An article in the New York Times (December 29, 2012) describes the struggle between apparel retailers who outsource manufacturing to factories in Bangladesh, labor advocates and the government. While the $37 a month wage rate makes Bangladesh an attractive sourcing location, enforcement of building codes, fire exit laws and reaction to fires is a sovereign right for the country, claim importer groups for retailers. Labor advocates claim that WalMart, Sears etc have to contribute to improve worker safety, but their auditors claim lack of jurisdiction over enforcement. Should the poor enforcement and associated costs to get safety standards implemented be included as part of sourcing costs and be paid by the importer? Should enforcement of safety be a Bangladeshi government responsibility? Or should a global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used, even at the risk of antitrust violations?
Tags
- agriculture
- Amazon
- Apparel
- Apple
- automobiles
- Capability
- Capacity
- China
- Collaboration
- competition
- consumer
- Consumers
- Coordination
- Cost
- Costs
- delivery
- demand
- Demand Surge
- Design
- disruption
- Dual Sourcing
- Ecommerce
- Efficiency
- emb2019
- emb2020
- Environment
- exports
- Fast Fashion
- Food
- Global
- global supply chain
- grocery
- Growth
- healthcare
- hospitals
- imm2018
- Imports
- India
- Infrastructure
- Inventory
- Japan
- Legal
- logistics
- Low Margins
- Loyal Customers
- manufacturing
- Margins
- mgmt5612018
- mgmt5612019
- mgmt5612020
- mgmt5612021
- Outsourcing
- pharmaceutical
- prices
- Quality
- rail
- Rare Earths
- regulation
- Retail
- Retailers
- Risk
- river transport
- Service
- ships
- software
- Suppliers
- Supply Chain
- Survival
- Sustainable
- technology
- transport
- Trends
- US
- WalMart
- Water
-
Recent Posts
Archives
- February 2022
- September 2021
- August 2021
- August 2020
- December 2019
- November 2019
- February 2019
- January 2019
- November 2018
- October 2018
- September 2018
- August 2018
- April 2018
- March 2018
- December 2017
- November 2017
- September 2017
- August 2017
- June 2017
- May 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- June 2016
- April 2016
- March 2016
- February 2016
- September 2015
- August 2015
- April 2015
- March 2015
- February 2015
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- November 2012
- October 2012
- September 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- October 2010
Categories
- Africa
- Air
- airport
- California
- Capacity
- car
- cash
- chicken
- China
- cobalt
- Collaboration
- competitiveness
- congestion
- consumer
- Coordination
- Cost
- delivery
- disruption
- Ecommerce
- emb2019
- emb2020
- emb2021
- fairness
- flash memory
- Global Contexts
- Grain
- hospital
- imm2018
- imm2019
- Innovation
- intellectual property
- IoT
- labeling
- Liability
- logistics
- loyalty
- Made in USA
- manufacturer
- mgmt5612018
- mgmt5612019
- mining
- Operations Management
- ordering
- Prices
- product
- productivity
- queue
- Railroad
- recycling
- retailers
- Service Operations
- ship
- shoes
- Starbucks
- supplier
- Supply Chain Issues
- Sustainability
- technology
- Tesla
- toy
- Train
- transport
- truck
- Uncategorized
- Variety
- vehicles
- waste
Meta
Global Supply Chain Musings 
One of the great challenges that we have as humans is that we are not usually aware of our surroundings. Physically, our brain is still incapable of processing all the information that surrounds us so we have developed a way to prioritize what ever we process. This is a big problem, that has lead us throughout history to oppression and wars. Also, we tend to be more sensitive towards the things that we know about and when we are able to establish an emotional connection with another entity.
As companies are handled by people, the above mentioned limitations tend to exist in organizations. Meaning that, we might think that there are other people that face problems, but the truth is that we usually are not aware to what extent this happens. Also, when something impacts us directly, we tend to give more importance. For example, there are people in companies that are under pressure of getting costs down, because the clients want them to; if that person is not aware about the precarious conditions of a supplier and only watches a number that is relevant for her/him, the problems in those suppliers can be pass unnoticed easily.
