Page 6 of 65
 Chapter 2
World Wide Garments
Sector

Page 7 of 65
Worldwide Garments sector

2.1 Garments Industry in India:

The garments industry in India is one of the best in the world. An extremely well
organized sector, garment manufacturers, exporters, suppliers, stockists and
wholesalers are the gateway to an extremely enterprising clothing and apparel
industry in India. There are numerous garments exporters, garments manufacturers,
readymade garments exporters etc. both in the small scale as well as large scale.

During April-December 1999-2000, textile exports were recorded as US $ 9735.2

million (Rs.440179.4 million), of which ready made garments comprised nearly 40%.
Interestingly, almost ¼ of India's total exports goes to the USA.

Indian readymade garments and textiles are extremely popular the world over. In fact,
exports of readymade garments registered a 6.4% increase in dollar terms and an
11.6% increase in rupee terms during the period April-December 1999-2000, despite
a sluggish growth in income both at home and abroad. Indian Garment export growth
during April-June 1998 for woolen ready made garments was a phenomenal 150%,
for ready made garments made of silk it was 58%, and for other ready made garments
it was 39%, in dollar terms.

Today, garments exports from India have made inroads into the international market
for their durability, quality and beauty. One of the reasons for the economical pricing
of India's ready made garments and apparels is the availability of highly skilled, cheap
labor in the country.
2.2 Garments industry in China:
The financial crisis in the second half of 2008, made some major developed countries
in Europe and the United States’ economy went into the worst recession, which has

Page 8 of 65
brought a heavy blow to many developing countries and regions’ export-oriented
economy. As the financial crisis spread to the real economy, the international demand
declined significantly. As the largest textile-producing countries in the world, China's
textile industry has also suffered a dramatic impact. China's textile industry had a
marked increase tended to decline for the first time after consecutive years of steady
and rapid growth. In 2009, the impact of international financial crisis was still
lingering, the international market remained in the doldrums, and the textile industry
is still facing with the non-optimistic external situation. In the harsh international and
domestic environment, in order to cope with financial crisis and achieve sustainable
growth of China's textile industry, study the impact that the international financial
crisis on trend of China's textile industry then put forward some guidance. But it’s still
relatively small to study in perspective of combine the status of the Chinese textile
industry and their problems, as well as the financial crisis triggered a chain reaction.
Only in-depth study of the financial crisis and Chinese textile industry China’s export
trade has important theoretical and practical significance. Most of the domestic and
foreign scholars are concentrating on the perspective of the impact that financial crisis
on export trade, to study the situation of China's textile industry and made a number
of coping strategies, or comparing the domestic and foreign policies and economic
environment trajectory to the study of the development its own problems, we can be
more targeted to guide China's textile industry to deal with the crisis, otherwise, just
remain at the surface of a general study is no practical guiding significance. This
paper based on reviewed the literature and relevant literature at home and abroad,
through in-depth analysis of the status quo and existing major problems, as well as the
financial crisis on the real impact of China's textile industry, ompared some of the
data in recent years, made corresponding countermeasures for the characteristics of
the textile industry of our country.

2.3 The Garments industry in Sri Lanka:

The garment industry in Sri Lanka expanded rapidly after the liberalization of the
economy in 1977. During the 1990s, the garment industry grew at 18.5 per cent per
annum. The export-led expansion of the industry led to the replacement of tea by
garments as the nation’s largest foreign exchange earner. Moreover, the industry has

Page 9 of 65
been contributing to the livelihood of nearly 1.2 million people. However, the boom
period for the industry is gradually coming to an end, with the quota system having
ended on 1 January 2005, regional trading blocs and bilateral free trade agreements
proliferating and governing nearly 33 per cent of global trade, and China emerging as
a major supplier of garments at very competitive rates. The Sri Lankan garment
industry is now gearing itself to face these challenges. This paper provides a broad
overview of the industry and analyses how the industry is preparing itself to meet the
global challenges. Section 2 provides a brief overview of the garment industry in Sri
Lanka. Section 3 gives a broad picture of the competitiveness of the Sri Lankan
garment industry.

These statistics clearly indicate that Sri Lanka is highly dependent on the
industry for both employment and foreign exchange earnings. Foreign direct
investment (FDI) has been very significant in the sector, accounting for 10.4 per cent
of total cumulative FDI in 2003. According to the available data from BOI, foreign
investors own close to 50 per cent of total garment factories and account for nearly 50
per cent of total textile and garment exports (USITC, 2004).2 Greater dependence on
imported textile materials indicates that Sri Lanka has a large export-oriented garment

Page 10 of 65
sector, but a small textile industry that has no capacity to supply the quantity or
quality of yarn and fabrics required by the garment industry.

In the early 1990s, a concerted effort was made to promote backward linkages
in the garment industry. Government-appointed delegations were sent overseas to
attract large textile producers to Sri Lanka. A number of textile producers that had
come up during the pre-1977 import-substitution regime and had found it difficult to
survive in the liberalized economy were privatized in the early 1990s. Despite all such
efforts, the development of backward linkages from the garment industry to the
textiles sector was very slow for a number of reasons (Kelegama and Foley, 1999). In
1997, the textile industry faced a major setback. The East Asian crisis had triggered a
currency depreciation in Indonesia and the Philippines – two of Sri Lanka’s
competitors in garment exports.

Today, the Sri Lankan garment industry remains a low value-added industry, though
some backward linkages had developed by the mid-1990s. There were 891 garment
factories in operation in 1999 — out of which 18 per cent was categorized as large, 50
per cent medium and 32 per cent small (TVEC, 1999). In 1999, 72 per cent of the
businesses were geographically located in the Western Province. Just 12 per cent of
the factories control around 72 per cent of the exports (CBSL, 2002:103). Some of the
top producers have developed strong and reliable links with well-known international

Page 11 of 65
retailers indirectly by buying intermediaries. Sri Lankan garments that were highly
quota-dependent initially have now become less dependent on quotas, with 47 per
cent of exports coming under the non-quota system in 2002.4 Most Sri Lankan
garment exports are destined for the United States (63 per cent) and European Union
(30 per cent); hence, there is not much market diversification. The key varieties of
garments that Sri Lanka exports are: HS 6204 (women’s or girls’ suits, and similar
items under this category), HS 6203 (men’s or boys’ suits, and similar items under
this category), and HS 6206 (women’s or girls’ blouses, and similar items under this
category). Sri Lanka is well known as a top exporter of women’s lingerie. Sri Lanka’s
garment industry has a fairly reputable status in the international market. Sri Lankan
garment exports to the United States market coped well with the emergence of
NAFTA in 1994 despite many pessimistic views expressed at that time.5 Sri Lankan
garment industrialists have opened factories in Bangladesh, Maldives, Jordan, Kenya
and Mauritius, among others, and are performing well. The large and well-established
garment producers have featured in published works (Friedman, 2000). The Sri
Lankan garment industry has gone through turbulent times; for instance, during the
1988-1989 civil conflict; in 1993, when countervailing duties and embargo were
imposed by the United States; and in 2001, when war-risk premiums and surcharges
were imposed after the bomb attack on Colombo International Airport. The industry
currently employs around 330,000 people and sustains the livelihood of around 1.2
million others.

