In the past two to three years, there have been some progressive apparel manufacturing companies resilient to navigating challenging circumstances and adapting to changing market conditions. While the immediate focus has been on sustaining the operations, the RMG manufacturing companies have timely realised that the commitment to growth and innovation remains unwavering even if the recent order dynamics have prompted them to temporarily pause the expansion efforts. One such company is Pakiza Group which is determined to make strides in its growth journey.
In an effort to shed light on pressing matters within the apparel manufacturing industry, Team Apparel Resources (AR) conducted an insightful interview with Rakibul Islam Khan, Managing Director at Pakiza Knit Group, a prominent company in Bangladesh. This exclusive interview aimed to delve into crucial topics that currently dominate reasons behind Pakiza Group’s strategic approach towards future growth. Rakibul shared valuable insights, providing a deeper understanding of the challenges and opportunities faced by his teams. Presented below are select excerpts from this enlightening conversation, highlighting the key points discussed.
AR: Congratulations on opening a new woven unit! Please take us through your new building, its capacities, products and your future goal behind this expansion.
Rakibul: The new production unit is a four-storeyed building and the total floor area encompasses approximately 50,000 square feet per floor. As of now, we have two operational floors, while the construction of two additional floors is underway. The production is focused on overall-style denim products. Presently, this production is happening across four sewing lines, and by the end of this year, we will expand to 12 lines hopefully. However, our future plans involve expanding into shirt production and diversifying our product range to tap growth.
Regarding our existing knitting unit, we regrettably hadn’t undertaken any initiatives in the past two years due to the pressing need for survival; however, now that the global market situation is decent, we have introduced value-added products to enhance our offerings. At present, we are exporting approximately 4.5 million pieces per month, with a corresponding value range of US $ 10-12 million.
AR: Despite experiencing a steady flow of orders in the years 2021 and 2022, you have chosen to adopt a prudent approach when it comes to your growth plans. Could you shed light on the rationale behind this decision?
Rakibul: The rationale behind this decision stems from our commitment to satisfying our buyers. In the past, when our buyers were content, we experienced a smooth operation. Unfortunately, the recent pandemic and war have presented significant challenges and the ongoing struggle has intensified.
Furthermore, our current order volume is low as compared to previous years in knit division. To address this, we have expanded our buyer base from 13 to 36 in order to utilise our production capacity more effectively. Currently, our primary struggle revolves around order fulfilment and product innovation. The gas and dollar crisis in Bangladesh have adversely affected our production capabilities. As a result, we are contending with numerous challenges; however, we remain positive about the future.
AR: What are your views on diversifying to emerging non-traditional countries?
Rakibul: Non-traditional markets hold great growth opportunities for us, especially at a time when we are encountering challenges in the US market due to the absence of Generalised System of Preferences (GSP) benefits, which poses a struggle. Additionally, the GSP benefits in the European Union will expire by 2026, which necessitates exploring new markets. Currently, our primary focus is on the South Korean market, which we consider to be a favourable location. Starting from May, we have also directed our attention towards Australia and Canada. These three markets hold significant importance for us.
In Korea, we already have a presence and are catering to specific buyers. We anticipate that the Australian market will show even more potential in the future, although many factories in Bangladesh are already producing Australian products. The Canadian market is another area of interest for us and, this year in Q1, Canada’s apparel imports have remained positive on Y-o-Y basis that makes it even more lucrative export destination for us.
AR: How does the price increase of various commodities impact your profitability? And, how crucial are buyers in ensuring the sustainability of your business within a highly competitive market?
Rakibul: Initially, there were higher costs and burdens associated with all this. However, the energy cost has now risen significantly, by around 100 per cent – from 14 Taka per unit to 30 Taka per unit! Similarly, the cost of steam per kilogram has also doubled. Considering these escalating energy costs, it becomes advantageous to opt for sustainable products. In the past, such a choice would have been financially burdensome but now we are taking buyers’ requirement for compliance and sustainability in a positive manner.
