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Abstract
Supply Chain Management is a pivotal gimmick for the active streamlining, evaluation and also
selection process of any modern industry. The Supply Chain of the world’s top manufacturing
companies is mostly dependent on China. Presupposing that Bangladesh can be one of the
resilient competitors of China by ensuring ample Supply Chain Capabilities provided by the
Government of Bangladesh (GOB) on some discrete sectors for instance Apparel and Automobile
Industry. Herewith the proposed framework for alluring the Foreign Direct Investment (FDI)
opportunities will shift out these manufacturing companies to Bangladesh in the post-COVID-19
season.

Keywords: Supply Chain Capabilities, Foreign Direct Investment, Apparel Industry, Automobile
Industry, Supply Chain Strategy.

Case Analysis & Problem Statement

According to WHO, Novel Coronavirus was first identified by Wuhan Municipal Health
Commission, China in Wuhan, Hubei Province on December 31, 2019 which soon became
pandemic. Since China is the largest exporter of the world’s production, the pandemic has
exposed the overreliance of companies and governments on China. According to a German firm,
four in every five major companies rely on Chinese suppliers. As China completely locked down
the most affected regions to contain the virus, companies around the world felt the heat. Some
industries like Fiat Chrysler and Hyundai were forced to halt production as they could not get
raw materials from China. Around 30% of companies surveyed by the American Chamber of
Commerce in China (AmCham China) in March, 2020 said they tend to relocate production and
supply chain operations or sourcing outside of China.

So, the major challenge for Bangladesh is to attract foreign manufacturing companies looking to
shift out of China and use this as a viable opportunity for future growth.

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Objectives

Concept of SCM

A supply chain is an entire system

of producing and delivering a
product or service, from the very
beginning stage of sourcing the raw
materials to the final delivery of the
product or service to end users.

The customers are the most vital

focal point of the supply chain.

The supply chain includes not only

the manufacturers and suppliers
but also transporters, warehouses,
retailers and even customers
themselves. The purpose of supply
chain is to provide the right
products in the right quantities at
Figure: Stages of Supply Chain the right moment at a minimal cost.

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 Concept of SCC
A country’s Supply Chain Capability (SCC) can be defined as the ability of the country to meet the
supply chain needs of organizations operating in the country. SCC is a diametrical factor that
enables a broken and disrupted supply chain to reconstruct itself and be stronger than before.
SCC encounters the needs of the organizations operating in the country such as to ensure the
distribution of its product promptly and attain the requirements of intermediates and other
inputs both tangible and intangible, for the organizations and their network partners and to
ensure the distribution of its products in a timely and efficient manner.

 Three broad variables determine the SCC of the country:

Supply Environment

Infrastructure Absorptive
Capacity

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 FDI Opportunities in Bangladesh
Foreign Direct Investment (FDI) is the key to the future growth of Bangladesh as a developing
country. So, the industries that possess the highest FDI opportunities are focused by using a
cause-effect diagram:

Figure: Fishbone Diagram

Since it is not feasible for the GOB to focus on all the sectors stated above at the same time.
Therefore, according to this report, GOB should focus to build further capability in the Apparel
and Automobile industry that will make Bangladesh an attractive country for investment and
may result shift out of some manufacturing companies planning to leave China at the post-COVID
season.

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Apparel
Industry

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 Apparel Industry
The apparel industry has become the second largest RMG exporting nation after China. But in
the Covid-19 crisis, this sector faced a massive challenge in China. So, this can be an opportunity
to surpass China in the post-COVID season. Therefore, it is a must to analyze the current situation
before making any development plan.

Figure: SWOT Analysis of Apparel Industry.

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 SCC Buildup Model

Phase 1: Investment Friendly Infrastructure

Proposed Location:

Figure: BGMEA Garments Park, Mirsarai Economic Zone.

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 Proposed Improvement Plan:

1. Digital and strict traffic laws to ensure a faster Road Transportation system.
2. Quickly complete the ongoing Power-Plant projects to ensure uninterrupted availability
of powers.
3. Design Virtual Supply Chain.

Phase 2: Expand & Optimize Supply Environment

Plan 1: Expand the Yarn Industry to Manufacture PET Yarn

Recycling of plastic waste with an appropriate procedure, it is possible to manufacture PET yarn
and flakes from plastic which will be very useful for local Hi-Tech garments and wearable product
producers. Since PET yarn is best suited for sportswear, there will be an opportunity to attract
foreign companies like Adidas, Nike etc. in the future. Deshbandhu Group is currently the only
PET yarn manufacturer in Bangladesh which alone is failing to meet the demand and optimizing
the huge abundance of PET bottles. Sufficient PET yarn manufacturing can make Bangladesh act
as a local supplier in RMG.

Figure: Proposed Supply Chain Model.

