A garment-wallah’s perception of the McKinsey growth myth

Rubana Huq
Published : 30 Jan 2012, 01:11 PM
Updated : 30 Jan 2012, 01:11 PM

I lag heavy suitcases from one continent to another, helplessly looking for a helping hand to ease my strain of pulling the two suitcases one after the other from the luggage belt. Over the years, my back has had multiple nerves impinging on it, causing crucial pain and spondylitis accompanied by a muscle spasm known as fibromyalgia. To make it worse, my thyroids have gone from bad to worse and I can't skip even a day of exercise. Because if I do, I will either feel restless or hopeless. I can't rest even for a moment; every second has to be planned; my blackberry can't stop beeping even past midnight and my "reply" button is ever ready to answer to any query or complaint. I talk to myself when I walk to bathroom, promising not to forget to bring the hairbrush out so that I don't have to walk through the bathroom door twice in order to avoid wasting time being repetitive. Years of being in the garment business have done me good, indeed!

One delay causes us over a dollar a piece (depending on the weight of the garment and of course destination); one week causes us either a 5-10% discount; one failure beyond this margin would label us as "unreliable" suppliers. We are now routinely graded. After a long time, we have gone back to school where we used to be graded out of 100. Difference is, in a garment wallah's report card, there are different headings: HR, Social Compliance, On time delivery, Sampling efficiency, Product efficiency and sales, Research and Design, Involvement of Top Management, Response time to queries, etc. At the end of almost every quarter, our report cards are issued and each one of us stand outside the retailer's gate, lining up to know whether or not we exist in their books.

Every buyer prefers to meet us outside our country, in China, lest there is an agitation, or an akheri-munajat, or a prolonged holiday because of our complicated festive lists in Bangladesh. In spite of all this, when we hear optimism, a few of us hit a glass wall and a few simply swoon out of despair.

A special soothsayer at this point has been McKinsey & Company. This company has filed a 23 paged report; rather a research finding saying that Bangladesh has the potential to be the next apparel sourcing hotspot, and ready-made apparel exports could triple within a decade. Apparently mid-market brands, generating about 13% of their sourcing value in Bangladesh today, plan to grow their share to 20-25% in the medium term. As a result of this demand inflow, McKinsey believes, "Bangladesh's ready-made-garments (RMG) industry will experience a market growth at an annual rate of 7-9% and export value of around $36-42 billion by 2020. This means the market will double by 2015 and nearly triple within a 10-year horizon."

Huh? Where? How?

The research by McKinsey & Company is based on interviews with a number of chief purchasing officers (CPOs) in European and US apparel companies, which is partially acceptable but the questionable variables that the report works on are its telephone conversation with "100+ local RMG suppliers" in Bangladesh and on research work done by private think-tanks, etc. Like any other report, this one too, has assessed assuring realities like majority of the CPOs wanting to decrease their business with China by almost 10%. A few hardcore facts include the search of the buyers for the "Next China" and that is where we GWs (garment wallahs) step in. We are the next Chinese. But if we were to "remain" Bangladeshis, then McKinsey lays bare a few harsh facts for us; our success is heavily conditional and depends on:

1)      How well we manage our business including increase in efficiency

2)      How well we address the minimum wage revisions based on "two-year" rhythms.

3)      How well we pitch more value added products based on our current infra structure, R&D capabilities

4)      How well the governments eases the Non Tariff Barriers which stand on the way of implementing the duty-free deal between Bangladesh and India; in other words, how well we can extract maximum goodness out of the policy makers for RMG who nurture an in born dislike towards garment wallahs.

The strangest twist comes on the tenth page of the report where the perceptions of the CPOs are carefully listed:

The Chief Purchasing Officers are100% skeptical about our infrastructure; 75% doubtful about our compliance; 75% apprehensive about supplier performance and workforce supply; 50% on guard about lack of raw materials and 50% uncertain about the political and economic stability.

In brief, out of a 500 points report card, we, the GWs have a current score of 150.

But as always, reports, by practice, hover around a few positive pointers that may appear to be dicey but need to be included in the pages. In this one, on page eleven, it refers to the possible expansion of the Dhaka-Chittagong highway to four lanes, "prepare" "long-term efforts" to establish a deep sea port in Chittagong, improve "efficiency" at Dhaka airport and double the train container transport capacity.

The challenge, as per the report, lies in us being 50% less productive than China in basic products. Excuse me, but how do we improve efficiency amongst workforce with existing pay scale, level of education and awareness? McKinsey answers all the questions posed in page 14 by clearly stating in page 15:

Institutions for technical skills are non-existent; top graduates are not interested to join the sector; lateral entries are not feasible or rather, an overnight overhauling mid-level management is also not possible for Bangladesh. To add to the growth myth is McKinsey's assumption of fabric lead time being only 7 days in Bangladesh, 15 days when sourced from India and 30 days when sourced from China. Irony is that Chinese fabric ends up at our doorstep much faster than our own ones simply because their R&D is faster, production time amazing and to top it all, there is a direct service from Shanghai to China now which takes only 10 days. By the time we have price quotes from Bangladeshi and Indian suppliers, the Chinese generally close their deals with us and start production. There is also a fallacy on page sixteen where it states that 21% suppliers have reduced their lead times to 30 days. For which products, though? And then finally the report hurt me where it bleeds the most. It says, "in longer term, a shift in the government's focus will likely emerge" out of the nation's need to diversify. If the governments of Bangladesh were half as focused on us then what they ought have been, I think, 50% of our spondylitis and fibromyalgia would disappear and the tight knots on our backs would calm their clutches on our frames.

While I sign off and prepare to send this column off, it is 2:15 am in Madrid. Neither do I recall the point when I did crash on my bed early evening, nor do I now have any scope of having my dinner other than a "club sandwich" with potato wedges through room service. And by the way, my meeting's scheduled for 8:30 in the morning, and the venue is an hour away from where I am currently staying which would require me to be up again by 5:30 latest.

"C'est la vie", as we garment wallahs would mildly put it!

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Rubana Huq, Managing Director, Mohammadi Group