What is the Supply Chain Management? Essay

A supply concatenation direction is the process, which start from the arrangement of the order from the client through the natural stuffs phase, material supply, production and selling & A ; distribution of that peculiar merchandise to the client or stop user. Every organisation has supply ironss of changing signifiers. The manner the organisation pull off their supply concatenation depends upon the industry, organisation construction, size, type of merchandise manufactured.

Supply concatenation direction ( SCM ) is the combination of the concatenation of proceedings associated with the motion of goods from natural stuffs to the ultimate client ( Mentzer et al. 2001 ). Supply Chain Management has been described as the assimilation of concern process that span the spectrum from the natural stuff extractor to the terminal user to supply merchandise, information, and services that add value ( Cooper, Lambert, and Pagh 1997 ). Furthermore, house ‘s can achieve their operational and strategic efficiencies thorough cooperation among internal and external map ( Rodrigues, Stank, and Lynch 2004 ; Stank, Keller, and Closs 2001 ). Furthermore, Supply concatenation Management “ involves integrating, coordination, and coaction throughout the supply concatenation ”

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There is some writer they describe supply concatenation direction and logistics is same and the intent of subject is facilitate the entire system of any organisation.

Logisticss is the… “ procedure of planning, implementing, and commanding the efficient, effectual flow and storage of goods, services, and related information from point of beginning to point of ingestion for the intent of conforming to client demands. ”

— — — — — — — — — — — — Council of Logistics Management

Supply concatenation direction… “ encompasses every attempt involved in bring forthing and presenting a concluding merchandise or service, from the provider ‘s provider to the client ‘s client. Supply Chain Management includes managing supply and demand, sourcing natural stuffs and parts, fabrication and assembly, warehousing and stock list trailing, order entry and order direction, distribution across all channels, and bringing to the client. ”

The Supply-Chain Council

Forum Logistics involves… “ pull offing the flow of points, information, hard currency and thoughts through the coordination of supply concatenation procedures and through the strategic add-on of topographic point, period and pattern values. ”

MIT Center for Transportation & A ; Logisticss

Though there has many definition and attack to achieve and set up supply concatenation direction in the organisation. The elements and procedure of supply concatenation depends on the organisation, industry nature and some other important factor but there are some common elements to a supply concatenation.

Production: Production is the cardinal strategic determination for developing supply concatenation in a peculiar organisation. In this phase organisation takes into consideration what merchandise they are traveling to bring forth and hoe many sums they want to bring forth and to whom they produce. What is the process of the production and what, if any, parts should be produced at which works or it should be outsourced to the capable providers. These kind of strategic determination are taken in this phase and its must concentrate on the capacity, volume, client demands and satisfaction.etc.

Supply: An organisation must make up one’s mind what their installations and installation is capable to bring forth, both economically and expeditiously, while maintaining the quality high. But in world most companies can non bring forth all constituents by supplying the higher quality and production efficiency. In this respect outsource is one of the best option. So, here company should hold to be cognizant to choose the providers for those constituents or natural stuffs.

Inventory: Further strategic determination focal point on stock list, stock list control. This is one of the important portion of supply concatenation direction because in this phase an organisation make up one’s mind how much merchandise they should in house, how much natural stuffs they need for smooth production, how often they order for the natural stuffs and other accoutrements to bring forth their merchandise. They besides has to see some other specific informations to run into the client demand like what is the pick clip of concern and what will be the stock list degree, what is the production and natural stuffs safety degree etc.

Location: Location determination depends on assorted factors: like market demand, industry location, population, human resources, installations etc. In this subdivision strategic determination must concentrate on the arrangement of production workss, distribution installations, stoking installations and puting them in premier location to cover the market.

Transportation systems: Transportation determination is closely related with the stock list determination and client wants. Using air transit evidently gets the merchandise quicker to the client but it will be more money to the client but the cost will be lower if the same merchandise is transporting by boat or rail. In this respect, this kind of determination are taken by sing assorted factors like what is the merchandise, nature of the merchandise, lastingness, how pressing is the merchandise to the client.

Information: Effective supply concatenation direction requires obtaining information from the point of terminal users, and associating information resources throughout the concatenation for velocity of exchange. To ease the whole procedure, today, most of the organisation is start utilizing assorted supply concatenation supported package to heighten the operation of supply concatenation direction.