In this sense, social media and communication (especially news) has been a great enabler of expanding our knowledge on the different realities that we face all over the globe. Society has become more and more aware of what we face as humanity and I believe as customer tend to give more importance to those topics, companies will be able to afford those “extra costs”. Nowadays, we can see how the company’s image is a major factor to take into consideration and society penalizes severely this cases. As a society, we have been evolving and I believe customers are caring more about the whole impact they create, which implies that the retailers will see added value and will be able to afford better conditions.
In my point of view, it is easy to blame a government for poor work conditions, but coming from Peru, I understand that sometimes people are willing to work under those conditions because it can be a survival issue and the government will not be there to save them. I have met people that find normal commuting to work 4-6 hours a day to work over 10-12 hours and have a family in a public transportation that are inimaginable in some parts of the world to get salaries of 200 dollars a month (of which $40-50 are spent in transportation).
Probably a way to certify that we are being responsible is through certifications like the “RSPO” for sustainable palm oil, but applied to responsible supply chain by a third party. But it is ultimately in the hands of each of us, what we prioritize and how we make our decisions.
Diego Palacios
One of the great challenges that we have as humans is that we are not usually aware of our surroundings. Physically, our brain is still incapable of processing all the information that surrounds us so we have developed a way to prioritize what ever we process. This is a big problem, that has lead us throughout history to oppression and wars. Also, we tend to be more sensitive towards the things that we know about and when we are able to establish an emotional connection with another entity.
As companies are handled by people, the above mentioned limitations tend to exist in organizations. Meaning that, we might think that there are other people that face problems, but the truth is that we usually are not aware to what extent this happens. Also, when something impacts us directly, we tend to give more importance. For example, there are people in companies that are under pressure of getting costs down, because the clients want them to; if that person is not aware about the precarious conditions of a supplier and only watches a number that is relevant for her/him, the problems in those suppliers can be pass unnoticed easily.
In this sense, social media and communication (especially news) has been a great enabler of expanding our knowledge on the different realities that we face all over the globe. Society has become more and more aware of what we face as humanity and I believe as customer tend to give more importance to those topics, companies will be able to afford those “extra costs”. Nowadays, we can see how the company’s image is a major factor to take into consideration and society penalizes severely this cases. As a society, we have been evolving and I believe customers are caring more about the whole impact they create, which implies that the retailers will see added value and will be able to afford better conditions.
In my point of view, it is easy to blame a government for poor work conditions, but coming from Peru, I understand that sometimes people are willing to work under those conditions because it can be a survival issue and the government will not be there to save them. I have met people that find normal commuting to work 4-6 hours a day to work over 10-12 hours and have a family in a public transportation that are inimaginable in some parts of the world to get salaries of 200 dollars a month (of which $40-50 are spent in transportation).
Probably a way to certify that we are being responsible is through certifications like the “RSPO” for sustainable palm oil, but applied to responsible supply chain by a third party. But it is ultimately in the hands of each of us, what we prioritize and how we make our decisions.
Ideally, regulations over safety and fair wages should be enforced by the government. Unfortunately, this is not always the case. It is then necessary for companies to use their leverage as global players to promote safety and higher standards in their suppliers locations. Audits are very expensive when it involves global supply chains over many suppliers. Given the fact that supply for many brands and companies are located in the same region, pooling up the cost of audit over many of these brands could help alleviate audit expenses for many of these companies. Also, other alternatives are available to map and keep track of compliance further up in the supply chain such as industry indexes (e.g. Nike’s sustainability index).