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Plan 2: Keep Optimized & Multiple Suppliers

Bangladesh import most of the raw material for RMG products from China. This takes at least
one month to order and receive the materials. But India is Bangladesh’s neighbor country which
is the highest cotton producing country in the world and has 23 land Customs stations between
these two countries.

Figure: SC Logistics

Table: Multiple Supplier Environment

Supplier Cost Quality Lead Time Raw Material

Country Effectiveness Abundance
S1: Africa High High More than S2 Medium
S2: India Slightly less than High Lowest Huge
S1
S3: Pakistan Less than S1 Medium Less than S1 Medium
So far, Bangladesh didn’t import much cotton from India because the price was 5% higher than
the international price for India’s higher MSP. But in this post-COVID season, Bangladesh will
have the opportunity to negotiate and try maintaining the international price with India in new
terms and conditions with a strong point that Bangladesh will always remain by the side of India
in this sector even if in near future a new pandemic arises.

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Plan 3: Separate Production Line for Personal Protective Equipment (PPE)

A recent forecast report shows that the PPE market is expected to grow at a CAGR of 7.8% over
2020-2025.

According to experts, the demand for fashionable clothing will fall drastically in the post-COVID
season. So, to ensure survival, the RMG industry should be focused by the GOB with appropriate
incentives to produce sufficient PPE so that it becomes affordable to all classes of people.

Actions that should be taken immediately are given below:

Proposed Action:

1. Dedicate an existing production line to manufacture PPE.

2. Take advantage of the incentives given by the GOB for collecting raw materials.
3. Meanwhile, build separate infrastructure for manufacturing PPE in the future.
4. Build an eco-system for maintaining health hygiene even after the pandemic.

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 Phase 3: Improve Absorptive Capacity
Full supply chain network connectivity should be done via internet-based portals, workflow and
integration technology. It will ensure the natural development of collaboration depth to capture
intrinsic supply chain value. Central R&D will ensure quick adaptation of new innovative trends.

Figure: Implementing Leagile Strategy for improving absorptive capacity.

In this model Agile Supply Chain Strategy and Lean Supply Chain Strategy is merged for
increasing responsiveness by postponement with incorporating industry 4.0 in Bangladesh’s
apparel sector. Together these two are called Leagile Supply Chain Strategy. Here a Customer
Order Decoupling Point (CODP) was found in between agile and lean supply chain strategy.
Where the lean supply chain strategy will be used before CODP and agile supply chain will be
used after CODP.

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 Cost Analysis

Budget Plans
The proposed plan with divided phases is expected to cost around BDT 900 crores approximately
to be implemented within the year 2025.

Probable Budget Distribution

18%

36%

46%

Phase 1 Phase 2 Phase 3

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 Feasibility of Proposed Model

Feasibility Analysis

100
Percentage %

80
60
40
20
0
Market Feasibility Operation Feasibility Technical Feasibility Financial Feasibility

Feasibility Factors

Model Implementation Timeframe

Impact of Proposed Model

Spider Model Impact

Proposed Model Existing Model
Supply Chain
6

Customer Satisfaction 2 Responsiveness

Quality Cost effectiveness

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Automobile
Industry

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 Automobile Industry
The demand for the automobile industry in Bangladesh is flourishing as a whole. It is high time
the automobile industry should step into the era of progressive manufacturing. Before doing
that, the situation of the current automobile industry is analyzed to develop forward and
backward linkages. The forecast says because of this crucial situation China’s light-vehicle
demand to fall for the third year in 2020.

In this scenario, it is discernible that the demand has fallen. This is the perfect scope to boast
“Made in Bangladesh” tag and offer mobility solutions. According to market researcher, “For
2020, we are forecasting 5% growth in automobile sales, with commercial vehicle sales (6.3%)
to outperform passenger vehicle sales (3%)”. Apparently, the predicted sales for 2020 are
extremely significant.

Bangladesh Automobile Industry Sales Trend

7000

6000

5000
Sales Amounts

4000

3000

2000

1000

0
2015 2016 2017 2018 2019 2020

Year (Predicted Sales)

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 Situation Analysis
The scope of local production is emphasized as the GOB is developing various automobile
policies. These policies will hopefully overcome the hurdles of the automobile industry and also
help to understand the forces that shape the competition within an industry.

Figure: Porter's Five Forces on Automobile Industry

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 Infrastructure Plan

Proposed Location:

Location Chittagong
EZ Name Mirsarai Economic Zone (Bangabandhu Sheikh Mujib
Industrial City)

Authority Government
Area 30000 acre

Competitive Advantages of the location:

1 • Direct waterway access

2 • Near to national highway

3 • Well connected to Chittagong sea and air port

4 • Hassel free land

5 • Gas, water etc. availability

6 • Quick import and technology facility

7 • Clean environment

8 • Power supply

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 Supply Environment

Local Supplier:
Supply material Local Availability Supply material Local Availability

Leather √ Battery √
Organic parts √ Air conditioning √
system
Engine materials × Glass √
Electrical √ Fuel Tank equipment ×
components
Tires √ Carpet √

Local Buyer:

Increased Increased Profit

Customer The higher selling
Due to lower price rate will increase
consumer rate will the profit.
be increased.

