The difference between profits and profitability is essential to take into account strategically for operating a business. Every dollar, we earn as a company in profit has a price tag comprising the cost of goods sold and all other indirect expenses. Inconsequent, each dollar in profit – is worth less than each dollar we never spent as a company.
Profitability, simply, lies in broad areas in proportionate to the profit. The industry size of Textile & Apparel of Bangladesh has been escalating with a declining rate of profit margin little by little. Factories now struggle for exploring scopes for sticking to a level of profit to stay sustainable in business.
In the quest of increasing profitability in textile and apparel, Textile Today picks an episode titled ‘scopes of increasing profitability’ in TexTIMe on 23 May 2021. Hasib Uddin, Chairman, APS Group and Abdullah Al Maher, CEO & Head of Business, Fakir Fashions were present in the webinar as panelists. Tareq Amin, Founder & CEO, Textile Today moderates the webinar.
Profitability can take place with either cutting costs or increasing revenue briefly. In practice, once industry people talk about profitability, they advocate for the cost-cutting approaches first to go with. The moderator gestured as to why we do not emphasize increasing revenue instead – he asked the panelists.
Abdullah Al Maher replied that – in the hyperbole of transparency and traceability, buyers eager to know or they already know the costs of input materials and manufacturing in detail. We are, by the ways, compelled to accept the pricing they design and offer. Buyers now approach with the preset cost sheets where factories possess scanty scope to negotiate for higher prices.
He lamented the difference of pricing on the variance of countries due to the image and branding of that particular country for the very same product. For example, buyers offer different prices to the manufacturers of Turkey, China and Bangladesh for the same quality and product.
Hasib Uddin, Chairman, APS Group shared his experience of persuading buyers and securing worthwhile margin back in 1996 when he started the apparel business. He mentions few companies run in profit. Many factories are doing their business as in the financial cycles just to survive. He stated that the Bangladesh apparel industry doesn’t have the competitive advantage of having cheap labor that was in the 1980s.
Moreover, factories now have to agree with the prescribed cost sheets settling from buyers. He emphasizes product diversity, efficiency and value addition with products for reaping of profitability, he added.
At Fakir Fashions, value-added products play pertinent roles in profitability where they harmonize a rigorous team of 130 for Research and Development. In addition, they also set up their design studio in several suppliers’ hubs in western countries.
As a result, we produced almost double in the time of even pandemic, Maher shared.
Hasib Uddin observed that buyers strategically attempt to distribute their cost centers to the suppliers’ sides in the name of RnD and others. Though he positions that product development or RnD should endeavor from both buyers’ and suppliers’ ends.
It can be of well mentioning that the APS group, with the robust leadership of Hasib Uddin, developed the antiviral and antibacterial protective cloths. They also export the antiviral and antibacterial face mask to the European and USA markets. With such new product developments, new markets can be explored.
Along with product development, we should focus on brand positioning and the enhancement of efficiency in the supply chain. He observed that there is only a 4 to 5% gap of efficiency in garmenting between Bangladesh and Turkey whereas the efficiency gap is as high as 16% in terms of the supply chain. Sensing the weight, he urges for the improvement of efficiency in SCM.
In the perspective of procurement, we should develop a ‘supply chain eco system’ the way buyers developed the same with us. He also said that the enhancement of efficiency of people from lower to mid-level management could fetch a breakthrough in the apparel manufacturing business.
In the process of innovation, APS triumphs over being one of the global benchmarks in water consumption that escorts a big saving for them as they dye light color fabric with 15.5 liters and 23 liters for black color. APS clinches expertise of viscose fabric where they manufacture viscose with 5% shrinkage – is adorable in the industry. It is one of the key drivers for them as a unique positioning to stay profitable.
Furthermore, he stressed the long and repeated order cycle of a particular product range that can drop down the manufacturing costs over time due to concentrated expertise. Maher also agreed with Hasib on the repeated orders of particular products.
In response to the significance of building proper organization systems, Maher exhibited his factory position to build a system where HR can play vigorous roles. To stay profitable, he stressed a system development within an organization that automatically fosters required skills and innovative human resources to lead an organization, and industry as a whole forward.
Watch the full video here: