Established in 2006 by AKM Aminul Islam (Founder and Managing Director), Mahmud Group is one of the most respected names in Bangladesh RMG industry. Fully vertical, from spinning to finished garments, the Group has a number of well-established entities under its umbrella, including Mahmud Denims Limited, Mahmud Spinning Unit, Mahmud Indigo Limited, Mahmud Woven Dyeing Unit, Mahmud Fashions Limited, Mahmud Washing Plant Limited, Mahmud Rope Dyeing Unit, Rupali Trading Agencies, Mahmud Trading Corporation, Provita Feed Limited, and Provita Hatcheries Limited.
Apparel Resources caught up with Rafee Mahmood, the young and dynamic Director of the Group, to discuss in detail various issues pertaining to COVID-19, and what the company is doing to effectively tackle the challenges (that the pandemic has brought with it) and maintain its relevance in such trying times.
Any rethinking of business strategies and operations from Mahmud’s perspective in view of COVID-19?
Rafee Mahmood: This pandemic has devastated the global economy, and has forced all entrepreneurs to rethink our strategies and operation procedures. The huge loss of business due to buyers holding/cancelling most of our orders has created a strain in relationship between manufacturers and buyers. Due to lockdowns throughout the world, buyers are renegotiating terms of payment, and to facilitate this change, we too are renegotiating our terms of payment with our suppliers. This has put immense pressure on the working capital, as we are receiving payments later than we are used to. The most difficult task for all of us is going to be adapting to new price pressures as all of us were operating with unsustainable margins before the pandemic.
We have undertaken various initiatives to address these issues efficiently. As the world has never faced a crisis like this, for the time being it is very difficult to make informed strategies, because the scenario is changing every day. It is clear that our existing customers will not be able to secure the same capacity as before. We are slowly spreading and improving the market reach as a core marketing strategy. We are also working on offering strong innovations to our clients that will be more appropriate on their demand. While for operation, our major focus is on cost cutting initiatives and enhancement of efficiency of scale of operation.
What has been the biggest takeaway from this pandemic?
Rafee Mahmood: This pandemic has taught us a very good lesson. The mistake most of us have done is putting all our eggs in one basket. We need to diversify; both our supply chain as well as our selling should be spread out to more diverse destinations in order to minimise risk. From this learning, our management is continuously searching for more alternatives. Another lesson is – we had taken the world for granted. We all should do our part in saving back the planet, and bring products that the Earth loves; our development teams are continuously developing products which are friendlier to mother Earth.
Any changes in terms of order quantities/speed to market/price points, etc.?
Rafee Mahmood: Products are becoming basic, and hence, there shall be immense pressure, as the competition is huge in the basic market. Business margins are going to be more competitive, and quantities will definitely change and projections will come closer to the season. At least for the next 6 months, buyers will place small orders to test the market response and changes in customer taste. E-commerce is going to be bigger than conventional malls today, due to which buyers will have more data available to them, and the way we do business is going to see a lot of change due to this. We are anticipating that prices will drop further because buyers will try to reduce selling price or offer discount to attract customers. Hence, to counteract, we have to focus on efficiency and precision of the business.
Any other changes that you foresee manufacturers may have to bring in the coming days in view of the same?
Rafee Mahmood: Manufacturers need to unite; we need to break the stereotype that we can survive without supporting each other. The pandemic has proved that we need to unite to get fair prices for our products and we need to work together with the Government to keep our dominant place in the global clothing industry. We need to organise to fight against decreasing price points; the buyers are as dependent on us as we are on them at this time. It will be a while before they can find an alternative to us; we have to understand this and stop getting intimidated by the heavy-handed negotiations. The Government and banks also have to put in place anti-dumping procedures which harm all of us in the market, as when one manufacturer lowers prices for a product, all of us suffer.
What, according to you, is Mahmud’s core competency that would help you regain business once the pandemic is brought under control?
Rafee Mahmood: Being one of the leaders in denim and moreover being vertical has always been one of our core strengths. We have grown and attained leading position in denim domain based on our core strengths like skilled and relevant experienced human capital, product innovation and reengineering, efficiency, and cost-competitive production approach.
This pandemic will negatively impact everyone, and unlike the past, we cannot solely depend on giving sharp prices, quality, and on-time deliveries. Mahmud has always believed in having the latest technology, diversifying product range, and equipping our facilities with the best machines available. We also have very capable marketing teams whose mettle will certainly be tested, but only through generating sales from all the possible markets can we hope to survive.
What’s going to be the ‘new normal’ post-pandemic? Have you got any indications from industry experts on what to expect?
Rafee Mahmood: COVID-19 has shaken the world to its core; no one is exempt from its reach. It has certainly highlighted the need for change, if we want to prevent any more disasters in the future. This pandemic has been a huge learning curve for each of us; not only for the RMG owners, but also throughout all levels of the economy. We, as an organisation, have always emphasised on being agile to market conditions and learning out of each experience. This pandemic has taught us the importance of structured and disciplined work culture, importance of hygiene and cleanliness, sustainability and its importance. We have tried our best to adapt in order to ensure the ‘new normal’.