Supply concatenation becomes the value concatenation: Harmonizing to Martin Christopher ( 1998 ), in the last two decennaries many alterations has been taken topographic point in the field of direction thought, most of the alterations accent on the value creative activity in the eyes of the client. In this respect to a extent of recognition must travel to the celebrated mind, Michael Porter. In his book competitory advantage ( 1985 ), he tried to pull value concatenation and its relation with some other of import factors.

“ Competitive advantage can non be understood by looking at a house as a whole. It seems many distinct activities a house in planing, bring forthing, selling. Delivering and back uping its merchandises. Each of these activities can lend to a house ‘s comparative cost place and make a footing for differentiation. ”

Figure: The Value Chain ( Source: Porter M.E, Competitive Advantage, The free Press, 1985 )

Value concatenation activities are divided in to two parts- Primary activities, consist of inbound logistics, operations, outbound logistics, selling & A ; gross revenues and service and support activities are consist of houses substructure, human resources direction, technological development and procurance.

2.2 Integration in the supply concatenation:

With supply concatenation direction, information, systems, procedures, attempts, and thoughts are integrated across all maps of the full supply concatenation. Supply chains become more complex as goods flow from more than one supplier to more than one fabrication and distribution site. The possibility of outside beginnings for maps like assembly and packaging are besides options in the concatenation.

Pull offing the connexions is where the integrating of the supply concatenation Begins. Any betterment in or break to the supply concatenation linkages affects the full concatenation. A broad assortment of events occurs in the supply concatenation that is mostly unpredictable. Suppliers can do early or late bringings. Customers can increase, diminish, or even cancel orders. New clients can put big orders. Machines or trucks can interrupt down. Employees can acquire ill, travel on work stoppage, and quit. Supplier cargos or manufactured merchandises can hold quality jobs.

Internal Integration

Internal integrating is defined as integrating within the house ‘s boundaries across house maps ( Chen, Daugherty and Roath 2008 ). The end of internal integrating is to develop a process-oriented focal point that discourages sub-optimization of specific functional countries in order to develop a more effectual overall procedure solution. It focuses on coordination across functional countries and can be examined by the extent to which logistics activities interact with other functional countries within a house ( Stock, Greis, and Kasarda 1998 ). Integration illustrates “ how harmoniously different sections of an organisation work together and how tightly coordinated their activities are ” ( Barki and Pinsonneault 2005, p. 166 ). Previous research has found a positive relationship between internal integrating and organisational public presentation. For illustration, Stank, Daugherty, and Ellinger ( 1999 ) found a positive association between frequent collaborative integrating within selling and logistics and steadfast public presentation.

Stank, Keller, and Daugherty ( 2001 ) found that internal coaction had a positive impact on logistics public presentation. Further, Germain and Iyer ( 2006 ) found that logistics public presentation is predicted by internal integrating ; in bend, logistics public presentation predicts fiscal public presentation. Stank, Keller, and Closs ( 2001 ) found that internal integrating was associated with overall public presentation betterment. Finally, Drum sanders and Premus ( 2005 ) found that internal coaction has a direct and positive impact on house public presentation.

External integrating

External examines integrating that occurs across supply concatenation spouses ( Chen, Daugherty, and Roath2008 ). External integrating may affect regulating backward integrating with first-tier providers, forward integrating with first-tier clients, and/or complete forward and backward integrating ( Fawcett and Magnan 2002 ). External integrating focuses on coordination and coaction attempts that occur among supply concatenation members ( Gimenez and Ventura 2005 ). Forging external coactions becomes a feasible scheme to vie in a dynamic planetary environment ( Al-Khalifa and Peterson 1999 ; Morgan and Hunt 1994 ; Simonin and Ruth 1998 ) as it can increase a house ‘s capability-based efficiency through resource pooling, development of complementary accomplishments, and information sharing.

Previous research shows that external integrating positively impacts public presentation. Gimenez and Ventura ( 2005 ) found external integrating had a positive and direct consequence on public presentation. Stank, Keller, and Closs ( 2001 ) found that client integrating was a critical competence that impacted overall steadfast public presentation. Stank, Keller, and Daugherty ( 2001 ) found that external coaction had a positive impact on logistics public presentation. In a related survey, Daugherty et Al. ( 2005 ) found that formalistic coaction could supply superior long-run public presentation. Corsten and Felde ( 2005 ) found that supplier coaction increased fiscal public presentation.

