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Assignment 3 Body

Assignment 3 Body

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Published by Navid Al Galib

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Published by: Navid Al Galib on Aug 13, 2012
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01/05/2013

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 Table of Contents
Introduction 2Operations and infrastructure 2-5Financing local operation 5-7Organization Structure 7Views of the Future 8APPENDIX
 
 2
Introduction
 
Based on previously conducted research on economic, financial and business/ taxenvironment of our country, we came to the supposition that a US based MNC will be willingto invest in the RMG sector of Bangladesh. In fact, US based MNCs as well some other  North American investors have shown interest in directly investing in this sector.Ever Fashion Ltd and Shahriar Fashions Ltd are one of those RMG companies, which areresult of such foreign investment. Shahriar Fashion Ltd was taken over by a Canadiancompany named Gildan. Since the take over, Gildan is in charge of all management decisionsas well as production and quality control in Shahriar Fashions Ltd.
Operations and infrastructure
RMG companies in Bangladesh commonly focus on manufacturing basic t-shirt is more thenthe ones producing taking complex order from their buyers. For a company taking orders for  basic garments product, it has to make bulk production in order to make a profit (as the profitmargin per t-shirt is very low). When the small amount of profit is multiplied with the hugeamount of t-shirt sold each month, it adds up to an adequate profit that enables the companiesto run efficiently (around 20+ container per month)Since the labor rate is significantly low, the companies can easily use the strategy of bulk  production. Therefore, the companies, using this strategy, looks for buyers who are willing togive mass order and US based companies like Wal-Mart are a prime target.After many years of importing from different garments industries in Bangladesh, Wal-Martfinally set up its own production company that would be ruled under specifications provided by Wal-Mart itself. First, it got to know the culture, the environment for setting up a businessand finally they took the decision to set up their own factory. By doing so Wal-Mart nolonger needs to hire any outside quality control team. Their hired employees and labors in production has specialized in producing the t-shirt according over and over again, whichminimized the chance for error and rejection and enhanced efficiency. The parent companycan now place all their basic t-shirt order in one place instead of going to several other factories. This way the whole operation will have coherence and will be under control of the parent.
 
 3
For all business stakeholders, infrastructure (transport and utilities supply) is the single
largest issue hampering Bangladesh‟s RMG industry. Buyers today are forced to carefully
select the type of products to source from Bangladesh, since congested roads, limited inlandtransport alternatives, and the lack of a deep-sea harbor add inefficiencies to garment leadtime. With the aim to move toward sourcing more fashionable, shorter lead time items inBangladesh, reliable and fast transport is becoming extremely important. The transport issuesneed to be solved quickly in order to avoid a collapse in the transport network as volumescontinue to grow.As the RMG industry is highly dependent on the Dhaka-Chittagong highway and Chittagongharbor as the only main transport routes, the following examples of current issues are already
limiting the efficiency of Bangladesh‟s garment industry:
 
 
The highway is often congested as capacity planning falls behind demand, increasingtransport time from Dhaka to Chittagong up to 20 hours.
 
Lead time for sea freight is increased by about ten days due to the lack of a deep-seaharbor.

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