Factors Affecting Supply Chain Management Efficiency in ...

Factors Affecting Supply Chain Management Efficiency in Cross Border Outsourcing:

A case study of H&M and its Outsourcing Operations in Bangladesh Md. Rajib Hasan and Mohammad Abdul Alim

Graduate School Master of Science in Logistics and Transport Management Master Degree Project No.2010:60 Supervisor: Leif Enarsson

Abstract

Background: Outsourcing has been emerged as an important business and economic strategy for achieving competitive advantage to multinational companies these days. The comparative advantages of different countries and companies intention to maintain increased focus on their core businesses drive them to go for offshore production sourcing their needs by utilizing an effective supply chain system. Although global outsourcing enables companies to achieve competitive advantage but the outsourcing operations is not easy to perform. Several factors are involved which ultimately affects the efficiency of the entire Supply Chain system and global outsourcing firms in different locations could face problem that make it challenging for managers. Therefore, it is important to consider these inefficiency factors while conducting outsourcing operations in Global market. Purpose

The purpose of our thesis is to investigate how inefficiency factors affect the Supply Chain system of Multi National Corporations (MNCs) during outsourcing process. With that view we have analyzed what implications of these factors in overall efficiency in entire value chain System, how these factor affects Supply Chain efficiency and, in particular, which factors are significantly responsible for inefficiency. We will also analyze probable solutions to minimize inefficiency in Cross Border Outsourcing.

Case Study We have selected the Ready Made Garments industry (RMG) of Bangladesh to investigate our problem. Ready Made Garments industry (RMG) in Bangladesh has emerged as the main export earning sector in Bangladesh and in 2008-2009 financial year 79.33% of its total export income from this sector. We have selected H&M as our case company as it has been sourcing in Bangladesh since 1981. Research Findings:

Study finding shows that some factors acting as a hindrance to this smooth operation in cross boarder outsourcing. Finally we analyzed several factors and find out the potential ways to minimize the effect of these inefficiency factors and recommended some probable measures to increase overall supply chain efficiency in total value chain system.

Key Words: Global Outsourcing, Supply Chain efficiency, Ready Made Garments Industry, H&M,

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Foreword

This thesis concludes our Masters degree studies in Logistics and Transport Management Program at School of Business, Economics and Law, Gothenburg University. It is our pleasure to conduct the research on Global Outsourcing, especially to discover the case of Ready-Made Garments industry of Bangladesh. Ready-Made Garments industry is not only the main source of export earning but also creates millions of job for Bangladeshi people who are involved directly or indirectly with this industry. Our research work will be successful if it contributes to increase the supply chain efficiency in Ready-Made Garments industry. We would like to thank the readers for their patience and interest on our research topic.

Firstly, we would like to thank our supervisor Leif Enarsson for his precious guidance, advice and suggestions to complete the thesis successfully. We also thank other concerned person in Logistics and Transport Management program and authorities of Gothenburg University to give us such a great opportunity to study here. Thanks to our class fellows and friends who had been helpful with various information and suggestion.

We would like to thank to Mr. Belal Chowdhury, Sea Export Manager at Damco logistics Bangladesh (Former Maersk logistics Bangladesh Limited) for helping us by giving details information by email and Telephone interviews.

We would also like to give special thanks to Tanjila Akter, Senior Compliance officer of H&Ms Dhaka office; and Mr. Rajib L. Rozario, Shipping officer of H&Ms Dhaka office for their valuable time, kind cooperation and passion for given information.

Our gratitude goes for Mr. Gazi Touhid Jamal, Assistant Manager, Commercial & Shipping, and Mr. Akter Hossain Chowdhury, Senior Manager, Merchandising at Hop Lun Bangladesh Limited; for their valuable time and nice cooperation for knowledge. Special gratitude goes to Mr. Gazi Touhid Jamal who has been very kind and helpful to us throughout the entire period of the research. We also thank Mr. Shamim, Commercial & shipping Manager, of FCI Bangladesh Limited.

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Additionally, we thank our opponents for probing our thesis report and giving suggestions and constructive comments. Finally, we would like to express our gratitude to our parents and relatives for their love and inspiration during the study period in Sweden, wherever we now, you are always with us. Best regards, Md. Rajib Hasan Mohammad Abdul Alim 26th May 2010 Gothenburg, Sweden

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Table of Contents

1. Introduction

10

1.1. Background

10

1.2. Problem Discussion

12

1.3. Purpose

14

1.4. Research Questions

15

1.5. Delimitations

15

2. Methodology

16

2.1. Doing research in a scientific way

16

2.1.1. Scientific approach

16

2.2. Research Design:

17

2.2.1. Case study:

18

2.3. Research Method

19

2.3.1. Qualitative Vs Quantitative Research

19

2.3.2. How the research is concluded: Induction Vs Deduction

20

2.4. Sources of Data

21

2.5. Selection of Data

21

2.5.1. Selection of Literature

21

2.5.2. Type of Survey

22

2.6. Validity and Reliability

23

3. Theoretical Framework

24

3.1. A Brief Overview of Global Outsourcing

24

3.1.1. Definitions of Outsourcing

24

3.1.2. Components of Outsourcing

25

3.1.3. Life Cycle and Stages of Outsourcing

26

3.1.4. Global Outsourcing as a Key to Competitive Advantage

29

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