Nike’s sustainability index:
https://purpose.nike.com/product-material-sustainability-indices
As employers, multinational firms have a fundamental responsibility to ensure their employees’ safety. Different jurisdictions will have different standards, and firms do not have to have the same standards across all jurisdictions, but they must ensure a minimum level of safety. If a country’s officials are unable to enforce minimum safety standards, then companies must have processes in place to make sure their employees’ are protected. To do this effectively companies could use 3rd party organizations to certify their safety practices. Ideally, this would also put pressure on countries to increase their standards. Workers in countries like Bangladesh would become accustomed to these higher standards and advocate for increased safety measures from their government. This does require that their government is democratic and/or that workers have the right to unionize. Unfortunately, these limitations, coupled with increased financial pressures for poorer workers, make this more challenging in reality.
First of all, I think it is important for any company wishing to make international purchases to provide employees with production conditions that comply with safety regulations. This is not only reflected in local legal requirements, but also a manifestation of corporate social responsibility. Developing countries have attractive labor costs, but at the same time the imperfect infrastructure should also be taken into consideration when companies calculate costs. In fact, more and more companies choose to choose a third-party review company to evaluate the target company before starting to cooperate with the supplier. The assessment content includes but is not limited to the employee’s working environment, safety, working hours, and salary. Suppliers that do not meet the requirements should propose rectification requirements or suspend cooperation. As for the additional costs that may occur, I think it should be resolved by agreement. Importers and local suppliers and even local governments jointly set and bear part of the cost.
This is primarily a responsibility of the government to ensure safe working conditions in their country. This is not only a right that each worker must have or an ethical move, it is also needed to attract more companies (in this case retailers) and in turn create more jobs which will drive the economy further.
The 2012 Dhaka garment factory fire led to an uproar among the workers and their families. This quickly became a political blame game with little effort to find the root cause.
One has to understand the difference between what a government “should do” and what is “actually done”. Also, different stakeholders would look for their own interests in such a crisis. Hence the onus ultimately falls upon large corporations/retailers like WalMart, Sears etc. to come forward and initiate by assisting/investing in healthy working conditions. Even though it is not their active responsibility, it sure is the “right thing to do” given their access to resources and capability.
Also, it is the responsibility of safety regulation groups in the country to make sure such incidents do not happen again. Companies and the government have to work together to ensure standards are maintained. Hence, prevention of fires require the third C, i.e. Coordination.
This is exactly what has been done. Many U.S. companies have signed a pact which holds them accountable to invest in factory inspections and upgrades in order to increase factory and worker well-being. The Government has to reciprocate and act proactively to make sure that such efforts are not wasted.
In pursuit of cost savings, companies often turn to developing countries or third world countries for raw materials or services sourcing. Factories in these countries manufacture the products according to specified quality standards and required technical specifications. However, in order to meet the minimum price, these suppliers sometimes sacrifice safety rules, uses slave force, or hire children. We can observe a similar situation in Xinjiang and Uzbekistan (https://thediplomat.com/2019/11/cotton-and-corporate-responsibility-fighting-forced-labor-in-xinjiang-and-uzbekistan/).
These companies may believe that they are fulfilling the terms of the supply contract, and the way in which they do so is their personal right. The governments of such countries may not care about the safety of workers for various reasons. And companies that place their orders at such factories refuse to pay for the safety of local workers. However, I believe that these companies can use preventive supplier audit tools to ensure that local plants use normal working conditions for their employees. Just like decades ago, these companies carried out work to improve quality at local factories, and this issue can be addressed in the same way.
On the other hand, if companies continue to buy raw materials from suppliers who use slave force, for example, they will definitely lose the goodwill they have accumulated over the years. Nowadays, product quality is not a valuable competitive advantage of a company, but a general characteristic of the product. It is not enough to simply produce high quality and fancy clothes. Companies need to have an attractive brand. Therefore, in order to compete in a very saturated apparel market, companies should take care of their reputation. The cost of losing reputation and image is too high.
I think the labor safety is one of the important segments for company sustainability therefore any company should take this issue seriously. This article actually implied the one of the obstacles for a company to do the supplier localization. First, without the assistance of the local government, it is hard the company to do the whole management for local suppliers. Second, the unfamiliarity and uncertainty in a foreign country put the company at risk. From my perspective, Walmart should redesign the audit for the factories in Bangladesh or these kinds of issues will keep occurring and eventually Walmart will lose the initial advantage it expects to gain from those suppliers- low cost. Furthermore, if Walmart put emphasize on its CSR to the public then it is the case worthy for them to deal with. Sometimes, it will be helpful for the company to build up an good brand image in a foreign country.