The competitive strength of the Sri Lankan garment industry is based on cheap labour,
a literate labour force, high labour standards, investment-friendly government policies
and strategic shipping lanes. On the other hand, there are also competitive
disadvantages, such as long lead times, weak marketing, lack of product development
and low labour productivity partly due to outdated technology. In 1983, Sri Lanka
experienced civil conflict and many foreign investors, including foreign garment
industrialists, shied away from the country. Some moved to Bangladesh; others
moved to newly emerging low labour-cost East Asian countries, such as Cambodia
and Viet Nam. Labour costs were comparatively low in these countries and, by the
mid-1990s, Sri Lanka could no longer compete on the basis of low-cost labour and
measures had to be taken to improve the productivity of the sector. Low productivity
has offset to some extent the low labour-cost advantage of Sri Lanka. A study on the
Page 12 of 65
productivity of the garment sector shows that there are a number of issues pertaining
to low labour productivity in the garment industry and that there is substantial room
for improvement (Kelegama and Epaarachchi, 2002). One area that requires
upgrading is the development of human skills to deal with the technological changes
taking place in the garment industry. To meet the growing demand for semiskilled
workers in the industry, two training institutions, viz, the Textile Training Centre and
Service Centre and the Clothing Industry Training Institute came into operation, both
in 1984. In addition, a private sector training institute, the Phoenix Clothing Training
Institute, was established in 1998. A number of design schools have emerged, with the
Department of Textile & Clothing Technology in the University of Moratuwa
becoming the apex body for design. Design courses have been introduced, with the
collaboration of the London School of Fashion Design, to keep pace with the latest
fashion developments in the world and to train workers to match the demand. The
Asian Development Bank (ADB) has given a grant to set up a major fashion school at
the University of Moratuwa that is expected to be in operation by 2005. Sri Lanka’s
lack of competitiveness in garment products is not solely determined by low labour
productivity, firm level inadequacies and high turn-around time but also by
government policies. The cost of production in Sri Lanka has escalated in recent times
owing to the high cost of public utilities, such as electricity, water and
telecommunications (IPS, 2003). In fact, Sri Lanka’s electricity charges remain the
highest in Asia as a result of poor government policies contributing to
mismanagement in the electric power sector. If Sri Lanka is to gear itself to the post-
2004 challenges, a number of restructuring measures have to be taken in the garment
industry. Some measures have already been taken. Until recently, the Sri Lankan
garment industry did not have a strategy or plan for its future expansion. In 2002, the
industry came up with a five-year strategy report. This report contains a
comprehensive analysis of “strengths”, “weaknesses”, “opportunities”, and “threats”
(SWOT) and recommends a strategy for eliminating weakness, consolidating
strengths, making use of opportunities and minimizing threats. The report argues for
the establishment of a special research cell for the industry to keep track of
international trends in garment trading, and this cell came into operation in late 2002.
Having realized the need to speak with one voice in order to achieve a common goal,
garment industrialists and stakeholders set up the Joint Apparel Association Forum
(JAAF), a consortium of five different associations, in 2002.
Page 13 of 65
2.3 Trends in Production

Yarn and fabric production has been growing annually at 1.9% and 2.7% respectively,
since 2000. Yarn production has increased from 3,940 mn kg in 1999‐ 00 to 4,326 mn
kg in 2004‐05. Man‐made yarn has driven much of this, showing a robust growth of
4.3% in the last five years. Spun yarn production and the cotton yarn sector have also
grown, albeit less impressively, recording growths of 2.4% and 0.6% respectively.

Fabric production has been growing at 2.7% annually between 2000 and 2005, driven
primarily by the smallscale, independent powerloom sector. Growth in the 100%
noncotton segment touched 5%, followed by cotton fabric at 1.5% and blended fabric
at 0.3%. Fabric production touched a peak 45,378 million sq mtrs in 2004‐05, and in
Nov 06, production recorded a robust 9% growth compared to the corresponding
period in the previous year.

Page 14 of 65
Segment wise Exports, 2002-2006 (US$ bn)

Page 15 of 65
Though significant investments egment, the are are in the spinning and weaving US$
6.67 segments is expected by 2008. Of this, more in the than segments, while only
25% is expected inunits.

2.4 Slowdown in economic growth and market demand

As the financial crisis deteriorates, many countries, such as the United States, Japan,
the European Union, have always been in economic recession, which impair
international market demand. China's textile enterprises have to adjust the rate of
production in order to relieve the operational pressure and survive in changes in the
market by cutting production and reducing inventory. Such actions decelerate textile’s
production and exports totally, and shrink the ratio of investment growth. According
to the data of China's Textile Industry Association, in 2008, the gross industrial output
value of China's textile enterprises amounted to ￥ 3.478061 trillion, increasing
13.73% compared with the same period of the previous year, but falling 8.84% in
acceleration. And in the first eleven months of 2008, total profit of textile enterprises
reach to 104.225 billion, but falling 1.77% compared with the same period of the
previous year, and falling 38.76% in acceleration; profit margin is just 3.45%, lower

Page 16 of 65
than the same period last year by nearly 14%. And in whole year of 2009, exports of
China's textile industry is 1713.32 million U.S. dollars, lower 9.65% than the earlier
year; and imports is 16.924 billion U.S. dollars, lower 9.24% .

2.5 The corresponding strategy of China's textile industry

Facts have proved that if the textile industry exporting production to world markets
just rely on low cost, they will be very vulnerable to international economic situation
and trade policies, and more easily to be fined because of prosecutions against low-
cost strategy, which is not conducive to the entire textile exports. In order to enhance
product quality and the competitiveness of products, the textile industry should focus
on technological innovation, and constantly increase the scientific and technological
input to establish the overall product development system, in particular, to strengthen
high-tech, functional, differential fiber research and development and form of its own
technology brand. Under pressure of the current situation of trade and environmental
issues, the textile industry should be accelerated industrial transformation and
upgrading, exploit of new technology in textile processing, develop green and
environmentally friendly textiles actively, strive to obtain export "green pass" and go
green sustainable
development road. Meanwhile, the Chinese textile industry should dominate the
market by information technology, adhere to combine internal and external
information, analysis and establish of a sound global procurement and supply

Page 17 of 65
information systems and industry information network to adapt to the trend of world
consumption and textile trends, and thus win the market.

The implementation of scientific management methods and export market

diversification strategy
For a long time, China's textile mainly exports to three markets, the United States,
European Union, Japan, which reflects China's textile trade has a strong dependence
and instability. The concentration in some countries’ markets has led to the conflict on
China's textile products to protect their own markets and respond to the problem of
unemployment, and now under the influence of the financial crisis, China's textile
exports encounter more difficulties. Therefore, our textile industry should efficiently
implement the management methods and export diversification of the textile
production. Enterprises should select and plan to develop the potential markets,
reduce risks of market concentration, promote China's textile trade for sustainable,
stable and coordinate development. On the other hand, implement of the "going out"
strategy. At present, some countries and regions in Southeast Asia and Latin America
already have a textile industry base and lower-price labor, as well as favorable foreign
capital policy, domestic enterprises can consider to build factories there, avoiding the
fierce domestic competition and the regional restrictions on the importing country, or
acquisition of the importing country textile producers, thereby linking the research
and development, design, brands, retail outlets and other sectors in order to
circumvent trade barriers.

Strengthen macro guidance and support efforts to establish early warning

mechanism of trade friction
Textile industry is still an important Chinese traditional manufacturing industry and
has main effect on employment. So Government should support this labor-intensive
development of the industry on national policy in order to maintain the current
production and operation stability of textile enterprises. Meanwhile, to enhance the
international competitiveness of the industry, the Government should pay close
attention to formulate relevant policies and measures for technological introduction
standard of raw materials, semi-finished products, thereby consolidate the overall
textile industry technical capability. Facing national trade protection measures, the
relevant departments should establish a sound early warning mechanism for textile
Page 18 of 65
exports. Besides, they collecting, collating and publishing timely information on
international textile trade friction, which provides enterprises with comprehensive,
objective and timely information service to guide enterprises to promptly adjust the
investment and business activities. Once trade disputes generated, we should
strengthen the coordination and cooperation among the government, industry
associations and enterprises. Using international trade rules, we formulate
countermeasures and response positively. And, through a variety of channels and joint
efforts, we can resolve problems in order to maintain a fair trading environment.

Page 19 of 65
 CHAPTER 3
An Overview of
Bangladesh RMG
Industry

Page 20 of 65
3.0 Factories Of Ready Made Garments:

Factories of ready-made garments have developed with the growth of garment export
of our country through buying house and direct marketing. It is the combination of all
marketing activities relating to searching foreign garment buyers and local buying
house for the order of garments products, taking order of readymade garment products
from them, execute order to local factories and providing overall support to the
both prospective buyers and trims suppliers.

It has not been a long time since Garments have started sprouting up here and there.
Only a few years back where it was difficult to find a reliable and quality Buying
House, but now, there are so many of those.

Garments industry is the highest industrial sector in Bangladesh. In one hand foreign
Buyers and buying house of garment products are largely dependent on this industry
for buying RMG, who are capable to produce and supply buyers demanded products.

In other hand trims producers are also dependent on this industry for their products
that places the order of certain garment item such as sweater that the producer
produces. So the relationship between garment industry and buying house industry are
interdependent. The existence of one without other is hardly possible. The reason for
this again exporting garment product involves so many stages from marketing to
distribution, which is not possible by any single group to do alone. For the
convenience of both buyers and suppliers, the buying house industry today has
developed enormously with a vision to perform marketing and distribution task of
garment industry.