As we all know the vaccines will not be out any time soon, the nature of our work means that we need thousands of people doing multiple tasks in a compound, which has its own risks. However, we have emphasised on a more improved cleaning routine, maintaining social distancing when possible, encouraging people to stay home if they are not feeling well and educate workers on how they can best fight COVID-19.
There are multiple theories on how things are going to be in the coming months and years. We did not get any firm indication from experts, as most countries are just starting to ease lockdowns. As countries start opening up, there is going to be new data regarding new changes in trends, buying patterns, selling price, etc. At the moment, we are developing new products following multiple trends to try and keep up with the changing trends in our markets.
Bangladesh is strong in basics, and many believe that for some time consumers will be more interested in basics rather than fashion. Do you think that will work well for you?
Rafee Mahmood: Until last year, the buyers were pushing us to add value to our supply chain, adding to our range. This pandemic has slowed that urge and we are seeing basic items being ordered more. The certain rise in unemployment will reduce disposable income, which will discourage spending. As a manufacturer, products that are more production-friendly help us achieve higher efficiencies and minimise our down time. On the other hand, the reality is that due to the current surplus of suppliers, it is almost impossible to ensure any profit at all in the basic range. It is always good to have a mix of products in production to optimise income.
The heavy investment on compliance and sustainable technologies is a cost which is not reflected in our product prices. The buyers need to recognise the cost of investing in non-performing areas, such as sustainability and compliance which have a huge financial burden on manufacturers, and the margins from only basic goods makes it even more difficult for us to pay for them.
What kind of hints are you getting from buyers in terms of future procurement plans?
Rafee Mahmood: Our Australian customers didn’t have any major impact on our running orders as yet; we have been having very good response from them during this pandemic which has given us assurance about our partnership with them. With European customers, we initially had the biggest hiccup as they were the first ones to go for hold/cancellations. From May onwards, we have been getting a better feedback which is not yet up to the original projections, but somewhat better. They are slowly opening up stores and getting positive response from their end-customers, but it’s still too early to say. They are generating more sales from online than walk-ins. Most of the hyper market customers are still in positive growth.
Consumer spending is at an all-time low and may even remain that way for some time even after things have improved. What impact that might have on the overall consumption/price points, etc.?
Rafee Mahmood: There will definitely be an adverse impact on the previous consumption and price. Our brands are going to be more dependent on precise analytics to plan their future orders in fear of sitting in piles of huge stocks. Manufacturers will be pressured to keep stocks at their facilities and deliver small PO’s in split quantities which will add a huge burden, as space is an issue for everyone. This will also add huge burden on our running capital, as brands have already renewed their terms of payment to defer up to 180 days. Prices of products will definitely come down, as brands will go for discount wars and the US manufacturers will need to gear up to fight for the tight prices. Our BGMEA, BTMA, banks need to play a huge role in making proper policy reforms which will help us regain our position in the global frontier.
There are different theories as to which markets will come out of coronavirus-induced recession faster. Which are the countries you think would reap good yields in the post-pandemic period?
Rafee Mahmood: In the last couple of decades, the world has seen the Asian economy transform. Asian economy is versatile, as it covers everything from agriculture, manufacturing, technology, and services. This versatility makes it more robust than other continents. However, since most of these countries have their own manufacturing experience, it is proving more difficult to penetrate with European and American prices. They want non-basic products at basic price points, which have given us a new challenge to reengineer our non-basic products to meet these sharp price points.
However, the whole world is tied in multiple layers with the US and European economy. All economies will suffer some slowdown as the consumption in the US and the EU decreases. We foresee the recession will have a much worse impact on us if we do not seek new destinations to sell. We will be exploring on untapped markets like China, India, Japan, Korea, Russia, and Africa to help offset the decrease in demand from our primary markets.
The pandemic has taken a heavy toll on the workforce as well. With context to the same, what have you done to keep them engaged?
Rafee Mahmood: We have taken multiple measurers to create less information gaps between workers and management, which is imperative at this time. We have been arranging multiple awareness campaigns to minimise the intensity of crisis. Our management, at a very early stage, focused upon ‘COVID-19 and its impact on business’ awareness drive. Restraining workers to adapt to this ‘new normal’ and keeping them updated regarding facts are the only ways to avoid any unrest or uncertainty that is present right now.
We are also using the lost times from less confirmed orders, to train the workers to improve their skills, so that we can be more competitive. Every person has been updated on all the steps we are taking to improve safety and provide a more hygienic environment. We have taken precautions to disinfect all our premises and have applied social distancing norms and have planned to minimise human contact to decrease the likelihood of infection. We are having regular meetings with the WPC leaders, and together, we have made a COVID-19 action team to maintain safety as much as possible. Furthermore, we have explained to them their rights regarding their wages to reduce confusions on their due payments.