If a retailer choses to move their business to a low cost and low regulation county, the retailer knows the present labor and enforcement issues in that country. Since they are choosing to move to this location, it is my belief that the retailer is responsible for ensuring safe working conditions. If the retailer knows there will be an issue with jurisdiction over who can make and/or enforce these improvements, that should have been factored into the sourcing decision. In an ideal world, Bangladesh and its government should be responsible for safety, but the retailer is responsible for the sourcing decision. Therefore, the retailer is also responsible for ensuring its production environment meets similar standards to the production environments in the destination country. A global cooperative could also be used to serve this same goal, of helping the retailer ensure the source for its production meets standards similar to those in the retailers home country.
In my opinion, factory owners should pay the associated costs to make sure safety standards are implemented and to ensure the safe working environment for the workers. Having said that, the western retailers should also financially help the factory owners to improve the fire and electrical safety standards at factories. It is clear from the article that Walmart’s own safety monitoring system was flawed, some fire safety aspects were not covered in sourcing audits like inspection reports never mentioned about fire-safe emergency exits. Fire exits are important points of escape in case of fire. This was a huge mistake to ignore during the audit inspections.
Government should enforce stricter labor laws, set minimum safety standards for factory workers, and punish factory owners and government inspectors for safety lapses. Only government should not be blamed, Bangladesh has “labor laws and safety standards which theoretically provide protection but are rarely honored. Government inspectors must do their duty, making sure every corner of the factory is complying with set safety standards. Apart from finding repeated violations in inspection reports, Walmart should also think about how to eliminate the risks. In all, the solution requires a coordination between western retailers and Bangladesh government.
The future well-being of garment workers around the world relies on the industry accepting its responsibility to these people and understanding that that responsibility extends well beyond the structural safety of the buildings they work in.
Although the sourcing products process needs to consider the total cost of ownership, cost related to suppliers’ safety is not supposed to be included for buyers. However, for this case, Walmart should take more social responsibility because clearly it is taking advantage of places such as Bangladesh for super low-cost labor. For people in undeveloped countries, they won’t expect too much but a job for food, even if they don’t have a safe working environment. “Everyday Low Price” and “Save Money, Live Better” shows that Walmart always offers customers lower prices compared to other competitors. But it’s really disappointing to learn how can this retail magnate offer such low prices. Walmart needs to help its suppliers have safer factories but not sweatshops. There’s no doubt that more sustainable benefits and better social reputation would achieve. The Bangladeshi government should definitely take more responsibility for the enforcement of safety because it should have more voice and action. For example, it needs to set up a safety standard for local factories to protect workers, and to assist local factories to negotiate with buyers such as Walmart from a humane perspective. Based on reality, the government has to compromise a lot during the process, but it truly needs to proactively get involved. Taking use of the global cooperative audit group to certify is a good idea, but it needs to adjust standards according to different local conditions with different certification levels.
Because of the extremely low margins for Walmart supplier and the nonexistence of quality infrastructures to match western world safety standards, it is very difficult for suppliers to meet the safety norms with their own means. Walmart should help suppliers with whom it works with to protect their employees because it is in the own interest of Walmart to ensure continuity in production and the wellbeing of its suppliers’ employee. However, Walmart accountability has its own limit and they can’t ensure that suppliers will respect the safety standards specially it they are abroad. Therefore, it is very important that local governments applied thigh control over those companies to make sure that they are in accordance with the law. Finally a private organism should audit independently regularly that those companies respect the contract signed with Walmart and protect its employees by enforcing the right safety standards in its premises in case that local governments failed to enforce themselves the law.