Page 21 of 65
3.1 Overview of Bangladesh RMG
The ready-made garment (RMG) industry of Bangladesh started in the late1970s and
became a prominent player in the economy within a short period of time. The industry
has contributed to export earnings, foreign exchange earnings, employment creation,
poverty alleviation and the empowerment of women. The export-quota system and the
availability of cheap labor are the two main reasons behind the success of the
industry. In the 1980s, the RMG industry of Bangladesh was concentrated mainly in
manufacturing and exporting woven products. Since the early 1990s, the knit section
of the industry has started to expand. Shirts, T-shirts, trousers, sweaters and jackets
are the main products manufactured and exported by the industry.

Bangladesh exports its RMG products mainly to the United States of America and the
European Union. These two destinations account for more than a 90 percent share of
the country’s total earnings from garment exports. The country has achieved some
product diversification in both the United States and the European Union. Recently,
the country has achieved some level of product upgrading in the European Union, but
not to a significant extent in the United States. Bangladesh is less competitive
compared with China or Bangladesh in the United States and it is somewhat
competitive in the European Union. The phase-out of the export-quota system from
the beginning of 2005 has raised the competitiveness issue of the Bangladesh RMG
industry as a top priority topic. The most important task for the industry is to reduce
the lead time of garment manufacturing. The improvement of deep-level
competitiveness through a reduction in total “production and distribution” time will
improve surface-level competitiveness by reducing lead time. Such a strategy is
important for long-term stable development of the industry, but its implementation
will take time. In contrast, the establishment of a central or common bonded
warehouse will improve surface-level competitiveness by reducing lead time, but
deep-level competitiveness will not be improved and long-term industry development
will be delayed. Therefore, granting permission to establish in the private sector such
warehouses with special incentives, such as the duty-free import of raw materials
usable in the export-oriented garment industry for reducing the lead time in garment
manufacturing is a critical issue for Bangladesh.

Page 22 of 65
Second, Bangladesh needs to improve the factory working environment and various
social issues related to the RMG industry. International buyers are very particular
about compliance with codes of conduct. Third, issues related to product and market
diversification as well as upgrading products needs to be addressed with special care.
Moreover, the Government of Bangladesh needs to strengthen its support. The
development of the port and other physical infrastructure, the smooth supply of
utilities, a corruption-free business environment and political stability are some
priority concerns for the Government to consider in its efforts to attract international
buyers and investors.

The RMG industry of Bangladesh has expanded dramatically over the last three
decades. Traditionally, the jute industry dominated the industrial sector of the country
until the 1970s. Since the early 1980s, the RMG industry has emerged as an important
player in the economy of the country and has gradually replaced the jute industry. The
“export-quotasystem”1 in trading garment products played a significant role in the
success of the industry. However, that quota system came to an end in 2004.
Therefore, the competitiveness issue needs to be addressed, with special attention
given to the long-term sustainability of the industry. The term “competitiveness” itself
is a broad concept. Its meaning, implications, adaptation and achievement vary from
firm to firm, industry to industry, or country to country. Michael E. Porter is a pioneer
of the “competitiveness theory” (Porter, 1990)at the national or macro level (Cho and
Moon, 2000). Firm/industry-level (micro level) competitiveness depends on various
parameters. However, the literature provides no universal agreement on the definition
of competitiveness. For example, some researchers consider the labor cost, unit cost,
exchange rate, interest rate, prices of material inputs another price- or cost-related
quantitative factor for measuring the competitiveness of manufacturing firm/industry.

Some other researchers consider product quality, innovativeness, design, distribution

networks, after-sales service, transaction costs, institutional factors relating to the
bureaucracy of export procedures and other non-price factors for measuring the
competitiveness of a manufacturing firm/industry The influences of both price and
non-price factors on the competitiveness of a firm/industry are reflected by market
share and profit. This study attempts to incorporate price, non-price and result (for
example, market share) factors in order to address the international competitiveness of
Page 23 of 65
the Bangladesh RMG industry. The majority of the competitiveness-related research
studies focus on the “competitive performance” or on the “factors influencing
competitive performance”. The studies consider product price, market share and other
indicators to measure competitive performance, while considering wages, costs,
productivity and other issues as factors influencing competitive performance.
However, the “capability “of 2 factor that influences the competitive performance of a
firm. According to him, improvement in the “capability” of a firm enhances its
“competitive performance”. This improvement takes time, but it ensures the long-term
sustainability of a firm. In contrast, improving only “competitive performance” and
not “capability” may not be sufficient to ensure the long-term development of the
firm. This study addresses the competitiveness issue from two broader dimensions:
surface-level and deep-level competitiveness.3 Surface-level competitiveness reflects
the “competitive performance” of a firm or industry that is directly observable to
consumers. Deep-level competitiveness reflects the “capability” of a firm or industry
that is not directly observable to consumers. An improvement in the deep-level
performance enhances the performance at the surface level. The severe competition
under the quota-free trading environment pressures the RMG industry of Bangladesh
to enhance its surface-level competitiveness at the earliest convenient time. However,
the long-term sustainability of the industry demands enhancement of deep-level
competitiveness. Therefore, the future development of the industry will depend on
how much importance will be given to which factors/dimensions, and how the
individual firms will respond and how government policies will influence the
industry. Hence, the discussion of the competitiveness of the Bangladesh RMG
industry requires simultaneous consideration of both the surface and deep dimensions.

In particular, this study uses (a) export value, product price, market share and lead
time as surface-level indicators, and (b) linkage expansion, factory environment,
product/market composition, and “production and distribution” time as deep-level
indicators for measuring the international competitiveness of the Bangladesh RMG
Industry. Provides an overview of the Bangladesh RMG industry. Section 3 discusses
the surface level competitiveness of the Bangladesh RMG industry. Section 4 focuses
on the deep-level competitiveness of the industry. Section 5 deals with the indirect
influences of governmental policies on the competitiveness of the Bangladesh RMG
industry.
Page 24 of 65
The RMG industry is the only multi-billion-dollar manufacturing and export industry
in Bangladesh. Whereas the industry contributed only 0.001 per cent to the country’s
total export earnings in 1976, its share increased to about 75 per cent of those earnings
in 2005. Bangladesh exported garments worth the equivalent of $6.9 billion in2005,
which was about 2.5 per cent of the global total value ($276 billion) of garment
exports. The country’s RMG industry grew by more than 15 per cent per annum on
average during the last 15 years. The foreign exchange earnings and employment
generation of the RMG sector have been increasing at double-digit rates from year to
year.

Important issues related to the Bangladesh ready-made Garment

industry.

Year(s) Issue

1977-1980 Early period of growth

1982-1985 Boom days
1985 Imposition of quota restrictions
1990s Knitwear sector developed significantly
1993-1995 Child labour issue and its solution

2003 Withdrawal of Canadian quota

restriction

2005 Phase-out of export-quota system

Currently, there are more than 4,000 RMG firms in Bangladesh. More than 95 percent
of those firms are locally owned with the exception of a few foreign firms located in
export processing zones (Gonzales, 2002). The RMG firms are located mainly in three
The RMG firms are located mainly in three main cities: the capital city Dhaka, the
port city Chittagong and the industrial city Narayangonj.

Bangladesh RMG firms vary in size Based on Bangladesh garment Manufacturers and
Exporters Association (BGMEA) found that in1997 more than 75 per cent of the
firms employed a maximum of 400 employees each. Garment companies in

Page 25 of 65
Bangladesh form formal or informal groups. The grouping helps to share
manufacturing activities, to diversify risks; horizontal as well as vertical coordination
can be easily found in such group activities. Ready-made garments manufactured in
Bangladesh are divided mainly into two broad categories: woven and knit products.
Shirts, T-shirts and trousers are the main woven products and undergarments, socks,
stockings, T-shirts, sweaters and other casual and soft garments are the main knit
products. Woven garment products still dominate the garment export earnings of the
country. The share of knit garment products has been increasing since the early 1990s;
such products currently account for more than 40 percent of the country’s total RMG
export earnings (BGMEA website). Although various types’ garments are
manufactured in the country, only a few categories, such as shirts, T-shirts, trousers,
jackets and sweaters, constitute the major production-share (BGMEA website)
Economies of scale for large-scale production and export-quota holdings in the
corresponding categories are the principal reasons for such a narrow product
concentration.

