SOURCING & MANUFACTURING
SOURCING & MANUFACTURING
Bangladesh is a developing country in Southern Asia. The country is about the size of Iowa and has a population of 163 million people, making it the 12th most densely populated country in the world. Growing at an annual rate of 7.4%, Bangladesh’s economy is the 3rd fastest growing economy in the world and the fastest growing economy in Asia. Bangladesh expects to reach middle-income country status by 2021, and their manufacturing industry is one of the biggest contributing factors.
Bangladesh is infamous for the Rana Plaza Tragedy, a factory building collapse in 2013 that killed more than 1,100 people. As a result, factory conditions have improved since the accident and are continuing to do so. While manufacturing is still safer in developed countries, Bangladesh has a bright future with a lot to offer.
The RMG industry, which is known for its negative impact on the environment, is the backbone of Bangladesh’s manufacturing industry. The high levels of pollution, waste, and energy depletion caused by the industry are not sustainable. That’s why Bangladesh is taking steps towards a greener future. This developing nation is leading the way in sustainable manufacturing. The country is home to 90 LEED green factories (Leadership in Energy and Environmental Design), 24 of which are considered platinum and 6 of which are in the top 10 in the world. These green factories are also much safer. The movement towards sustainability in Bangladesh has significantly improved the country’s reputation. In one of the most environmentally negative industries, Bangladesh is striving to make a positive impact.
Bangladesh is a developing nation with plans to become developed by 2041. The country has seen significant economic growth and decreased poverty in the last decade. Bangladesh has made manufacturing development a priority since independence in 1971. Although the industry is young, it is relatively strong. According to the International Labor Organization, the RMG sector dominates the industry with more than 5,000 factories nationwide.
Right now, it’s hard to find a manufacturer in Bangladesh for a product outside of the garment/textile industry—but that’s changing. The government is pushing for manufacturing diversity, focusing mostly on the leather industry. Bangladesh’s huge supply of livestock gives them a distinct advantage. They produce 50 million head of livestock a year, so sourcing is more direct and less expensive. The country is also prioritizing increased manufacturing in the automotive, agribusiness and pharmaceuticals sectors.
One downside to manufacturing in developing countries is the ease of doing business, or the lack thereof. Bangladesh is ranked among the lowest in the EODB (World Bank’s Ease Of Doing Business Survey). When working with Bangladesh you may face difficulties like getting electricity or enforcing contracts. To help combat this problem, the government set up the BIDA (Bangladesh Investment Development Authority). BIDA will hopefully reduce the incidence of bribery and red tape in the industry and make it overall easier to do business. The language barrier can also cause difficulties, as the spoken language is Bengali and it’s less common for factory management to be fluent in English.
The 2017-2018 Global Competitiveness Report ranked Bangladesh 109th in overall quality of infrastructure, and 99th in transportation. The government is well aware of how poor infrastructure will hinder their manufacturing industry and they’re working actively towards improvements. The government plans to upgrade the roads from factory cities to ports, cutting travel time in half and decreasing transportation costs. They’re also working towards nationwide electricity access in 2021.
Bangladesh’s biggest appeal is their extremely low cost of labor, even though the national minimum wage was last increased in December of 2018 and is now higher than ever before. Bangladesh still boasts a significantly lower cost of labor compared to China and other Asian countries. Bangladeshi garment workers make a minimum of US$94 per month while other non-industry-specific workers make a minimum of US$19 per month.
Minimum wage can be a good way to predict the cost of labor, but it’s important to note that labor cost varies significantly depending on the factory and region. Labor will account for less than 20% of your final cost, but you will notice the difference. Other factors, like the complexity of your product and the availability of materials needed, will play a role in the cost as well. Expensive materials and outsourcing will both raise the overall cost of your product. Shipping costs will vary greatly depending on your location, courier, and method.
The United States has a free trade agreement with 20 countries, but Bangladesh is not one of them. This means that you’ll be paying customs duties on most goods you manufacture in Bangladesh. The amount of these duties depends on the goods that you’re importing, as well as the quantity. The Harmonized Tariff Schedule is a code system that classifies goods into specific categories, dictating what you pay. What you pay in customs duties will be determined by the HS code of your product. This search bar can help you find the correct HS code for your product to help you calculate your cost. Keep in mind that China isn’t the only Asian country being hit by high tariffs from the United States. Some goods from Bangladesh face disproportionately high tariffs from the United States, which will add to the overall cost of your product.
A Bright Digital Future
The government in Bangladesh is working hard to raise quality standards and bring more business to their manufacturing industry. In February of 2019, the government undertook the enormous and game-changing project of creating a digital directory of all of their garment factories. The project takes the form of a map (which can be found here). The country’s goal is to have all factories in Bangladesh digitized by 2021.
The directory includes key information for each factory, including: location, contact information, products manufactured, number of workers, brands and agents, memberships, inspection listing, WPC status, and export countries.
No country has ever completed such a project, of making all their factories searchable and digitally connected. If they are successful in their goal, Bangladesh could become a global manufacturing leader—which is definitely something you should keep in mind.
Do Your Due Diligence
No matter what country you’re manufacturing in, finding the right supplier is crucial to the success of your product. Do your due diligence to ensure that the supplier is honest and legitimate. This means investigating the finances, certificates, and creditworthiness of the supplier. Do they have the money and resources to manufacture your product? Will they be able to complete the project within your timeframe? Will they hold up to your standards of quality? Asking these questions before making a commitment will help prevent problems in the long run.
Bangladesh is working towards a digital future, but finding the right factory is still complicated, and honestly, it’s a lot of work. The good news? Blacksmith can take care of it for you. We do the research, so you don’t have to. We work with more than 1,500 vetted global factories, so you can rest easy knowing that we can find one that fits your needs perfectly.