2.3Importance of Supply Chain Management in Modern Businesses

Supply Chain Management ( SCM ) as defined by Tom McGuffey is “ Maximizing added value and cut downing entire cost across the full trading procedure through concentrating on velocity and certainty of response to the market. ” Due to globalisation and ICT, SCM has become a tool for companies to vie efficaciously either at a local degree or at a planetary graduated table. SCM has become a necessity particularly for fabricating industry when it comes to present merchandises at a competitory cost and at a higher quality than their rivals. Here are some of the ground SCM has become of import to today ‘s fabrication industry: –

Competitive Edge through Core Competences

Today ‘s concern clime has quickly changed and has become more competitory as of all time in nature. Businesss now non merely necessitate to run at a lower cost to vie, it must besides develop its ain nucleus competences to separate itself from rivals and stand out in the market. In making the competitory border, companies need to deviate its resources to concentrate on what they do best and outsource the procedure and undertaking that is non of import to the overall aim of the company.

SCM has allowed company to rethink their full operation and restructure it so that they can concentrate on its nucleus competences and outsource procedures that are non within the nucleus competences of the company. Due to the current competitory market, it is the lone manner for a company to last. The scheme on using SCM will non merely impact their market placement but besides strategic determination on taking the right spouses, resources and work force. By concentrating on nucleus competences besides will let the company to make niches and specialisation of nucleus countries. As stated in the Blue Ocean Strategy outlined by Chan Kim, in order to make a niche for competitory advantage, companies must look at the large image of the whole procedure, and calculating out which procedure can be cut down, extinguish, raise and make.

As an illustration stated by Chan Kim, the Nipponese automotive industries capitalise on its resources to construct little and efficient autos. The Nipponese automotive industries gain competitory border by using their supply concatenation to maximize their nucleus competences and place itself in a niche market. The scheme works and now Toyota Motor Corporation, a Nipponese company, is considered to be the figure one car auto shaper in the universe whipping Ford and General Motors of the United States.

Value Advantage

SCM has allowed concern presents to non merely have productivity advantage entirely but besides on value advantage. As Martin Christopher in his book, Logistics and Supply Chain Management: Schemes for Reducing Cost and Improving Service ‘ provinces, ‘Productivity advantage gives a lower cost profile and the value advantage gives the merchandise or offering a differential ‘plus ‘ over competitory offerings. ‘ Through maximising added value and besides cut down the cost in the same clip, more invention can be added to the merchandise and procedure. Mass fabrication offers productiveness advantage but through effectual supply concatenation direction, mass customization can be achieved. With mass customization, clients are given the value advantage through flexible fabrication and customized version. Product life rhythms besides can be improved through effectual usage of SCM. Value advantage besides changes the norm of traditional offerings that is ‘one-size-fits-all. ‘ Through SCM, the more recognized offerings by the industry to the consumers would be a assortment of merchandises catered to different market sections and clients penchants.

Constructing Relationships through Supply Chain Management

One of the critical key success factors in finding the effectivity of a Supply Chain Management is the attack of dialogue between the purchaser and providers. The construct of squashing the providers in order to derive a coveted result can endorse fire the purchaser in the long tally. The construct of coercing the providers to cut down monetary value is a win-lose relationship in the short term. It can besides be a lose-lose relationship if the purchaser still uses the same method over a long period of clip with the same providers. This is because the purchaser will lose its competitory border due to the inferior merchandise delivered by its providers and the provider besides will lose due to the decreasing net income border. In presenting goods or services, each parties involved must larn to negociate with a win-win attitude. By transfusing this positive behavior, the trust between the provider ‘s webs will turn and therefore the relationship will maturate to a strategic partnership. The win-win thought does non merely concentrate on quality and cost entirely, but besides to future coaction. A win-win relationship besides fosters good working environment for both parties as both will profit in the procedure.

At the initial phase of any relationship, there tend to be a relationship that has minimal or no trust at all. Critical information such as finance information is kept within the companies and is non shared among its spouses. The circulation of information is really limited and therefore shackles the formation of a web among the providers. In order to make a successful web of providers, the critical information such as fiscal informations and merchandise informations must be on an unfastened based communicating. Open communicating instil trust amongst the providers and hence creates the inclination of providers more added value than it is required. By opening up communicating besides allows jobs to be noticed every bit rapidly as possible and countermeasures can be taken instantly. Other advantage of unfastened communicating is that invention and originative thoughts can be brought more easy into the supply concatenation by both sides of the parties involved.