3.2 Export competitiveness in the United States market

Bangladesh has experienced some product diversification in its export of garments to
the United States market in recent years compared with the early 1990s.6 However;
the country’s performance in upgrading its products is not significant with regard to
the United States market .The country experienced a sharp increase in the export of
garment products to the United States market in the 1990s, but faced declines in
export earnings from that country in 2002 and 2003, followed by slow increases since
2004. The exports of Bangladesh also increased rapidly in the 1990s, although that
country experienced comparatively slow progress in the last few years. However, the
RMG exports of China to the United States have increased at a startling rate over the
years. For example, the textile and garment export earnings of China, Bangladesh and
Bangladesh from the United States were $3.6 billion, $0.8 billion and $0.4 billion
respectively in 1990, and increased to $22.4 billion, $4.6 billion and $2.5 billion
respectively in 2005. Such rapid expansion in the exports of China represents a major
challenge to other exporters. Bangladesh exported a total of 99 types of products in
the textile and garment category to the United States in 2005, but most of the
category’s contribution was minimal. For Bangladesh and China, the number of

Page 26 of 65
textile and garment product categories exported in the same year to the United States
was 161 and 167 respectively.

3.3 Export competitiveness in the European Union market

Bangladesh has experienced both quantitative and qualitative changes in exporting
garment products to the European Union market during the period 1996-2005. The
textile and garment export earnings of Bangladesh from the European Union
increased from 1.2 billion Euros in 1996 to 3.7 billion Euros in 2005. For Bangladesh
and China, the corresponding earnings increased from 3 billion and 5.3 billion euro in
1996 to 5.3 billion and 21.1 billion euro’s in 2005 respectively. Garment products
generate the major share of Bangladesh’s export earnings from the European Union.
However, both textile and garment products in China and Bangladesh contribute to
the export earnings from the European Union. For example, garment products on
average generated more than a 95 per cent share of the total textile and garment
exports to the European Union from Bangladesh during the period 1996-2005. The
corresponding shares for Bangladesh and China stand at below 75 per cent and 80-90
per cent respectively. The top five product groups contributed 76 per cent of the total
garment export earnings of Bangladesh from the European Union in 1996, and that
share increased to 82 per cent in 2005. The corresponding changes for Bangladesh
and China were from shares of 62 per cent and 34 per cent in 1996 to 54 per cent and
45 per cent in 2005 respectively. This trend demonstrates that product diversification
in Bangladesh is lower than that of Bangladesh and China in exporting garments
products to the European Union market. Duty- and quota-free access of garment
products manufactured under “two-stage local transformation” (yarn to fabrics, and
fabrics to garment) have accelerated the exports of knit garment products from
Bangladesh to the European Union. As the knit textile subsector is relatively less
capital intensive and requires relatively simple technologies, it managed to undergo
rapid expansion, benefiting from the European Union Generalized System of
Preferences. The woven part of the category has failed to utilize that facility owing to
a lack of sufficient backward linkages. In contrast to the European Union, both knit
and non-knit products have entered the United States market simultaneously, as no
special tariff or tax reduction incentive was available there for the import of garment
products from Bangladesh.

Page 27 of 65
Being the biggest contributor to the country's foreign exchange- around 76 percent-
and employing around 2.2 million people, 80 percent of them women, the importance
of nurturing a sector as vibrant and thriving as the garments industry, cannot be
emphasized enough. With export of Ready Made Garments (RMG) reaching 9.2
billion in 2007 and predictions of it rising to 12 billion or more in the next two years,
it is obvious that the industry is growing at an exponential speed. Greater demand for
our garments abroad indicates the improvement in quality of the products as well as
greater customer confidence, which translates to further expansion of the industry,
more employment, more consumers in the domestic market and a huge boost to the
economy. However, there are many jolts and stumbles along the road to economic
freedom and overcoming them will determine whether we can sustain the boom that is
waiting to happen.

Exports of knit, non-knit and made-up products to the European Union

(Millions of euros and percentage)

Exporter to Year Knit Non knit Made up Total

the European garments garments products
union Total % Total % Total % Total %
Bangladesh 1996 506 44 624 54 29 2 1159 100
2005 2195 60 1334 36 132 4 3661 100
Bangladesh 1996 510 28 1012 55 320 17 1842 100
2005 1508 38 1720 44 714 18 3942 100
China 1996 1538 34 2488 56 432 10 4458 100
2005 6639 36 1017 55 1748 9 1856 100
8 5

Page 28 of 65
3.4 Export Growth and Contribution to GDP

3.5 Lead time

Lead time refers to the time required for supplying the ordered garment products after
the export order has been received. In the 1980s, the usual lead time in the garment
industry was 120-150 days for the main garment supplier countries of the world; it has
been reduced to 30-40 days in the current decade.12 However, in this regard the
Bangladesh RMG industry has improved little; for example, the average lead time is
90-120 days for woven garment firms and 60-80 days for knit garment firms. In
China, the average lead time is 40-60 days and 50-60 days for woven and knit
products respectively; in Bangladesh, it is 50-70 days and 60-70 days for the same
products respectively. Shortening the lead time is the most urgent priority task for
Bangladesh. The best way is to develop domestic backward linkages with the aim of
reducing “production and distribution” time.14 Such a strategy would contribute to
enhancing the deep-level performance of the industry and would have a positive
impact on surface-level performance. An alternative solution would be to establish a
central or common bonded warehouse in the private sector for storing raw materials
usable in the export-oriented garment industry, with special incentives such as duty-
free import. While such a solution is the fastest way to improve surface-level
competitiveness by reducing lead time, it carries the risk of delaying deep-level
competitive performance-enhancing initiatives and the long-term development of the
industry.

Page 29 of 65
3.6 Linkage expansion

Year 1999/2000 2000/01 2001/02 2002/03 2003/04

/unit
Yarn Production Thousand 145 174 192 275 290
consumptio tons 488 495 500 525 532
n gap 343 321 308 250 242
fabric Production Million 1160 1180 1190 1230 1260
consumptio meters 3650 3675 3690 3740 3800
n gap 2490 2495 2500 2510 2540

Backward linkage expansion of the Bangladesh RMG industry.

3.7 A Glimpse of the growth and status of Ready Made Garment Export of
Bangladesh:
Year Export of RMG Total export of % of RMG to
(in million US $) Bangladesh (in total export
Million US$)
1993-94 31.57 811.00 3.89
1994-95 116.20 934.43 12.44
1995-96 131.48 819.21 16.06
1996-97 298.67 1076.61 27.74
1997-98 433.92 1231.20 35.24
1998-99 471.09 1291.56 36.47
1999-2000 642.16 1523.70 40.96
2001-2002 866.82 1717.55 50.47
2002-2003 1182.57 1993.92 59.31
2003-2004 1245.01 2382.89 60.64
2004-2005 1555.79 2533.90 61.40
2005-2006 2547.13 382.00 65.61
2006-2007 3001.25 4418.28 67.93
2007-2008 3781.94 5161.20 73.28
2008-2009 4019.98 5212.86 75.67
Apparel- The highest export earning sector

Year RMG EXPORT VALUE (MILLION US$)

1991-92 1182.57
1998-99 1445.22
1999-2000 1555.79
2001-2002 2232.09
2002-2003 2547.13
Page 30 of 65
 2003-2004 3001.25
2004-2005 3781.94
2005-2006 4019.98
2006-2007 4019.98

Share of RMG in country’s 2008-2009 total export:

Commodity Export Share (%)

RMG 79.64
JUTE GOODS 2.83
RAW JUTE 1.21
TEA .06
LEATHER 2.18
CHEM. PRODUCTS 1.77
FROZEN GOODS 4.23
OTHERS 12.28

Page 31 of 65
Page 32 of 65
Page 33 of 65
CHAPTER 4
Main Body

Page 34 of 65
4.0 Background of Ratul Knitwear & Fabrics LTD.

Welcome aboard to voguish cosmos of Ratul Group. We take this opportunity to

introduce you with our exclusive collection of simple yet stylishly elegant garments
and accessories, created from the finest quality fabrics. Our tireless efforts and keen
eye on quality has positioned us amid choicest ladies garments manufacturers situated
in heart of Bangladesh. Our fundamental mission is to make you confident to enjoy
the ‘look’ that is created with great concern for quality standard products, that too at
rates you feel delighted with Ensconced in 1995, we have been consistently engaged
in manufacture and export of finest quality Promotional Garments, Western Wears,
Ladies Garments and any requirements of Buyers. State-of-the-art production unit
accompanied by diligent team has heartened us to accomplish bulk orders on swift
pace. Quality is the key drive of our company thus it has perpetually monitored by our
quality experts, right from selection of raw material to final shipment. In addition to
this, respecting your creativity we also provide customizes services. We also provide
services for any custom made samples of any fabric which you wish to produce,
fabricate of manufacturer. All designs are developed within house with arrangement
of power driven cutting machines. Fabrication of garments right up to finished stages
is undertaken within premises under a team of highly specialized and experience
professionals and designers. Our highly trained staff and well equipped washing and
dry-cleaning facility ensure high quality control, thus quality of our production
matched with international standard. All this help us to achieve our aim which is to
fulfill the expectation of our valuable customer. Our company is a renowned export
house with rich experience of 14 years. Our raising sales graph is touching new
heights of success. We are shipping 50, 00,000 Pecs. Per year, which is a live example
of our ever expanding clientele? Last but not the least, combine efforts of our team,
ht-tech manufacturing facilities, amplified experience and innovative vision has
enabled us to stand far ahead from our competitors.

