We cannot allow ongoing negative price pressure to endanger the industry
The ongoing pressure on Bangladesh’s RMG suppliers to improve lead-times at the same time as reducing costs is no longer sustainable; the industry needs to learn how to say "no" to its customers in certain circumstances.
"Saying ‘no’ is not something that comes naturally to the majority of people," says Susan Newman, PhD, social psychologist and author of The Book of NO -- 250 Ways to Say It -- and Mean It and Stop People-Pleasing Forever.
This is a situation that I feel is too commonly found within the Bangladesh RMG industry when companies negotiate with their customers. The industry is rife with manufacturers complaining about the downward price pressure exerted on them by customers, yet we rarely hear of companies that say “no” to unrealistic price negotiations, preferring instead to keep their operations running by under-cutting their competitors, even if their profit margins are severely affected.
What I observe is commonplace in today’s apparel business environment is that, too often, companies fall into the trap of selling on cost comparison alone, resulting in them losing in the long run. It has been proven that it is nigh impossible to establish a profitable, sustainable business, manufacturing in the most ethical, environmentally sound manner if any business’s prime concern is competing by undercutting their competition.
It is a simple economic fact that continued price pressure and acceptance of unrealistic cost prices will impact any business’s profit margin with the devastating effect of a negative impact on workers’ livelihoods and well-being, and restricting the company’s ability to develop in a truly sustainable manner.
Despite this most obvious of sound economic principles, it is heart-breaking to see companies following this strategy in Bangladesh today; so how do we change the situation and the mind-set of factory owners and their staff that deal directly with customers?
First and foremost, it is in all our best interests if manufacturers in Bangladesh begin to take pride in the apparel products they produce. Too often, the industry is treated as the whipping boy, with customers assuming that our capabilities only extend to basic, price sensitive, mass-volume product.
Those of us involved with the apparel industry know that this is far from the case today and we need to be able to show the global audience the product integrity emanating from the country. Our capabilities as a nation have improved dramatically over recent years with huge investment, not only in the upgrading of manufacturing facilities to international standards, but also in the latest technological systems and machinery, allowing us to produce in an environmentally sound and ethical manner.
The nation is home to the largest number of LEED certified apparel manufacturing units in the world and has taken great strides overall in the fields of workers’ rights and health and safety and sustainable, responsible manufacturing, all of which is something that we can be proud of and, most importantly, adds value to the garments we produce.
Coupled with this, Bangladesh has advanced in the field of research and development (R&D) with companies now able to provide their customers with the latest in design-led, on-trend product across all apparel categories that we manufacture.
We no longer have to hide behind the argument that we can only produce low price products and need to have the courage of our convictions to demonstrate that to our existing, or potential, customers. We should all be striving to build a brand out of Bangladesh, not continuing to be satisfied with making a lower price commodity product, and endorse the “Made in Bangladesh with pride” slogan.
Another factor in the equation is customer service -- we need to ensure that we listen to our customers’ requests and respond as promptly and efficiently as possible. We have to accept that there will always be some manufacturer or another (whether in Bangladesh or another sourcing hub) that can manufacture products at a lower cost price, but we need to avoid the temptation to join the race to the bottom; instead we need to demonstrate that we possess “value-added” capabilities, in which customer service plays a crucial part.
A satisfied customer will be more ready to listen to a company’s point of view if they feel comfortable in the service that they are receiving. By generating genuine interest and understanding on the behalf of the customer in the operations of the company, the task of saying “no” to unrealistic price demands, should the occasion arise, will become a far less daunting prospect.
Hand-in-hand with customer services is to understand the customers’ business and trading conditions and, together with open discussion, find the best ways of working together for the mutual benefit of all parties. We need to be inquisitive and take an active interest in the customers’ market and consumer. Just as we need the customer to engage with our business operations, we need to engage with theirs.
Finally, we, as an industry, need to learn to not be afraid to say “no” to unrealistic customer demands. We need to be promoting the value that we can add to product through R&D, efficiency, ethical and environmental standards, and effective customer service.
These benefits need to be effectively communicated to our customers but it is something that will not happen until we fully appreciate what we are really selling and have the confidence to promote the industry. The added value provided by our industry needs to be communicated effectively, putting the real costs of any product into perspective for the customer to understand. It's about knowing our value, understanding what we are really selling, and being able to effectively communicate that value in a way that puts our manufacturing cost into perspective.
How we say “no” in negotiations with customers is a sensitive subject; the manufacturer must not be seen to be aggressive. Instead, by understanding the customer’s point of view, coupled with an understanding of their market and product requirements, it is better to explain, openly, the reality of the situation, detailing why the cost being demanded cannot be met and that by accepting the order the manufacturer would be doing a disservice to his own company and to the long-term relationship with the customer.
I believe many would be surprised by the reaction of their customer. If a true working relationship has been developed, the customer will understand the needs of the manufacturer and if, due to cost pressure, an order cannot be accepted, they will place it at another manufacturer and move on to develop product where cost prices can be met with their partner.
“Sorry seems to be the hardest word,” as legendary British singer Sir Elton John sang, but now is the time for those of us involved in the Bangladesh RMG sector to face up to reality and work with our customers to secure fair prices for the product we produce. There is no shame in saying “no” to unfair price negotiations. We cannot allow ongoing negative price pressure to endanger the industry that we have built, and we need, collectively, to make a stand to ensure that fair prices can be attained for all, even if that requires saying “no” under certain instances.
With a change in attitude, a better approach and clear, frank negotiations with our customers we can look forward to ensuring that our industry is built upon a sound pricing foundation, allowing the Bangladesh RMG industry to continue to grow in a sustainable, responsible manner.
Mostafiz Uddin is Managing Director, Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). He can be reached at [email protected].