Effective Market Positioning Through Supply Chain Management

The peak epoch of mass fabrication where all the pull offing facet in presenting a merchandise being done in one roof is no longer a tendency. Companies who tend to pull off internal procedure merely and squash the providers for cost decrease will lose their competitory border. As clients demands quickly change and merchandises life rhythm are shortening, companies now non merely necessitate to pull off their internal procedure efficaciously, they now must besides pull off their external providers more efficaciously. Pull offing the supply concatenation as a whole will make the ability of the company to place failings and strength in the full supply concatenation. To vie, it is non adequate by merely placing the company ‘s strength but besides placing what is your supply concatenation spouse ‘s strength every bit good. By pull offing the supply concatenation and extinguishing waste procedures, the cost decrease will be important and at the same clip value add-on to the merchandise.

Understating Risk Using Supply Chain Management

A supply concatenation is a system which needs a certain sum of control and direction. Like any other system, it is prone to outside perturbation that can do legion effects to its system. One illustration of perturbation in the supply concatenation is the Forrester consequence. Forrester consequence is the deformation caused by demands from the retail merchant that causes fluctuation of stock list from the distributers, warehouses up to the mill. Other such deformation that can convey impact to the supply concatenation is the failure of any parties to present its good to other spouses in a specific clip period that causes major break to the overall supply concatenation procedure.

In extenuating this break, Supply Chain Management allows certain hazard to be shared or delegated among its spouses. Activities that carry the highest hazard can be done by either the purchaser itself or outsource to several dependable spouses. The activities that hold the lowest hazard can be outsource to new spouses as to estimate the provider ‘s public presentation before migrating them into a higher degree. The scheme of pull offing this hazard should be handled efficaciously by all spouses in the supply concatenation. Identifying capableness of internal and besides external procedures must be done with thorough hazard analysis and extenuation scheme.

2.4 Problem of execution of supply concatenation

SCM ‘s chief characteristics include long-run relationships between supply histrions, a client orientation, common benefits and/or sharing of information, net incomes and hazards ( Arlbjom 2002 ). Kopczak and Johnson ( 2003 ) name this a ‘supply concatenation direction consequence ‘ that shifts concern focal point from crossfunctional to cross-enterprise. This consequence may assist to increase a house ‘s fight or organisational effectivity relation to rivals by take downing costs and increasing net incomes and client satisfaction ( Elmuti 2002, Tan 2002, and Wisner 2003 ).

A key job is how to place the start and terminal of such interlacing supply ironss. Ganeshan et Al. ( 1999 ) limited the range of a supply concatenation to inter-connected activities in planning, organizing and commanding stuffs, and finished goods from provider to client concerned with merely two distinguishable flows, stuff and information, through the organisation. They besides raised a duty job, i.e. who is responsible for the supply concatenation? This issue of who is in control, either as a legitimate ‘channel captain ‘ or as an histrion with excessive power, is besides of import for finding how much influence any one house has throughout the full supply concatenation? ( Grant 2005 ). The possible power of an single histrion to alter a given supply concatenation set up leads to inquiries such as ‘who is in charge of SCM? ‘ or ‘what, where and how much of SCM can be used? ‘ ( New 1997 ; Bretzke 2005 ; Gudehus 2005 ).

Chapter 3

3.1: Introduction:

In this chapter, I focus on Bangladesh, its international concern cooperation and the concern environment. Then I illustrate profoundly about Bangladesh RMG sector, development and station consequence of Bangladesh RMG sector after stage out MFA. In the terminal of this chapter, I tried to supply an illustration organisation which practising supply concatenation in the RMG sector.


Overview of Bangladesh

Bangladesh is an independent and autonomous Republic known as the Peoples Republic of Bangladesh. The state emerged as an independent province on March 26, 1971.

Figure: Map of Bangladesh

Beginning: hypertext transfer protocol: //worldatlas.com/webimage/countrys/asia/bd.htm

Geographic Location: Between 20A°34 ‘ and 26A°38 ‘ north latitude 88A°01 ‘ and 92A°41 ‘ east longitude.

Boundary: North: India, West: India, South: Bay of Bengal, East: India and Myanmar

Area: 56977 SQ. Miles or 147570 SQ. KM

Territorial H2O: boundary12 Nautical Miles

Official Name: Peoples Republic of Bangladesh

Capital City: Dacca

Major Administrative Unit of measurements: Dhaka, Chittagong, Khulna, Rajshahi, Mymensingh, Comilla, Barisal, Sylhet

Standard Time: GMT+6.00 Hours.

Language: State linguistic communication Bangla. Second linguistic communication English

Demography: Population: 141.34 million, Annual Growth rate: 1.48 %, Density: 928 per sq. kilometer, Religion: Moslem 88.3 %, Hindu 10.5 %, Buddhist 0.6 %, Christian 0.3 %. Secularism is ensured constitutionally.

