With the rise in labor costs and also, currency valuation, profit margins have gone down for multinational companies that were manufacturing in China. As a result of these adverse trends many companies involved in raw material intensive and low skill trades have been motivated to shift their operations to relatively lower cost sourcing destination like Bangladesh. One has witnessed the rising outsourcing costs in conventional global sourcing destinations like China, Philippines and India. As such Bangladesh Sourcing is becoming a favorite choice for those global clients who are interested in the diversification of their sourcing portfolio. The low cost labor, the fantastic age demography and the Bangladesh government's incentive for its IT service sector, all this have made Bangladesh a key player in the global outsourcing market. Bangladesh boasts of the most enviable population demography. 50 per cent of the total population of 160 million is under 25 years of age. The country is fuelled by a young enterprising, passionate and dedicated workforce with relatively lower attrition rates.

 

Bangladesh Sourcing Making its Mark

Bangladesh has made its presence felt in the global procurement market thanks to its professionalism, cost effectiveness and commitment. It is today regarded as one of the top twenty global sourcing destinations by European Union. Bangladesh has also made its impact in global IT outsourcing and has figured in the list of top 30 global IT sourcing markets. Bangladesh leaped to the 15th position amongst potential countries for business and investment in the year 2010 as opposed to its 28th rank in the year 2009. Witnessing the massive advancement in the IT sector, the apparel and textile sectors are becoming hugely competitive in Bangladesh.

 

Major Apparel Sourcing Destination

Bangladesh enjoys the status of being the world's second largest apparel manufacturer. It is quite popular as an apparel sourcing destination as it offers the lowest labor costs worldwide. Workers in Bangladesh earn an estimated $.24 per hour minimum wage as opposed to $1.26 per hour paid to workers in China. Multinational companies such as Gap, Walmart and Polo Ralph Lauren are immensely attracted by the country's huge manufacturing capacity in addition to the cheap labor force. Bangladesh sourcing has got a tremendous boost thanks to its 5,000 garment factories and almost 3.6 million apparel workers.

 

Attractive IT Sourcing Destination

A remarkable chunk of young, techno savvy and talented workforce is available in Bangladesh at a relatively lower wage than Philippines, India, East European Countries or Vietnam. It is hugely advantageous from the cost point of view to outsource from Bangladesh as man hour cost for workforce here, is relatively lower than that of America and Europe. Bangladesh Government's dream of Digital Bangladesh by 2021 is resulting in major growth in the country's IT outsourcing sector. The government has come up with some remarkable budgetary incentives such as duty cuts, tax exemptions etc. to draw more foreign and local investors in the IT sector. Moreover, the government of Bangladesh is treating Software and IT Services as definitely a High Priority export sector.

 

Locational & Infrastructural Advantage

Bangladesh offers a time zone advantage for its European clients, thanks to its geographic location. It has a time difference of half day so queries relating to work that are sent to Bangladesh every evening can be processed by early morning (European time) the very next day. Besides, low wages, the cost of infra-structure in Bangladesh is also, pretty low. Rent for an office space in Bangladesh's capital Dhaka is at least 20% less than that in Delhi or 40% less than Manila. Bangladesh boasts of cutting-edge telecommunications infrastructure. All across the nation there is fiber optics connectivity. Internet bandwidth charges in Bangladesh are almost 50 per cent less than in India and are presently, the lowest in the whole of South Asia.

 

Risks Involved

The rapid growth in the apparel sector in Bangladesh has been marked by a series of terrible workplace disasters. It has been estimated by the International Labor Rights Forum that about 1800 Bengali workers have been killed in building collapses and factory fires. As a result of these tragedies the companies have been forced to choose between shifting base, risking reputational damage or improving the overall worker safety including an investment of $3 billion toward factory repairs in Bangladesh. Long supply chains and longer lead times are other issues related to Bangladesh sourcing. Longer lead time necessitates meticulous planning well in advance, to avoid product shortages or excess inventory. However, these risks can be managed and mitigated by having personnel in the ground in Bangladesh to monitor both quality and the production process.