Lower Price
As the product is Increased
manufactured locally Production Unit
the extra amount of The higher selling and
tax due to import customer unit will lead
won’t have to be paid. the production rate to
That will make the
go higher.
product affordable.

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 Business Process

Strategy:
For the automobile industry in Bangladesh, the proposed model will be a combination of
agile and lean supply chain models. In this case:

Section Lean Agile

Manufacture √

Transportation √

Distribution √

Maintenance √

Supplier Category:

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 Absorptive Capacity Buildup Model
Open innovation improves the innovation performance of any industry so far. But not every firm
equally benefits from tapping into external knowledge. As it contributes to competitive
advantage and product innovation, an open-source of knowledge, R&D handled by the
government will affect the contingent on the firm’s multiple components of absorptive capacity.

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 Cost Analysis

Cost Estimation Per Vehicle

3%
Raw materials and the prices of auto
24% parts
Research, development, engineering,
and running the facilities
Variable Cost
57%

16% Profit

So it is clear that the variable cost which also includes labor cost can easily be decreased as well
as running facility cost can also be optimized as Government has offered a different scheme to
establish an economical condition. Moreover GOB has exempted VAT and supplementary
imported raw materials. As per calculation, the predicted profit is increased from 3% to 7%.

Cost and Profit Comparison Per Vehicle

60%

50%

40%

30%

20% Existing

10% Proposed

0%
Raw materials and Research, Variable Cost Profit
the prices of auto development,
parts engineering, and
running the facilities

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 Model Implementation Timeframe
Gantt chart:

1/1/2022 4/11/2022 7/20/2022 10/28/2022 2/5/2023

Speeding The Service

Supply of Utility

Tax Wavier Phase 1

Duty Free Import of Machinary

days to complete

Figure: Short Term Plan.

11/27/2022 3/7/2023 6/15/2023 9/23/2023 1/1/2024

Bond Facilities

20% Supplier Establishment

40% Supplier Establishment

60% Supplier Establishment

Transportation Development

days to complete

Figure: Mid Term Plan.

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 11/22/2023 6/9/2024 12/26/2024 7/14/2025

70% Supplier Establishment

Extending Port for Import &

Export

Development of EZ

Tax Wavier Phase 2

days to complete

Figure: Long Term Plan.

Impact of Proposed Model

Spider Model Impact

Existing Model Proposed Model

Supply Chain
5
4
3
2
Responsiveness Customer Satisfaction
1
0

Cost Effectiveness Quality

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 Investment Attractiveness of Bangladesh

Low Labor Cost:

Minimum monthly wage USD

China $351.0

Bangladesh $94.14

Other factors that make Bangladesh an attractive country to the foreign investors are shown
below by the Kano model:

Figure: Investment attractiveness.

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 Conclusion
Coronavirus is changing the dynamics of foreign investment around the globe. Priorities are
shifting among investors and investees, traditional investors are retreating and new ones
emerging, and sectors for investments are getting reshuffled. Companies relying on China,
completely or partially, seeking to expand out of or replacement of China. In this consequence,
Europe, Japan, and the US have declared that they will shift their factories from China in this
crucial situation and will reduce their dependence on one country. Bangladesh has a huge
possibility as the population is about 16 million and has many potential skill resources. This area
and market are untouched for many industries. But the GDP growth has made people look for
better products. Bangladesh can make itself an attractive place for its expansion. Therefore, we
need to conclude that Bangladesh can seize the opportunity by providing them sufficient facilities
and also ensuring flexible supply chain capability.

References
1. https://www.prnewswire.com/news-releases/world-personal-protective-equipment-
ppe-market-growth-trends-and-forecasts----market-forecast-to-grow-at-a-cagr-of-7-8-
during-2020-2025--301072706.html
2. https://www.beza.gov.bd/economic-zones-site/government-owned-sites/mirsorai-
chittagong/
3. https://www.dhakatribune.com/opinion/op-ed/2020/05/28/a-realignment-of-priorities-
in-light-of-covid-19
4. https://www.thedailystar.net/shift/automobile-industry-in-bangladesh-the-future-of-it-
1805257
5. https://carfromjapan.com/article/industry-knowledge/how-much-does-it-cost-to-make-
a-car/
6. https://home.kpmg/xx/en/blogs/home/posts/2020/03/covid-19-impact-on-the-
automotive-sector.html

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