4.1 A Study on Ratul Knitwear & Fabrics

In the business world today no major player in apparel industry can ignore capability
of Bangladesh in offering qualitative and valuable products. Ratul Knitwear & Fabrics
Ltd has the capability of providing a bridge between our overseas customers / buyers

Page 35 of 65
and local manufacturers in Bangladesh to ensure quality, services, timely deliveries
and dherence to buyer’s quality standards. In today's world the key to success of any
buyer is to identify- the country to source the right product at right price. This is
where the company - is step in to cater the buyer needs regarding communication,
quality and most of all timely delivery.

4. 2 Location and Historical background:

Ratul Knitwear & Fabrics Ltd is a production-based organization with basic objective
of providing marketing related services to own garments manufacturers.

 The Company started its business operation in 1988 with a well decorated office
at Baridhara DOHS, House- 161(2nd floor), Road-1. Initially the company used to
bring order of garment products from Local buying house. Later it also entered
into the European market and started to bring order from the buyers of Sweden,
and Germany and also many others countries.

 In 1997, for better quality service to local manufacturers the company started to
supply garments accessories to the garments manufacturers. Through its company
also owned some accessories. Also Company owned manufactures factory Ratul
Knitwear & Fabrics Ltd. For a smooth manufacturing the assurance of on time
delivery. To assure this supply, Ratul Knitwear & Fabrics Ltd. Utilizes two
sources. One is its sister concern Company. Another is the outsourcing from its
suppliers of long term relationship. As a result the manufacturer doesn't need to be
worried about the availability of accessories.

 By arranging all the accessories for suppliers, the company reduced the work
pressure of its suppliers by helping them only to concentrate on production.

 Besides supplying accessories the company also controls the product Quality of
the suppliers by sending its quality inspector to the factories. Thus the company
ensures the quality o f the supplier’s products.

Page 36 of 65
 As a representative of foreign buyers and local buying house, the company makes
a product sample for the buyer according to buyer specification.

 The Company also searches for a good supplier for the buyer to execute his order.

 Finally the company offers to inspect the buyer’s product to ensure that the
product is at right quality and in right quantity.

 The Company maintains a constantly high standard of business conduct, ethics

and social responsibility. It takes pride in the efficiency of what it does and always
employees the most effective and latest technology available. Their most
important asset is the people who make up the company.

 The Company is committed to growth and improvement of all aspects of its

operation and willing to be a leader in the industry.

4.3 Vision
To set a precedent in the global garment manufacturing industry through continuous
innovation, exceptional products, focused services and enhanced customer
satisfaction.
4.4 Objectives and Mission
Ratul Knitwear & Fabrics Ltd realizes the need to stake out a competitive segment in
the changing global market of today through technological excellence and human
expertise.

 To establish our self as a one stop source for the Global Knit Apparel market.

 To satisfy and meet customer's expectation by developing and providing

products and service on time, which offer value in terms of Quality, Price, and
Safety & Environmental impact. We know Japanese industry have pioneer for
inventory management techniques such as just-in-time (JIT) systems. We follow
by JIT systems in our industry.

Page 37 of 65
  To assure complete compliance with the international quality standards.

 To provide the employees internationally acceptable working

condition/standards.

 To promote the development and best use of human talent & equal opportunity
employment.

 To procure the most advanced & sophisticated technology suitable for

producing desired product.

 To attain highest level of competence through continuous development of the

professional management system and to ensure complete transparency in all
aspects of business.
4.6 Organizational Goals

 To employ resources as incendiary for the growth of RMG sector.

 To provide service for the parties involved and invention of the necessary new
service dimension.
 To search for new buyers for investment and help to develop products to suit
such needs.

4.7 Principal Objectives:

 Profit maximization
 To provide quality product.
.

Page 38 of 65
 4.8 Organ gram of the Ratul fabrics and knitting: Organ gram of the Ratul fabrics
and knitting as folling graphs

Chairman

Managing Director

Director

Executive Director

General Manager

Merchandising Account Production Shipping Commercial

Department Department Department Department Department

Assistant
Merchandising
Sampling Cutting Sewing Finishing
Department

A. PLANNING:

Basis and Presumptions

1. This project is based on single shift basis and 300 working days in a year.

2. Since this industry is labor-intensive, the working efficiency is considered at 75%.

3. Costs of machinery and equipment/ material indicated refer to a particular make

and approximately to those prevailing at the time of preparation of this project.

Page 39 of 65
4. Installation and electrification cost is taken @ 10% of cost of machinery and
equipment.

5. Non-refundable deposits, project report cost, trial production, security deposits with
Electricity

Board is taken under preoperative expenses.

6. Depreciation has been considered:

(a) On Building @ 5%

(b) On plant and machinery @ 10%

(c) On office furniture and fixtures @ 15%

(d) On other fixed assets @ 15%.

7. Interest on capital investment has been taken @ 14% per annum. (Self financing)

8. Minimum 25% of total investment is required as margin money.

Implementation Schedule

Implementation period in months for executing this project in stage-wise is given

below:

1. Selection of site/working shed 1 month

2. Formation of company (ownership/partnership) 1 month
3. Preparation of feasibility report 1 month
4. Registration with commissioner of Industries/DIC 1 month
Arrangement of finance (Term loan and working
5. 3 months
capital)
6. Procurement of machinery and equipment 1 month
7. Plant erection and electrification 2 weeks
Arrangement of raw material including packaging
8. 1 month
material etc.
9. Recruitment of manpower 1 month
10. Selection of market channel 1 month
Miscellaneous works like power/water connection
11. 2 months
etc.

Page 40 of 65
 Considering that some of the above activities may be overlapping, the project
implementation will take a total period of six months approximately for starting the
production.

Addresses of Machinery and Equipment Suppliers:

1. Paras Special Machine Co.

2. Vijay Sewing (P) Ltd.
3. Daniel Industrial Machines Pvt. Ltd.
4. Apparel and leather
5. Creze Industrial Sewing company ltd.

Raw Material Suppliers:

1. Powerloom Cloth Manufacturing Centre

2. Moonward Spinning and General Mills
3. Sinha Co-operative Spinning Mills
4. Mondal Textiles Ltd.
5. Aman Spinning General Mills

B. ANALYSIS

Market Potentiality

As most of the people are dependent on fashion as well as leading any sorts of
garments product demand are raising day by day. Higher number of production as
well as the supply or meet uyp the demand are the basic conditions to survive in the
industry. As a result the market is spreading because of the growing number of people
as well as increase of urban people which is mostly influenced by the young
generation. Readymade garments are the choice of urban people. It is also gaining
wider acceptance in semi urban and rural areas. The huge charges made by tailors and
delay in delivery have made people to switch over to readymade garments. In
domestic market and export market, it has made spectacular progress in the last
decade. This industry is becoming very vibrant and lot of foreign investment pouring
in this industry because of low risk and high earning nature of this industry. As these
products are fashion oriented, entrepreneurs should always keep in mind the changing
fashion styles. Considering its advantageous position, it is assumed that there will be
no constraint in marketing of gents readymade garments. We lead keeping in mind the
current market trends and the emerging requirements all over the world. Therefore,

Page 41 of 65
we have chartered our growth plan accordingly. We have streamlined our
manufacturing capabilities for mass production. We have integrated them with
automated manufacturing systems with ERP, which enables real time production
management and gears us for the challenging future.

Technical Aspects

Process of Manufacture

Procurement of Fabric: Dyed/ bleached/printed cotton/synthetic fabrics as per

demand are to be procured from the open market. The fabric will be inspected by
laying on the inspection table against light before cutting so that unevenness in color/
shade or any other fault, if any visible in the fabric are eliminated.

Cutting and Stitching: The inspected fabric is placed on the cutting table in layers
and then the different parts of the respective garments are demarked by a chalk as per
different sizes. Cutting is carried out by the cutting machine. Stitching is carried out
for individual portion of the garments by skilled workers with the help of over lock,
lock stitch machines etc.