Climate: Sub-tropical. Three chief seasons: Winter

( November-February ), Summer ( March June ), Monsoon ( July – October ). Climatic fluctuations: Winter temperature norm maximal 29A°C, Winter temperature norm minimal 11A°C, Summer temperature norm maximal 34A°C, Summer temperature norm minimal 21A°C, Monsoon average rainfall 1194 millimeter to 3454 millimeter.

Topography: Over 85 % of the state is level, alluvial and field.

Chief rivers: Padma, Meghna, Jamuna, Brahmaputra, Teesta, Surma and Karnaphuli ( Entire 230 rivers including feeders ).

Currency: Taka

Economy: Agribusiness Based.

Chief Industries: Jute & A ; cotton fabrics, garment devising, tea processing paper, newspaper, cement, chemical fertilisers, light technology, sugar.

Chief Minerals: Natural gas, lignite coal, limestone, ceramic clay and glass sand.

Chief Exports: Ready made garments, natural jute, jute makers, tea, fish, fells and teguments, newspaper.


Road Transportation system: Road transit installation with quality conveyance and sensible menu. Bridges on about all of the major rivers. The span over Jamuna ( 4.8 kilometer ) is the eighth longest span of the universe.


Sea: Chittagong and Mongla

Inland River: Dhaka, Chandpur, Barisal, Khulna, Baghabari, Sirajganj, Sharishabari, Narayanganj, Bhairab Bazar, Ashuganj.

Air passage:

International: Dhaka, Chittagong and Sylhet

Domestic: Dhaka, Chittagong, Jessore, Ishwardi, Sylhet, Comilla, Cox ‘s Bazar, Thakurgaon, Syedpur, Rajshahi and Barisal.




Clip line and development of Bangladesh RMG sector

The ready-made garment ( RMG ) industry of Bangladesh started in the late seventiess and became a outstanding participant in the economic system within a short period of clip. The industry has contributed to export net incomes, foreign exchange net incomes, employment creative activity, poorness relief and the authorization of women.The export-quota system and the handiness of inexpensive labor are the two chief grounds behind the success of the industry. In the 1980s, the RMG industry of Bangladesh was concentrated chiefly in fabrication and exporting woven merchandises. Since theearly 1990s, the knit subdivision of the industry has started to spread out. Shirts, T-shirts, pants, jumpers and jackets are the chief merchandises manufactured and exported by the industry. Bangladesh exports its RMG merchandises chiefly to the United States of America and the European Union. These two finishs account for more than a 90 per cent portion of the state ‘s entire net incomes from garment exports.

The state has achieved some merchandise variegation in both the United States and the European Union. Recently, the state has achieved some degree of merchandise upgrading in the European Union, but non to a important extent in the United States. Bangladesh is less competitory compared with China or India in the United States and it is slightly competitory 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 precedence subject. The most of import undertaking for the industry is to cut down the lead clip of garment fabrication. The betterment of deep-level fight through a decrease in entire “ production and distribution ” clip will better surface-level fight by cut downing lead clip. Such a scheme is of import for long-run stable development of the industry, but its execution will take clip.

In contrast, the constitution of a cardinal or common bonded warehouse will better surface-level fight by cut downing lead clip, but deep-level fight will non be improved and long-run industry development will be delayed. Therefore, allowing permission to set up in the private sector such warehouses with particular inducements, such as the duty-free import of natural stuffs useable in the export-oriented garment industry for cut downing the lead clip in garment fabrication, is a critical issue for Bangladesh. Second, Bangladesh needs to better the mill working environment and assorted societal issues related to the RMG industry. International purchasers are really peculiar about conformity with codifications of behavior.

Third, issues related to merchandise and market variegation every bit good as upgrading merchandises need to be addressed with particular attention. Furthermore, the Government of Bangladesh demands to beef up its support. The development of the port and other physical substructure, the smooth supply of public-service corporations, a corruption-free concern environment and political stableness are some precedence concerns for the Government to see in its attempts to pull international purchasers and investors.

1. Introduction

The RMG industry of Bangladesh has expanded dramatically over the last three decennaries. Traditionally, the jute industry dominated the industrial sector of the state until the seventiess. Since the early 1980s, the RMG industry has emerged as an of import participant in the economic system of the state and has bit by bit replaced the jute industry.



