Bangladesh has set a target to increase its Readymade Garment export to USD 50 billion by 2021. Achieving it would require rapid growth of the RMG companies. When a factory moves towards an accelerated growth it must take right growth strategy. A sudden investment with high interest rate adds huge pressure on company’s financial portfolio. A young growing company Knit Plus Ltd. would be a right example of this growth model. Proper strategic plan is helping the company in reducing risk and keeping its profitability intact. Textile Today has visited the company and discussed the strategic issues with Knit Plus Ltd Managing Director Ishtiaque Ahmed Patwary. The story is built by the support of Fong’s National Engineering Co. Ltd.
Knit Plus started its textile business by putting knitting facilities back in 2003. From 2006 the company entered in garment making, printing and embroidery gradually. By 2013 they procured an old dyeing finishing unit and renovated it. Today Knit Plus’ dyeing finishing unit is processing around 14 tons of knit fabric per day with modern machinery set up. The company however is an ISO 9001:2008 and Oeko-tex standard 100 certified. More importantly it is one of the fastest growing companies in the country which already has invested around USD 18 million and investing another $7.5 million within months.
When asked about the fast growing strategy, Mr. Ahmed told that market opportunities allure us to grow this is only a side of the story. We must go for such growth in fact to remain competitive in the market. We are in a market where you will see big vertical set ups having gigantic capacity and also you will find factories having small cutting and making facilities only. Large variety of company size has created many options for buyers to negotiate on the price. Many times smaller and bigger both sort of companies are accepting orders at very low price which is many times like increasing loss as there is no real premium in those orders. Every day our cost of manpower, utility, compliance such costs is increasing while buyers’ price is getting reduced. At this reality we must built our own backward and forward linkages to save cost for remaining profitable. With vertical integration we also can offer buyers with fully in house facilities, explained Knit Plus’s Managing Director Ishtiaque Ahmed Patwary.
Mr. Ahmed looked very confident that Bangladesh would reach the target of 2021 much early if we could get some support from government. He shared his factories gas scarcity and load shading situation which is costing him around 3 million BDT per month additional. He added that recent safety pressures from Accord and Alliance has cost him around 30 million BDT. He expressed frustration that with increasing cost every day, when ask additional amount from buyers, there are not willing to pay any premium. Environmental and social compliance issues have become very costly for us. On top of those cost now we are trying to increase our capacity to cater loss we are occurring, Mr. Ahmed justified his growth target.
While asked about his growth strategy, Mr. Ahmed looked pragmatic and informed that we are taking some small initiatives that are having great impact on our overall financial portfolio. We are living in a reality while our cost of capital is higher than many of our competing countries. So, when we take any loan from our banking system for expansion its ads huge pressure on our loan repayment portfolio. For a fast growing company like us it has significant impact on our overall overhead cost. So we lose competitiveness. To reduce these problems we tried to select such machinery which is well functional, efficient and cost effective.
To explain it further Mr. Ahmed cited the example of Fong’s TEC 38 series atmospheric dyeing machine. “These machines are specially designed for cotton fabric. They are atmospheric but still efficient. We can use all modern automation facilities in this machinery like ‘Integrated Intelligent Rinsing (IIR+)’ & ‘Lint collector’…etc. As we can utilize the full loading capacity easily of the machine our running cost is very much improved. By choosing atmospheric machines would be able to reduce handsome amount of initial investment cost compare with high temperature machines. As around 90% of our fabric in 100% cotton, TEC 38 atmospheric machines are good for us.” Mr. Ahmed explained. However we have good quality high temperature machines as well which we can use for synthetics and synthetic blend fabric. Such analysis of technology options and going for right cost effective solutions are helping us remaining cost effective in the time of rapid expansion, Mr. Ahmed concluded.
Technology adoption is being discussed these days to make sure value addition, remaining cost effective and increasing revenue. Choosing right technology requires proper study of the product mix, utility structure and financial modeling. Knit Plus experience with Fong’s TEC 38 series atmospheric machinery would be an example to reduce cost investment that ultimately keep overhead cost of the factory in competitive level.
Kenneth Chu from Fong’s National Engineering Co. Ltd. further explained that Fong’s has carefully designed the TEC 38 series especially for Bangladesh. As Bangladesh is mainly a cotton processing country an efficient dyeing machine like TEC 38 would be very helpful for the country maintaining its efficiency and reducing its investment for expansion. In full machine load TEC 38 can dye in 1:5 liquor ratios. Due to its design it’s easy to use and control for Bangladeshi dye house operation, Kenneth added.