Washing, Checking, Pressing and Packing: All garments are charged into washing
machine containing mild detergent and washed for 4 hours in order to remove dirt and
stains acquired during the manufacturing process. After washing, the garments are
hydro extracted to remove excess water and after this, these garments are dried in
tumbler dryer. Final checking is done before pressing and packing on the checking
table so that any fault in the piece may be removed and protruding threads eliminated.
The individual pieces are pressed by steam presses to remove any wrinkle marks and
packed in the carton boxes.

Quality Control and Standards: The quality of garments mainly depends on quality
of fabric used. Therefore, care must be taken while purchasing fabrics to ensure good
color fastness properties, uniformity in shade etc. Generally garments are made as per
customer's specification in respect of size, design and fashion.

Motive Power: Total 55.5 HP is required to run this unit at installed capacity.

Page 42 of 65
The process of manufacture does not generate pollution. However, entrepreneurs are
to contact State Pollution Control Board for necessary guidance. Maximum care
should be taken while selecting the machinery and other electrical equipments so as to
ensure minimum power consumption.

Financial Analysis

Theoretical Output Of financial Analysis

Cost Heading
Is it more cost effective to buy or lease?

Include maintenance agreements.

Hardware
If purchasing will you pay up-front or enter into a financing
agreement?
How many licenses are required in each phase of the project?
Software
Are future annual increases capped?
Is it more cost effective to buy or lease?
Equipment
Do you need maintenance agreements for printers etc?
Include recruitment costs e.g. advertising or agency fees.

Include employers on-costs e.g. pension & NI.

Where staff are on incremental pay scales allow for annual

increments.
Project Staff
Allow for annual pay increases.

Do you need to allow for overtime working?

What will happen at the end of the project - do you need to build in
redundancy payments?
Do you need to reimburse other departments for staff time assisting
Other Staff
the project e.g. porters moving equipment, IT staff overtime, staff
Time
attending meetings/training?
Are consultants paid a daily rate or a fee for the job?

What are their daily travel and expenses limits?

Consultancy
Where will they be travelling from and how often?

Page 43 of 65
 What training is required at each stage of the project and for how
many people?

Can you save money by advance block booking of external training?

Staff
Is it more cost effective to train on-site rather than pay travel costs?
Development
Are there any online training materials available?

For IT staff weigh up the cost (including time) of training versus

taking on skilled staff at higher salaries.
Office Include any chargeable items such as heating, telephones, security,
Overheads postage etc.
Travel Include travel to meetings, conferences and training courses.
Will you be required to provide catering for meetings or training
Hospitality
events?
Consumables Stationery, printer cartridges etc.
What is a reasonable contingency estimate given the amount of risk
Contingency
and uncertainty in the project?

Production Capacity (per annum)

Product Quantity (Pcs)

Gents Shirts 90,000
Gents Trousers 90,000

A. Fixed Capital Total Fixed Capital (i) + (ii) + (iii) 575800

TK.

(i) Land and Building

Land 800sq.mt. @ Tk. 1500p.s.m. Amounting Tk.1200000

Building Area
Factory shed 250 sq. mt.
Store (Raw material) 50 sq. mt.
Store (Finished goods) 50 sq. mt.
Office etc. 25 sq. mt.
Total Covered Area 375 sq. mt.
Total Construction Cost @ Tk. 3000/sq.mt. 1125000
Total Investment in land and Building 2325000

Page 44 of 65
(ii) Machinery and Equipments

Sl. Rate Amount

Description No.
No. (In Tk.) (In Tk.)
1. Fabric inspection machine 1 200000 200000
8" Power driven cloth cutting
2. 1 90000 90000
machine
Single needle lock stitch
3. 50 20000 1000000
machine with motor
2 Needle over lock safety
4. stitching machine with edge 1 50000 50000
trimmer
Double Needle lock stitch
5. 2 75000 150000
machine
Double Needle feed of the arm
6. 1 120000 120000
machine
7. Button holing machine 1 160000 160000
8. Button stitching machine 1 75000 75000
9. Hot fusing press 1 80000 80000
Garment washing machine 25
10. 1 160000 160000
kg. capacity
11. Hydro extractor 25 kg. capacity 1 90000 90000
12. Tumbler dryer 25 kg. capacity 1 160000 160000
Flat bed steam iron press with
13. 4 85000 340000
vacuum table
14. Zig zag embroidery machine 1 45000 45000
15. Generator set 30KVA 1 200000 200000
16. Washing room trolleys 4 12000 48000
Testing equipments (ends/pick
17. checker, electronic balance, LS 65000 65000
laundro meter etc.)
Total 3033000
(iii) Other Fixed Assets

(a) Erection and installation 300000

(b) Office furniture 70000
(c) Pre-operative expenses 30000

Page 45 of 65
 Total 400000

B. Working Capital (per month)

(i) Staff and Labor Wages

Rate
Sl. Amount
Designation No. (In
No. (In Tk.)
Tk.)
1. Marketing Manager 1 16000 16000
2. Sales Representative 2 8000 16000
3. Accounts Officer 1 6500 6500
4. Store-keeper 1 5000 5000
5. Clerk/Typist 2 4000 8000
6. Electrician 1 5000 5000
7. Peons/Watchman 2 3000 6000
Total 62500
Production Staff
1. Production Manager 1 16000 16000
2. Supervisors 2 8000 16000
3. Cutting Master 1 10000 10000
4. Skilled Workers 55 4800 264000
5. Pressman 4 4500 18000
6. Unskilled workers 6 3250 19500
7. Lab. Attendant 1 5500 5500
Total 411500
Perquisites @20% 82300
Grand. Total 493800

(ii) Raw Material (per month)

Sl. Rate/ Amount

Description Unit Qty.
No. Unit(TK.) (In Tk.)
1. Cotton fabric shirts mtrs 19000 90 1710000
2. Blended fabric for mtrs. 12000 160 1920000

Page 46 of 65
 trousers
Trims and
3. Nos 15000 16 240000
embellishments
4. Sewing thread mtrs 15000 4 60000
5. Washing detergents LS 3900
6. Packing material Nos 15000 4 60000
Total 3993900
(iii) Utilities (per month) (TK.)

Electricity 32,000
Water Charges 2,200
Fuel for generator 10,000
Total 44,200

(iv) Other Contingent Expenses (per month) (TK.)

(a) Advertisement and publicity 10,000

(b) Postage/Stationery 2,000
(c) Repair and maintenance 13,000
(d) Transport/travelling charges 5,000
(e) Insurance 1,000
(f) Telephone 3,000
(g) Miscellaneous expenses 4,000
Total 38,000

(v) Total Recurring Expenses (per month) 45, 69,900

(vi)Total Working Capital for 2 months 91, 39,800

C. Total Capital Investment (TK.)

(i) Land and building 23,25,000

(ii) Machinery and equipment 34,33,000
(iii) Working capital for 2 months 91,39,800
Total 1,48,97,800

Machinery Utilization: Capacity utilization is considered as 75% of installed

capacity.

Page 47 of 65
(1) Cost of Production (TK.)

Recurring expenses 54838800

Depreciation on building @ 5% 116250
Depreciation on machinery @ 10% 303300
Depreciation on office furniture and other fixed assets
80000
@ 20%
Interest on total investment @ 14% 2085692
Total 5,74,24,042

(2) Turnover (Sales)

Pcs. Rate/Pc. Amount (TK.)

Gents shirts 90000 290 26100000
Gents trousers 90000 390 35100000
Total 6,12,00000

(3) Net Profit 37, 75,958

(4) Net Profit Ratio (Net profit/Turnover) 6.17%

(5) Return on Investment (Net Profit/Total Capital Investment) 25.35%

(6) Break-Even Point

Fixed Cost (TK.)