I believe the responsibility should lie on the importer. The safety of the employees should be the priority of the company. Even if the government does not regulate these standards it does not inhibit the importer from holding a higher standard than minimum compliance. The up front cost of these safety measures will pay dividends, because there is typically large public backlash if word gets out that these large corporations are not sourcing ethically and are endangering employees within their supply chain. Nike famously had poor working conditions in manufacturing plants throughout the 90s, and this caused a huge downturn in sales. Even Haribo (the candy company) felt repercussions for sourcing gelatin from farms that treated pigs poorly, imagine if word got out that human beings in Walmart’s supply chain are in danger at work. The benefits both socially and economically outweigh the cost.
In order to increase profit margins, many companies prefer to outsource manufacturing to countries or regions with low labor costs. This approach is very effective but also comes with risks. For example, in this case, the factory fires in Bangladesh, lack law enforcement, unsafe working environment, or maybe lack of safety awareness, and factory managers do not pay enough attention to safety in the factory. These risks all could be contributors to cause an accident and all parties should be responsible for it. However, when importers decide to outsource services to manufacturers in those low labor cost regions, they must also understand that the working environment there is not as good as their own countries. Thus, for importers, they need to provide proper training to factory employees and regulate their behaviors in factories. Associated costs can be included as sourcing costs. Safety audits could be another effective approach. External safety audits are quite common in civil aviation because safety is always a priority in this industry. Safety audits are conducted to assess the degree of compliance with the safety regulations and identify potential hazards before accidents happening.
Since the global cooperation takes advantage of the low labor costs in Bangladesh, they should consider the working environment, especially the safety, in the factory. The enforcement of safety is not only the responsibility of the local government. The cooperation should also take the responsibility. The cooperation needs to certify the working condition before they set the contract or complete a thorough contract content. Also, the support from local government to provide better working condition will build the long relationship between the cooperation and the supplier. It will be reasonable the cooperation invests on the environment improvement, but the follow-up associated costs which come from the poor enforcement should belongs to supplier.
Even third world countries like Bangladesh has poor enforcement of working condition safety, and this is why the sourcing cost is so slow and looks attractive to apparel importers. It is still a basic requirement for the importers to contribute to the associated costs to improve their worker standards. The Bangladeshi government also has responsibilities to enforce the outsourcing companies to ensure working conditions before they set the contract so that they make sure the building is safe before they can start the operation. However, it is not solely the importers responsibility to bare, the government also needs to contribute to this to make sure wage and working condition equality is enforced for their citizens. In order to accomplish fair contract between the government and the companies, a global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used is a good as long as they can ensure that there is no risk of antitrust violations.
It is extremely difficult for foreign companies to invest in the safety of the local suppliers. On one side, they were attracted by the low wages and on the other side, any additional cost is sensitive to the overall sourcing costs. Thus, coordination needs to be made. Foreign companies should discuss the safety issues with the local government and suppliers to find a common ground where everyone sacrifice a little bit to ensure workers safety. In the end, workers are the companies’ most valuable assets. The importers need to plan and consider the associated costs as part of the sourcing costs. It is not responsible to leave all the enforcement issues to the local government, the companies should also actively monitor the situation and work with the government. Bringing a global cooperative audit group across retailers can help with the situation but the most important thing is every party coordinating together to make a safe supply chain eco system.
The poor enforcement and associated costs should be included as sourcing costs because it should be look as a whole capital. If something dangerous happen, the company still need to be fully responsible and have legal liability. Bangladeshi government should request certificate of the manufacturing site to guarantee safety environment. For example, the certificate should include hours of safety training and knowledge exam. In addition, it should be taken each couple years. The government also needs to inspect the site and equipment each year.