Going forward, we are actively seeking out buyers who offer favourable terms as it is not feasible to sustain a business by incurring losses. Eventually, those buyers who refuse to meet our price expectations will be compelled to find alternative sources. We can observe a similar pattern in China, where they initially provided cheaper products but shifted their focus once regulations were enforced. Consequently, these buyers turned to Bangladesh, which offered more affordable options. However, our prices have now increased as well. These buyers will have to raise their prices or search for new suppliers. I am not referring to a timeframe of ten years; rather, it is a gradual transition as costs continue to rise. Therefore, we must establish a sustainable business model for buyers who adhere to ethical practices.
AR: Please share with us your sustainable initiatives.
Rakibul: In my ongoing project, I have already initiated three key endeavours. Firstly, I aim to transition to full solar energy utilisation. Currently, we rely on three-megawatt electricity from gas generators, but I am working towards converting the entire system to solar power. This shift would allow to operate solely on solar energy for at least 12 hours, resulting in substantial energy cost savings of approximately 20 per cent to 25 per cent. Moreover, sustainable projects like this one often receive more favourable financing terms, including lower interest rates, from banks.
Secondly, we are exploring the utilisation of jute as a sustainable solution. Fabric scraps and waste are commonly generated in factories and often sold at minimal costs. We plan to utilise this waste in our boilers to generate steam. However, we are also mindful of the environmental impact, particularly regarding air pollution. To address this concern, we are studying the waste-to-energy technology employed in Switzerland, where waste is burned, and the resulting ashes are treated before being released into the air. Our priority is to ensure that any solutions we adopt are environmental-friendly. Thus, thorough research and analysis are necessary for such projects.
Lastly, we are actively researching rainwater harvesting. Currently, we have implemented a system to filter and reuse water from our Effluent Treatment Plant (ETP). This filtered water serves various purposes such as floor cleaning and watering plants.
AR: How have the worker engagement initiatives undertaken by Pakiza Group contributed to the development of a robust organisational culture?
Rakibul: One aspect of Pakiza that I truly admire is the engagement of workers in various activities – thanks to my father who encouraged us to promote such activities within our organisation. He always emphasised on the importance of building relationships with workers, rather than just focusing on managerial positions. This value has become deeply ingrained in our company’s traditions, with a strong focus on prioritising the well-being of our workers.
Today, we organise an annual picnic and badminton tournaments during winter as a means of fostering team spirit. Additionally, we celebrate various festivals throughout the year. Winners receive rewards and trophies, providing an enjoyable experience for all participants. We believe that creating a lively and engaging work environment is crucial. Even during times of adversity such as the pandemic, we considered it essential to provide such activities to keep our workforce active and rejuvenated.
We believe that by investing in the happiness and satisfaction of our workforce, we can achieve a harmonious balance between man, machine and materials. Maintaining the contentment of our workers is a challenging task, but it is one that we undertake every year as a tradition. Currently, approximately 70 per cent of our workers have been with us for more than seven or eight years, demonstrating their loyalty. Although there is a 30 per cent turnover, we hold a sense of responsibility towards those individuals as well.
AR: What’s your group turnover currently and what are your future plans?
Rakibul: From September to February period in FY ’23, we witnessed positive growth, with monthly exports averaging around US $ 12 million. However, in the last two months, we have encountered challenges, with export figures declining to US $ 7-8 million, and suddenly experiencing a drop of US $ 4-5 million in orders during May ’23. Some clients who had initially placed orders are now deferring them to a later date.
In the previous year, we successfully achieved around US $ 98 million in our knit composite unit. Though I am somewhat apprehensive due to the current order situation, looking ahead to the next fiscal year, FY 2024, our targets are set at US $ 115 million for knits and US $ 5-6 million for other products in our knit composite unit.
Our target is to achieve a monthly export volume of approximately US $ 15 million in the new woven garmenting division, once our set-up is fully operational by the end of this year.
Recognising the current boom in the undergarment market, one of our next targets is to establish 12 lines dedicated to undergarment production, which will mark a new venture for us. This initiative aligns with our commitment to sustainability, an aspect that all businesses are striving to address. We are currently evaluating the feasibility of this project, weighing the potential risks and benefits. If all goes well, we will soon go ahead with the project.