The RMG industry is the lone multi-billion-dollar fabrication and export industry in Bangladesh. Whereas the industry contributed merely 0.001 per cent to the state ‘s entire export net incomes in 1976, its portion increased to about 75 per cent of those net incomes in 2005. Bangladesh exported garments worth the equivalent of $ 6.9 billion in 2005, which was about 2.5 per cent of the planetary sum value ( $ 276 billion ) of garment exports. The state ‘s RMG industry grew by more than 15 per cent per annum on norm during the last 15 old ages. The foreign exchange net incomes and employment coevals of the RMG sector have been increasing at double-digit rates from twelvemonth to twelvemonth. Some of import issues related to the RMG industry of Bangladesh are noted in table 1.4 presently, there are more than 4,000 RMG houses in Bangladesh. More than 95 per cent of those houses are locally owned with the exclusion of a few foreign houses located in export processing zones ( Gonzales, 2002 ).

The RMG houses are located chiefly in three chief metropoliss: the capital metropolis Dhaka, the port metropolis Chittagong and the industrial metropolis Narayangonj. Bangladesh RMG houses vary in size. Based on Bangladesh Garment Manufacturers and Exporters Association ( BGMEA ) information, Mainuddin ( 2000 ) found that in 1997 more than 75 per cent of the houses employed a upper limit of 400 employees each. Garment companies in Bangladesh signifier ball or informal groups. The grouping helps to portion fabrication activities, to diversify hazards ; horizontal every bit good as perpendicular coordination can be easy found in such group activities. Ready-made garments manufactured in Bangladesh are divided chiefly into two wide classs: woven and knit merchandises. Shirts, Jerseies and pants are the chief woven merchandises and unmentionables, socks, stockings, T-shirts, jumpers and other insouciant and soft garments are the chief knit merchandises.

Woven garment merchandises still dominate the garment export net incomes of the state. The portion of knit garment merchandises has been increasing since the early 1990s ; such merchandises presently account for more than 40 per cent of the state ‘s entire RMG export net incomes ( BGMEA website ). Although assorted types of garments are manufactured in the state, merely a few classs, such as shirts, T-shirts, pants, jackets and jumpers, constitute the major production-share ( BGMEA website ; and Nath, 2001 ). Economies of graduated table for large-scale production and export-quota retentions in the corresponding classs are the chief grounds for such a narrow merchandise concentration.

3.3. Post and pre consequence of MFA on Bangladeshi RMG sector and Why Bangladesh needs backward linkage in fabric and RMG sector?

( from RM literature reappraisal )

Backward linkage to Clothing export of Bangladesh:

In This subdivision I am seeking to give a general thought about the chance of set uping the backward linkage industries in the fabric and vesture of Bangladesh. Furthermore, I besides tried to associate backward linkage with the different pertinent factor of supply concatenation direction. In the ulterior phase, I would integrate constructs of backward linkage in the fabric industries, compatibility of standard theory of Bangladesh fabric and vesture sector with specific illustration, different perpendicular phases of the concatenation, analyzing the horizontal factors linked to every phase in the sector, related backward issue in general, screening out the possible stairss to be taken at every such phase.

2.5.1 Concept of Backward linkage and Forward Linkage.

Dr. Carole E Scott1 presents an first-class definition of forward and backward linkage in his article “ Economic Growth ”

Linkage refers to the economic connexion between a houses operations and other sector of the economic system. It is called a forward linkage when a houses end product is used as an input by the other houses, so by supplying necessary inputs, its being creates an chance for enterprisers to creates houses in downstream industries. A A company demonstrateA rearward integrationA when it controls subordinates that produce some of the inputs used in the production of its merchandises. For illustration, an car company may have a tyre company, a glass company, and a metal company. Control of these three subordinates is intended to make a stable supply of inputs and guarantee a consistent quality in their concluding merchandise.

( Diagram of Backward and frontward linkage )

Downward supply concatenation in the RMG sector of Bangladesh

Downward Supply Chain in RMG sector of Bangladesh

Raw stuff sourcing is one of the three most of import factors for RMG concern in anyplace in the universe. These are: natural stuff sourcing, production and bringing to the purchaser. As Bangladesh is a underdeveloped state with relatively low economic resources we do non hold a strong backward linkage in footings of RMG sector despite a consentaneous consent of its importance for Bangladesh. Holocene investings are merely fulfilling a little part of the immense demand in backward linkage support for RMG industry. Due to shortage in our economic and physical resource Bangladesh largely depends on China for the natural stuff support. For cotton import Bangladesh depends on Africa, USA, Brazil and Middle Asia. Detail facets of natural stuff sourcing in RMG sector of Bangladesh is given below:


For garments concern cotton is the first natural stuff in the production concatenation. Cotton produced in Bangladesh is non suited for mass production of quality RMG merchandise. This is because local cotton ‘s fibre length is really short and its production measure is really low. Based on this, about 100 % of the export oriented mills import cotton from outside. Most common beginnings of cotton for Bangladesh are: China, USA, African states, Uzbekistan, Turkmenistan, Kazakhstan, Brazil, India, Pakistan etc.