The main conflict in this case is Walmart’s suppliers are keeping get the extremely low margins and in the meantime the suppliers are trying hard to meet the safety guidelines with insufficient ability or infrastructures. It makes sense that sourcing products is an important part of total cost of ownership. But it can not be used as a trade to the safety especially there is huge volume of goods involved in. When we are talking about capital from Walmart’s perspective, it’s all about business expanding, revenue growths, and more attractive prices. But in some countries, the money is only fulfilling the basic goal and meeting the simplest goal for living. Because of the low margin, factories and employees have to get massive order to accomplish the goal. When managing huge quantity of goods in the same time can be difficult, even tiny bit mistakes can lead to safety related tragedy. To prevent those types of activities, local governments should apply more controls and set more standards about those issues. Also, Walmart need to provide certain guidelines to better help the factories.
There are different level of responsibility when it comes to safety issues in the workplace, primary the frame for it should start with the intervention of the government, who is the one called to create the necessary norms that need to be applicable for all companies in their territory and provide with a minimum standard required to protect their employees and prevent incidents, but in developing countries as Bangladesh that might not be the case. Considering that American companies are aware of the lack of appropriate safety condition that companies perfume in Bangladesh, they should be responsible for imposing the implementation of this practices in their suppliers’ facilities. Of course, the low cost of wage in those countries make them very attractive for big companies to outsource their products, but this should be an important factor to consider before signing an agreement. So, it would necessary for all companies to verify the conditions where workers perform in those factories beforehand, either to decide to help them improve all their safety procedures or decide to not use them at all.
In my opinion, the poor enforcement and associated costs to get safety standards implemented should be included in procurement costs and be paid by the importer. As mentioned in the article, a Walmart executive admitted that the industry’s safety monitoring systems were seriously flawed. Code Orange Problems appear in their factories, putting workers’ lives at risk. They should take immediate measures to solve these problems and eliminate these risks. Walmart should step up its CSR efforts and fund safety improvements, rather than shifting all the blame to the Bangladeshi authorities and the factory owners.
The Government of Bangladesh is also responsible for the enforcement of safety. As the article points out, Bangladeshi government inspectors are notoriously overworked and prone to frequent errors. Although Walmart has a greater responsibility, the government should also train inspectors to ensure enforcement of safety. I think this is better than allowing global cooperative audit teams across retailers to certify working conditions before using suppliers since audit teams are not easy to implement because of the risk of illegality.
The owner of the supplier factories is focused on making the most out of their little margins. As much as ensuring safe working conditions is his responsibility, to entirely blame the owner is not fair. While giants like Walmart and Sears, focused on their own profitability, are harnessing the lower wage rates for outsourcing, it is their responsibility to ensure safety protocols and proper infrastructure standards are maintained at the supplier factories. While cost of sourcing drives their decision, having a certification or some sort of standardized safety measure along with regular audits is the need of the hour from a people bottomline standpoint. While the reports of managers preventing employees from leaving their workstations during hazards just to keep up with the throughput is saddening, it begs the question that is this a necessity for survival more than a choice to be competitive? If so, I feel labor safety must be prioritized or more so drafted into the standard outsourcing practice.
The fact that a fire started can be attributed to poor safety standards but the poor handling of situation once the hazard was known is entirely the fault of the management. No matter what level of standards are set in, if an incident does happen, effective mitigation and worker life prioritization are essential elements that should be inculcated by the government of Bangladesh. The fact that their manufacturing formula is driven by low wage rates and restriction of rights is an atrocious act of exploitation and must not be condoned. “A government task force to oversee regular inspections of factories and uphold the rights of workers” is an excellent beginning and must be converted to a standard system to sustain the perception of skill in workforce.
Low cost advantage
Bangladesh is an important place for global textile trade, one of the top five textile exporters, and a key in the supply chain of many retailers. Bangladesh’s low-cost productivity makes it one of the most attractive sourcing markets for the apparel industry in the world. Bangladesh’s legal minimum hourly wage is the lowest in the world, so outsourcing garment production to Bangladesh is an attractive way to save money for companies with meager profits and huge competitive pressure. Low wages not only allow consumers to enjoy low prices, but also allow producers and retailers to maintain stable profit margins.
