Since our last Supply Chain Matters commentary regarding developments related to the recent factory building collapse tragedy in Bangladesh, events seem to be moving rather quickly. In our last commentary, we further noted a report of yet another factory fire. It is now reported that this factory contained clothing destined for Zara.
Tragically, the death toll involving the Rena Plaza collapse now exceeds 1100 persons, with many more with injuries, branding this as the single largest factory tragedy in many years, and certainly the most noteworthy concerning the apparel industry.
On Sunday, the textile minister for the government of Bangladesh indicated that that government will begin talks with labor groups and factory owners to agree to higher minimum wage guidelines that could be retroactive to May 1. However, the Wall Street Journal reports that this may only be a gesture since the majority of factory owners oppose the increase because consumers have become too accustomed to cheap clothing.
Yesterday, some of Europe’s largest and most agile retailers, along with others, agreed to sign a five-year legal agreement designed to improve safety conditions among Bangladesh garment factories. Reported to be among those retailers are Hennes & Mauritz (H&M), Inditex, the parent of Zara, Primark, Tesco PVH Corp, the parent of Calvin Klein and others. The accord calls for refraining from buying apparel from manufacturers who fail to meet prescribed safety standards.
However, some major U.S. retailers were missing from this agreement including Wal-Mart, Sears Holdings, Gap, JC Penny and others. According to separate reporting by WSJ, Gap indicated it would not sign the agreement because the current language provides liabilities in U.S. courts. No doubt, in-house lawyers are having their influence heard. Wal-Mart is reported to be one of the largest customers for clothing produced in the country.
Efforts among retailers and contractors to improve the overall working conditions in Bangladesh factories are all positive signs. However, without the collaboration and direct support of the country’s biggest customer, Wal-Mart, these efforts will not, in our view, have the teeth to change the supply chain business culture within Bangladesh. To be a global leader in retail implies leadership in supply chain and corporate social responsibility. Apple and other OEM’s are demonstrating leadership commitment in the consumer electronics area and Wal-Mart needs to step-up as well for clothing and apparel.
Consumers themselves have to leverage their influence through their buying actions. Much of the current reporting and editorial in business media these past days continues to reinforce that cheap clothing has become too much of the expectation from all of us. We are not as consumers cognizant of where our apparel originated and under what conditions it was produced. Many retailers are perhaps betting that this behavior will continue as the current news cycle passes to the next event.
Our community takeaway is that some supply chain organization will hopefully demonstrate that fashionable and trend setting clothing can be provided in safe factories, in a timely fashion, and at a reasonable cost. Others will then surely jump on the bandwagon.
Bob Ferrari
Hello Everyone,
A further update regarding our latest Supply Chain Matters update on developments concerning Bangladesh and apparel supply chains.
Business media has now reported that Wal-Mart Stores broke with major European retailers by announcing its own singular plan for improving safety at its supplier factories across Bangladesh. The plan calls for the retailer to engage outside auditor Bureau Veritas inspect all 279 factory suppliers it utilizes. Results of this audit will be published on the Wal-Mart web site by June 1. The retailer further indicated that if worker safety issues are found, factory owners will be required to make required repairs at their own expense. Wal-Mart further acknowledged that any cost of improvements would be reflected in the price it eventually pays to factory owners. According to reporting in today’s Wall Street Journal, voluntary efforts do not have a successful track record and now, the proliferation of competing proposals may undermine overall effectiveness of improvements.
Meanwhile, 6 more global retailers signed on to the European initiative noted in our commentary. The Gap is also quoted as indicating that it is six sentences away from signing the European accord, if modifications can be made to mitigate concerns relative to enforcement in U.S. courts. The indicator is that Gap wants to join provided these accomodations can be made.
Thus, as we indicated, Wal-Mart appears to want to take its own independent approach which takes away from an industry-wide effort.
Bob Ferrari