International cotton monetary value is rather unstable and requires long term planning, investing and fudging like the oil market. There are besides some international political relations in action in the cotton concern of the universe. After the recession monetary value of cotton has increased late and it squeezed the net income border of the fabric proprietors of Bangladesh. The recent monetary value hiking was chiefly because of China and India ‘s sudden addition in demand and relatively lower international production. Another job for Bangladesh was the prohibition on cotton export in India by their authorities which resulted in supply deficit in local market as Bangladesh is significantly dependent on Indian cotton supply.

The increasing disfavour against cotton of mid Asiatic states like Uzbekistan, Turkmenistan, Kazakhstan ( CIS cotton ) is besides negative factor for Bangladesh. This is because fabrics from Bangladesh prefer CIS cotton as the quality of cotton from those states is really good and the monetary value is relatively lower than other countries. But USA and European purchasers are now seeking to avoid CIS merchandise because of the run against usage of kid labour and forced labour in CIS states. So now we are now purchasing from USA and Africa where the monetary value is higher compared to the quality of the cotton.

To do over the cotton sourcing job fabrics of Bangladesh should concentrate on Brazil and besides Africa. They besides should do a favourable trade with Fair Trade organisation for lower monetary value and quota installation on USA cotton. Long term planning on cotton purchase is besides a necessity by now.

Narration and Thread

Narration and yarn are the 2nd measure in garments production measure. These are produced in whirling Millss from cotton and man-made fibres. Narration is what used to do the cloth through knitting procedure. Thread is the specialised narration for run uping the cloth to do the garments. Both thread and narration can be of different constituents. There can be pure cotton, polyester etc. or can be mixed like 60 % cotton and 40 % polyester.

Spining Millss in Bangladesh are wholly dependent on cotton import from abroad. The entire production of narration and yarn in Bangladesh is non sufficient plenty to carry through the demand of RMG sector of Bangladesh. Bangladesh particularly lacks the production of specialised yarn and man-made narration like lycra. These are chiefly imported from China.

Fabric ( Knitting and Weaving )

Fabric doing procedure for knit and woven cloth is a spot different which needs different machines, procedure and different quality narration. Bangladesh can bring forth all types of knit cloth needed for the state ‘s export. But we have to import immense sum of woven ( shirt ) cloth because yarn supply is non capable of run intoing the demand in Bangladesh. Quite frequently we see that the quality of woven cloth ( shirt ) of Bangladesh is non good plenty to run into the purchaser ‘s criterion. So most of the woven ( shirt ) mills of Bangladesh now have to import woven fabric from the purchaser nominative mills for quality and design. These nominated woven fabric mills are chiefly runing in China.

To add values here, Bangladesh needs to put meagerly in woven cloth mills which really need more investing than a knit fabric mill. The quality job has to be solved through better quality cotton and therefore better narration.


After the cloth is made it is dyed harmonizing to the garments demand. Often it is merely washed to do the colour of the cloth lasting. In many instances cloth does non necessitate dyeing since the narration used to do the cloth was dyed before.

After the dyeing procedure is completed the cloth is sent to the garments where is cut harmonizing to the demand s of the peculiar garment.


After cutting the cloth as per the program parts of organic structure cloth where the printing and embellishment should be done are sent to the printing and embellishment units for completing those procedures. There are different types of printing which use different method and media for the procedure and necessitate different clip and finishing procedure. Both printing and embellishment procedure are done before the garment is sewed.


Before the printing and embellishment procedure are done all the back uping accoutrements have to be in-housed in the shop of the garments mill. The most common accoutrements are:

Management of accoutrements is a important portion for the production of garments and most of the clip the beginning of hold and other jobs for the mill.

Downward Supply Chain flow chart for a knit garments mill

Example of a Company who are utilizing downward supply concatenation direction:

The nucleus concern unit of Viyellatex Group is Viyellatex Garments Limited which is a knit dress fabrication mill. There are separate units for narration, cloth & A ; accoutrements every bit good as printing and woven garments. Viyellatex has late diversified its concern through come ining in a new sector last twelvemonth. It has acquired a tea garden and started selling tea. The group is besides be aftering to spread out into ship edifice in the close hereafter and therefore will lend more to the national economic system.