Harsh working environment
Bangladesh has the lowest legal minimum hourly wage in the world. Because of low productivity costs, Bangladesh’s textile industry plays a very important role in the retail supply chain. But at the same time, Bangladesh is also known for its poor working environment and frequent workplace accidents. Bangladesh has made a lot of efforts, but these conditions still exist today, which has brought serious reputational risks and cooperation to clothing retailers. Regulatory risk and supply chain risk.
Risks bring heavy losses
Many of the risks in the Rana Plaza accident in Bangladesh may themselves cause disastrous business interruption for retailers, and even the smallest business interruption can cause high losses. After the Bangladesh factory accident, retailers face The most serious reputation risk of the accident is the damage to its brand, especially the changeable and fierce competition in the apparel market. Young consumers are more sensitive to the issue of corporate social responsibility. These consumers have many choices and can easily change their Brand loyalty.
I don’t think global cooperation would be a good idea, exactly because of the risk of antitrust violations. However, the government and companies as Walmart should both be responsible for the safety regulation. First of all boat parties are getting benefits from the factories – the government gets tax while companies get revenue. Considering this both parties should be responsible for the safety issue related to the creation of those benefits. Secondly, both parties have the authority to audit the implementation of the safety regulation, while the government for sure possess the power of regulating fire safety, the company as purchaser of goods also have the authority to make sure those goods are produced in a safe environment to ensure quality and safety of in-factory inventory. Lastly, both parties have the ability to monitor the implementation of those fire safety regulations through legal enforcement and contract terms. In conclusion, both parties should be responsible for fire safety in those factories, and they possess the authority and capability to ensure goods are produced in a safe environment.
The main problem here is that who should be responsible for keeping the safety standard in the factory. From my opinion, if importer chooses certain factory to manufacture products, they should at least be partly responsible for everything happening in that factory, which means it’s Walmart’s responsibility in this case. The most important reason for this is that if they choose this factory, they should know the situation of this factory and the laws and rules in this region. They should know the safety problem prior to choosing the factory. So, they should either not choose this factory or include the cost as part of the sourcing cost after choosing.
As government, maybe they don’t need to give money to improve the safety, but they need to tell factories whether they are safe or not. It’s understandable for government, especially for poor country government, not want to spend time on factories which manufacture products from other countries. They might think everything in those factories should be importer’s duty. But the thing is, when it comes to standards or enforcement of safety, the government should be responsible for monitoring and supervising the factory to see if they fit the rules and tell them either to improve the operation or stop operating.
Before choosing a supplier, I believe the audit group should evaluate and certify the working condition. They can’t just ignore them if this is going to violate antitrust violation. They should find other ways, like by communicating with local government, to work this out because safety is always the first priority. If they are going to leverage the labor advantage in this country, as least they should keep their workers safe under this working condition. And the government should work with them, tell them the local standards and rules and give them permission to certify to improve the working condition together.
For years, the apparel industry has taken advantage of the cheap labor market in Bangladesh. It’s proven to be profitable for the fashion industry; big fashion names contract with factory owners, who in turn put pressure on factory workers who, in most cases, don’t have another alternative and really need the job. In order to meet deadlines and decrease costs, manufacturers use subcontractors. When subcontracting, the manufacturer outsources certain production processes to other factories and workplaces without informing the buyer. This leads to a chaotic work conditions with little respect to human rights and the safety of the workers. In subcontracting, entire orders may be shifted to unknown suppliers, which make it difficult for the client to track the complete supply chain of their products. For this reason, the local governments need to be firm and put pressure on factory owners and big fast fashion companies to include the cost of worker safety in the contract and to build a strong legislation to punish those who don’t respect the safety and rights of these vulnerable workers. Additionally, big fashion companies need to make sure that subcontractors, wherever they are aware of them, are respecting safety procedures and need to certify these subcontractors. Incidents related to safety of workers will hurt the image of the fast fashion industry, leading to a big wave of boycotts
its been always a kind of vicious circle where supplier want to increase their price while the consignee want to decrease their cost of products or services. A lot of things are primarily depends on too parties involved but sometime regulations play an important role. Bangladesh apparel workers are paid an average monthly wage which is below the national poverty line. I feel governments are responsible for establishing national minimum wages, and businesses should integrate a fair living wage strategy into their business plan. Industry organizations and NGOs have since sought to establish equal living wages and also urged businesses to introduce them in their supply chain. Living salaries are measured at the country level, taking into account the parameters provided below and aggregated at the provincial level. There has long been a divide in Bangladesh between established and politically affiliated national trade union federations and militant unions that are more closely linked to workers’ daily experiences. I am certain of the role that more than an importer or an exporter, its government who has to play an important role in regulating labor and safety issues, they have to implement at least the minimum standards very strictly so that all the people and organizations involved in export and import fall in line.