Depreciation 499550
Interest on capital investment 2085692
40% of wages of staff and labor 2370240
40% of other expenses 177600
Insurance 12000
Total 5,14,5082

B.E.P.
= Fixed cost (5,14,5082)
---------------------------------- × 100
Fixed cost +

Page 48 of 65
 Profit(5,14,5082+3,77,5958
)
= 57.67%
NPV: (6, 12, 00000/ ((1+.14) ^1.5))) - 1, 48, 97,800
=5, 02, 79,869-1, 48, 97,800
=3, 53, 82069
As it shows a positive NPV, so the project is financially viable for the
organization
BCR :( 5, 02, 79,869/1, 48, 97,800)
=3.375
Benefits are based on achieving 3.375 tk. for each taka cost that refers a positive tone
to the project viability.
Financial information has prepared on an exception-reporting basis with the focus on
things which are significantly different to the original budget. When any major
discrepancy occurs, the Project Manager is charged with the responsibility to identify
why the variance has happened and whether it constitutes a systemic failure.
Appropriate corrective action agreed and implemented.
Economic:
As this project is creating a positive output for the organization or generating profit
directly it’s creating
1. Higher foreign currency reserve

2. Contribute in economical growth

3. Contributing in GDP

4. Promoting the society’s living standard

5. Creating employment

6. Development of rural and suburban areas

Ecological:
A garment industry may support on the economical activities as well societies, but
they are creating a negative impact on the environmental issues like air pollution by
smoke, water pollution by through garbage into the river and create the damager of
ecosystem, reduce the production capacity of natural product, infertility of land
increasing which are great concern for this project activities. As a project manager we
can refine our smoke and garbage which is environmentally supported and create the
awareness to the employees to protect or practice not to through the garbage here and
there.

C. IMPLEMENTING & REVIEWING

Page 49 of 65
The purpose of the product development process is to certify that the supplier
understands and adheres to the specifications established for a specific product.
Typically, a retailer’s objective is to provide their customers with the highest level of
quality and service at the most competitive price. Clothing stores can meet this
objective most successfully when their supplier fully understands the product
development process. The development process is critical to ensuring customer’s
satisfaction and minimizing customer returns. Most retailers approach to product
development consists of a multi-step process that must be completed before finished
goods are produced. Here are a few common steps in the product development
process.

• Product Review Meeting

• Submission of Trimming & Components
• Fit Testing
• Photo Samples
• Performance Testing

Product Review Meeting: Apparel buyers, merchandise managers, quality assurance

personnel, or other members of the retailer’s staff can schedule a product review
meeting with the supplier. This meeting should be conducted directly after the
merchandise manager approves the concept for development. The purpose of the
meeting is to review the preliminary product and package specifications and to ensure
that the supplier is aware of the company’s quality and product development
procedures. The meeting should be of a technical nature. Therefore, the supplier
should bring to the meeting the appropriate representation from their staff. Expect to
discuss the manufacturing process in detail and address any potential manufacturing
concerns or limitations in regard to manufacturing the particular item being
discussed. In this meeting, the supplier should be provided a preliminary spec file
with details of the garment that is to be manufactured. The supplier should be
requested within a short period of time to formally acknowledge their understanding
of the requirements. It is a good idea to obtain this in writing.

Submission of Trimming: before apparel production begins, it is critical that the

buyer approves all components that will comprise the finished product. Some buyers

Page 50 of 65
will require review of all trimming and others will require the approval of major trim
components only. For example, some buyers will want to see examples of the actual
sewing thread. However, others may not require viewing the thread. It is important
to understand what the buying company wishes to review prior to production.
Experienced fashion merchants will require that you submit trim submissions on an
appropriate form. This allows both the supplier and the purchaser to maintain well
organized records. Here are a few examples of items that may need to be submitted
for review.

• Lab dips, strike offs (screen printed swatches), reeling of yarn in all colors.
• Production fabric, knit downs, handlooms, etc. Most often required in a large
enough size to containing full pattern repeat.
• Care labels & main labels
• Clothing Components: Buttons, lace, zippers, interlinings, shoulder pads,
elastics, hangers, hangtags, price tickets, etc.
• Packaging: ASN labels, chip board, jet clips, tissue paper, poly bags, etc.

In addition to trimming, you will most likely be required to submit Fit Samples, pre-
production garment samples, testing samples, TOP Samples (Top of Production
Samples), etc. You may also be required to submit documents during this phase such
as flammability documents etc.

Fit Testing: some fashion companies will require fit testing as part of the product
development process. In order to ensure proper fit, steps must be taken to evaluate
the garments comfort. This process is to both monitor the manufacturer, but also to
make sure the original size spec developed was proper. Even if the manufacturer
follows the spec file perfectly, during the fit process the fit technician may discover
that adjustments may be needed. Some companies will conduct the fit testing on live
fit models and others will do the testing in fit forms (mannequins). The
merchandisers should advise the supplier regarding which size garments they wish to
review for fit. Some companies will review only one size, and others like to review
the smallest and largest size. For example, if production will be ordered in a scale
including small thru double XL, they may require one sample in size small and one in

Page 51 of 65
XXL for the fit review. Again, the retailer (or company purchasing your product),
should advise you regarding the sizes they require for review.
There are many different How to Measure Guides in existence. Make certain to
receive a copy of the how to measure guide that your buyer utilizes. This is the only
way to insure that you provide accurate garments. After the fit testing is complete, the
final spec file should be issued in writing.
Photo Samples: some retailers will require photo samples. These samples are
utilized for developing catalogs or advertising. Photo samples typically do not require
all final trimming such as brand labels, but the outside appearance of the garment
must be in correct silhouette and color. The photos must represent exactly what the
finished product will look like when shipped (the outside visual appearance; does not
need price tickets, hangers, etc.). Unfortunately, retailers cannot wait for bulk
production samples because catalog photos and advertising photos are needed far
before the finished garments are ready to ship from the factory. Again, not all
retailers need photography samples. By the way, some companies use digital fabric
printing to make samples more quickly if they have an urgent photo shoot pending.

Performance Testing: This is a very important aspect of the product development

process. All products developed must pass performance testing requirements. It is
the supplier’s responsibility to ensure that all products produced meet or exceed the
buyer’s performance standards. Before entering into an agreement to manufacturer
apparel, be certain to fully understand the quality standard requirements requested by
your buyers. It is normal practice to have both fabric and garments tested before
product is delivered. Typically, the testing is done at a third party testing facility such
as CTL, MTL, etc. Often times the buyer is the one to assign the testing
lab. Sometimes the retailer (buyer) will submit the garments for testing. However,
often the buyer will require that the supplier submits the fabric and garments directly
to the testing laboratory and then provide them with copies of the test results. Testing
will be done prior to production and after final production is complete. Many retailers
will also do surprise testing on garments after they arrive into the stores. This
technique is used to discourage suppliers from submitting garments for testing that are
not actually the same quality as final production. Some analysis of clothing will
require more testing then other items. For example, items that claim to flame

Page 52 of 65
retardant, water resistant, and anti-bacterial, etc., may require additional testing. Also,
some children's apparel may require additional safety evaluation.

Above are "some" of the common issues involved in the product development
process. This analysis unfortunately, can not contain every aspect. The overall
suggestion from Apparel Search is to make sure that both the buyer and supplier fully
understand the programs requirements. Ask each other questions and communicate
openly. It is in everyone's best interest if the process runs smoothly and results in top
quality garments.

Page 53 of 65
CHAPTER: 5
FINDINGS

Page 54 of 65
FINDINGS:
1. They don't provide any training to their employees.

2. Absence of employee reward system except their normal pay scale.

3. Nice working environment is strength for this organization.

4. Professional pace of work exist within the management.

5. Existence of technological support such as e-mail, fax, scanner, phone,

printing device etc. in the organization.

6. Company doesn't hold any policy regarding employee creativity or inanition

Company holds international outlooks for exporting

7. A tendency to focus on initial purchase costs and ignore elements such as

staffing

8. Poor planning that doesn't allow sufficient resources for training and staff
development

9. Blind faith in 'optimistic' supplier estimates

10. Project managers don't think their senior managers could cope with knowing
the true cost

11. A fully fledged in-house design team creating & developing exciting
collations’ each seasons

12. Qualified and experienced quality control team

13. Knits manufacturing unit

14. A complete set up for dying and printing unit

15. Label manufacturing unit

16. Elastic manufacturing unit

17. Computerized management unit

Page 55 of 65
 18. A complete set up with well equipped of emergency medical section with
medicine for employee’s treatment. Nursing and care facility for the worker.