By and large the organisation operates chiefly in RMG sector of Bangladesh. It has presence in backward linkage of RMG such as yarn production ( whirling ), fiction ( knitting ), Dyeing, Embroidery, Printing and Accessories sector. Viyellatex ‘s forward linkage installation includes Washing and Logistics Management Services which is a new extension of concern for the company with a moneymaking concern facet.

By 14 old ages this organisation has become a US $ 290 million gross gaining group of companies in Bangladesh with growing rate around 33 % this twelvemonth. Viyellatex now employs more than 13,000 people in its eight units and maintains a congenial relationship with its workers through best compliant environment in the industry concentrating on long term safety and public assistance of the employees. It pays 20 % higher wage than the RMG industry criterion and authorities ordinance and therefore helps the workers to hold a better life style. Furthermore, one-year net income sharing strategy with the workers is besides put into action and therefore the organisation celebrates its success with the workers and makes them experience like proprietors of the company. As a compliant mill, free tiffin is provided for all the employees of the group. Viyellatex besides spends important sum of money on worker preparation and motive plans. Hence a congenial relationship is maintained with the workers advancing an first-class work environment.

This RMG concentrated organisation has a market portion of 0.78 % in knit export and 0.42 % in woven export of Bangladesh. So from a volume position Viyellatex ‘s part is really low in the RMG export of Bangladesh. But from other positions like merchandise quality, merchandise monetary value, purchaser class, work environment, conformity policy, engineering integrating etc. Viyellatex is considered one of the forepart smugglers in RMG sector of Bangladesh.

Unit of measurements of Viyellatex Group

Viyellatex Group has seven fabric related SBUs as follows:

Viyellatex Garments Ltd.

The nucleus strategic concern unit of Viyellatex Group is the garments unit. Its chief merchandise is basic knit wear with other knit garments. Production capacity of this unit is 2 million units of readymade garments every month with full in-house embellishment support.

Departments of Viyellatex Garments

Unlike other traditional readymade garments fabricating companies, the sections are otherwise devised. This is because of the usage of SAP which defines the traditional “ selling section ” to be split up into three separate sections called the “ Gross saless and Distribution ( SD ) ”, “ Materials Management ( MM ) ” and “ Production & A ; Planning ( PP ) ”. However, these three sections are required to work closely in conformity with the specific purchaser in order to execute their responsibilities. Thus it forms a matrix and ensures proper coaction among the sections. Hence, for comparing intent, these three sections will be referred to as the selling section in this study.

Gross saless and Distribution ( SD )

The gross revenues and distribution section is responsible for pass oning with the purchaser about the orders being placed. They negotiate the monetary values of the orders. They besides are responsible following up on the production procedure and maintaining the purchaser updated. Last, they ask the commercial section to book containers for the cargo of finished merchandises.

Materials Management ( MM )

The stuffs direction section books all the natural stuffs needed for a specific order. It takes up from SD and makes certain everything is ready and in topographic point for production. For this ground MM needs to work in close coaction with SD in order to guarantee that the natural stuffs are in house on clip for production to get down so that cargo of the finished merchandises can be made on clip.

Production Planning ( PP )

The planning squad works alongside the MM squad to come up with the production agenda and allocates run uping lines for the specific order. Thus it helps the production to be done on clip for the scheduled bringing.

Quality Assurance

The quality confidence squad has a difficult work to make. It has to guarantee that every piece of garment to be shipped is checked for quality. This is truly of import as all the purchasers are really concerned about the quality of the finished garments.

Quality and Efficiency

Viyellatex emphasizes upon quality merchandise and timely bringing. It besides focuses on minimum usage of natural stuffs for production. Viyellatex uses natural stuff from the best providers in the market, employs best workers in the state with 20 % higher wage and uses best machines for smooth operation. To heighten efficiency and seasonableness Viyellatex has integrated assorted package in its operational degrees. It is besides the first readymade garments maker to implement SAP ( ERP package ) in a big graduated table. Some of the of import package used in Viyellatex ‘s operation are:

Specific aim

Software used

ERP package


Production planning

Fast React

Garments SMV and line layout


Dying unit direction


Warehouse direction

EDI Asia

Human Resource Management


SAP is used all over the group. Use of other package in the different sections is given below.

Figure 4: Organizational chart for the different package uses in Viyellatex Group


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