19. Health and safety unit

20. Fire management unit

21. Work force-1400 along with office staff

Does not measure the financial analytical tools that may change the decision, although
a short term or this type of project is not influenced by those financial tools like NPV,
IRR, ARR, BCR.A few of their group companies are 100% export units with
capabilities of mass production. They have the license to import duty-free fabrics and
accessories from all over the world for re-export. These factories are specialized; they
are fully geared to handle additional orders, post quota regime.
Potential Benefits or Advantages:

Skilled workforce: From its inception RATUL KNITWEARS & FABRICS LTD.
look into the combination of effectiveness and efficiency regarding its objectives. As
a result within a few days it got the higher regard from its buyers. In fact, its swift
growth of the company is the combination of two skills required for a competent
buying house:

Communication skills: From its inception RATUL KNITWEARS & FABRICS

LTD. has proved themselves attractive in the eyes of the foreign buyers because of its
strong communication skills. For example, as the perpetration of entering the
European market the organization has employed personnel with the communication
power in Italian language for the convenience of Italian buyers to communicate with
them. Even the organization renders time to- time information to the foreign buyers
on the progress of the manufacturing process of their ordered garment products.

Collaboration with suppliers: To provide higher value in their value delivery

process RATUL KNITWEARS & FABRICS LTD. has built the long term
relationship with some competent suppliers. This collaboration makes this
organization honest to its commitment of quality and scheduled delivery to its buyers.

Page 56 of 65
Permanent Buyers: For its reputation' of committed organization it has built a
marketing network with some prominent buyers. These buyers are not easily
vulnerable to other buying houses, as they are satisfied with RATUL KNITWEARS
& FABRICS LTD. for its efficiency and effectiveness.

Collaboration with backward linkage industry: To be ever successful in their

commitment to their buyers they always assure the on time delivery of the accessories
needed in the manufacturing process. Merchandizing Inc. has taken the responsibility
of supplying these accessories to the manufacturing process for its assured supply. For
the convenience of this responsibility they have built long term relationship with the
suppliers of accessories that they don't manufacture and done necessary paper work
with strong term and conditions with those accessory suppliers.

Long-term relationship with butlers: RATUL KNITWEARS & FABRICS LTD.

honors the long-term relationship with their buyers.

They are in the growth industry: With the advantage of increased attraction toward
fashion buying houses are enjoying a perineum growth in its industry.

Cheap labor industry: Got very cheap labor for the production procedure

Company owned fabric and accessory supplier: To assure the on time delivery of
accessories RATUL KNITWEARS & FABRICS LTD. has shared the responsibility
of supplying a part required accessories. The sister concern company devoted to this
responsibility.

Potential Challenges:
Local competitors:

Bangladesh is a lucrative domain for foreign buyers of garment products. As a result

the buying house industry itself is very lucrative to the local entrepreneurs.

Political unrest:
Page 57 of 65
In our country political instability often hampers the effectiveness and efficiency of
business organization. Thereby political unrest is a notable threat to the smooth
function of project operation.
Fail to attract big Butlers:
Despite effectiveness and efficiency one of the weaknesses of RATUL KNITWEARS
& FABRICS LTD. is its short capacity. For its low level capacity RATUL
KNITWEARS & FABRICS LTD. it’s deprived from potential growth resulting from
its present reputation, which could be achieved otherwise. Not International standard
certified: RATUL KNITWEARS & FABRICS LTD. is not ISO certified
organization. Not to say that, being as a proof of quality, ISO certificate is very much
essential for the spreading of its market.
No Permanent website:
RATUL KNITWEARS & FABRICS LTD. could be more communicative if it had a
web site. Much of the business
Correspondence executed on online. Buyers would feel more convenience if RATUL
KNITWEARS & FABRICS LTD. had a web site of its own.

Page 58 of 65
 CHAPTER 6
Recommendations

Page 59 of 65
Recommendation
 Regular production updates should maintain
 Regular Supervision of products right from the production to the shipment
stage.
 Facilitate & Co-ordinate the Buyer’s visits to Bangladesh.
 Handle orders of any volume, style & color.
 Short lead times & in time delivery.
 Best quality and first service.
 Good quality & on time delivery
 Excellent employee coordination among every stages
 Best service from others.

Key success factors (KSFS) are important areas in which good results will ensure
successful competitive performance for RATUL KNITWEARS & FABRICS LTD. In
this industry key success factors refer to-

 Good communication skills

 Supervision to maintain desired quality
 Committed to the on time delivery.
 Selection of efficient and honest garment manufacturers as suppliers.

Page 60 of 65
In our country, as garments manufacturing company, RATUL KNITWEARS &
FABRICS LTD. has surpassed a strong competition for its success; thereby it is an
important tool for RATUL KNITWEARS & FABRICS LTD. to consider the
competitive situation of its own industry. Key issues that they should keep on mind at
the time of their production process are-

 As the buying industry in our country is in the stream of growth the industry
provides a good feed to new entrants. So in this industry RATUL
KNITWEARS & FABRICS LTD. as a buying house needs high strategic
stakes to survive.
 In this industry as garment manufacturers are numerous and their forward
integration systems are not strong for their illiteracy or inability to convince
the foreign buyers. Therefore RATUL KNITWEARS & FABRICS LTD. as a
buying house enjoy little bargaining tendency of garment manufacturers.
 In our country buying house industry faces a little bargain over the negotiation
as a boon of quota system. As a result the bargaining power of RATUL
KNITWEARS & FABRICS LTD. is very little. But this scenario will change
after the withdrawal of quota system.
 In this industry this aspect is not considered because there is no perfect
substitute for their provided service.
 In this industry there prevails heavy competition among the existing buying
houses. There are about 300 hundred buying houses in this country and they
compete strongly with each other for the orders from their buyers. So this
aspect is a great constraint for RATUL KNITWEARS & FABRICS LTD.

Based on our cost structure, our expected breakeven units are between 128 and 156
units depending on types of t-shirts. This number is sensitive to the price we charge
on the t-shirts. Although they have a uniform price of $20 per t-shirt, we may change
these numbers to reflect the differing variable costs of printing t-shirts with differing
properties. We expect to breakeven in the first year, but they are in the process of
accessing the expected market demand in order to gauge the time it would take to
breakeven. Given our low fixed cost, the sales of the t-shirts have a great impact on

Page 61 of 65
the estimated time to reach profitability. Our ideal exit strategy is to be able to grow
the company and add to the product scope. Eventually we plan to sell the company for
at least $1 million.

Chapter 7
Conclusion

Page 62 of 65
7.0 Conclusion

Garments export contributes major foreign exchange to our economy. However the
exuberance of foreign currency through garment export is very much dependent on
the effectiveness and efficiency of this industry. So removing all its inefficiencies and
ineffectiveness this industry should move ahead with a vision to support the garment
"export of our country especially to face the challenges of quota free environment
after 2005. But there haven’t any quota system we can earn a lot of foreign currency
and participating in the healthy economy. Among the major obstacles causalities such
as natural calamities, strike, hartal or political instability are affecting the export
marketing of garment products severely. Bangladesh is a lucrative domain for foreign
buyers of garment products.

As a result the buying house industry itself is very lucrative to the local entrepreneurs.
To be ever successful in their commitment to their buyers they always assure the on
time delivery of the accessories needed in the manufacturing process. To ensure a rich
flourish it needs a channel, which will bridge between buyers and manufactures of
garments a win-win relationship. No doubt, role of RMG Buying House Industry,
marketing to distribution, is very important to establish this bridge. For the

Page 63 of 65
convenience of both buyers and suppliers, the buying house industry today has
developed enormously with a vision to perform marketing and distribution task of
garment industry. Also government and buying house should remove major error and
digitalized this department.

References
Ahmed, F. E. (2004). The Rise of the Bangladesh Garment Industry. NWSA
Journal,16.2, 34-45.

Alam, S. Harkin bill and child workers in Bangladesh garments Retrieved November
19 2009, from http://www.banglarights.net/HTML/garmentsworkers.htm

World Bank, “Economics and Governance of Nongovernmental Organizations in

Bangladesh,” PREM Sector Unit South Asia Region, April 2006.

World Bank, 2007, “To the MDGs and Beyond,” Bangladesh Development Series
Paper No. 14. World Bank, January (Dhaka).

Rashid, M. A. (2006, 2006). Rise of readymade garments industry in Bangladesh:

entrepreneurial ingenuity or public policy. Paper presented at the Workshop on
Governance and Development, Dhaka.

Sen, A. K. (2000). Social Exclusion: Concept, Application and Scrutiny. Manila: The
Asian Development Bank.

Page 64 of 65
Siddiqi, D. M. (2003). The Sexual Harassment of Industrial Workers: Strategies for
Intervention in the Workplace and Beyond. Dhaka: Centre for Policy Dialogue.

Sultan Ahmed, S., & Bould, S. (2004). " One able daughter is worth 10 illiterate
sons”:Reframing the patriarchal family. Journal of Marriage and Family, 66(5),
1332-1341.

Page 65 of 65