It is fair enough to source from countries with low wage rates, as those rates reflect the overall economy and buying power of a dollar in that country. It is not fair however to compare these rates on absolute dollar value as what a dollar can buy in different countries varies. The importers must take care of the minimum wage rates as they do in their home countries. This being said, factors such as safety and working conditions are not some things that should vary based on the country. Its the importer’s responsibility to enforce same safety standards for employees across the globe, because unlike the dollar value human life value is the same for everyone around the world. Apart from the ethical justification, there is also an economic justification for this argument. In the short run it may seem attractive to bypass these safety standards but strategically this could cost the importers a fortune. Many incidents in these low wage rate countries in the past have tarnished the brand image of multinational companies. Of course, there are consumers who choose products just based on price points, but various surveys, including those by Walmart, show that the percentage of consumers giving more importance to sustainable production of an item for buying decision is increasing. In the long run, this percentage is expected to increase. Also, the countries under discussion are developing countries and the enforceability of labor laws is improving. Maintaining standards from the beginning can help in avoiding fines as well as sudden capital expenditures.
I think the government should ideally take the lead in ensuring that all the factories within its borders are functioning under a minimum safety requirement. The workers of those factories should be able to hold these governments responsible if they are democracies. However, there are instances where these governments turn a blind eye so that the factories could be appealing to outside investors. Then it is up to the companies to ensure that their supply chains have minimal standards. While the auditors might not have jurisdiction over enforcement of these standards on the level that a government could, a multinational company could decide to switch from flagged suppliers to protect their corporate image from any potential fallout if a disaster happens. In the event that both the government and the companies are both not upholding safety standards, it often falls on the end customers to drive change in the system. However, it usually takes a disaster for the end customer across the world to see the conditions that their products are made and react in a way to get the attention of the local government and the multinationals.
While audits are a good way to ensure safety at suppliers operations, many of the importers do not do that often and suppliers are informed of audits beforehand which gives them opportunity to hide the violations of contract. Thus, it becomes extremely important to have surprise audits which can expose the real working conditions. However, compared the supplier audits including the cost of risk and safety in sourcing is sensible and justified way as it will give suppliers an incentive to save unnecessary costs which they try to save through child labor, quality of labor, working conditions, etc..
Considering the topic is specifically about Bangladesh market, I believe the cost structure is that of a developing country. I would like to consider that in this part of the world there isn’t sufficient vigilance in terms of safety for small sized business, and quite a big chunk of imports are supported by these business. Simply deploying an inspector wouldn’t help much in altering the situation. With the advent of technology, new avenues are coming to monitor health and safety of workers. If these were truly to be implemented and the consequent cost conventionally were be borne by the government, it wouldn’t probably be a feasible situation, as these are the countries that don’t have sufficient funds to invest. On the other hand, if these cost were to be borne by the companies, a different cost structure is bound to be faced. In this case, the companies will consider the altered cost structure and might shift to neighboring countries with relatively better infrastructure and a slightly higher labor cost, depending on the analysis of total cost. This might create a disadvantage for Bangladeshi workers. To mitigate these problems, I would suggest that companies create leverage on government to have all safety infra in place before they could invest in these countries. That would not only allow the companies to maintain $37 monthly wage (might go up by a little) but also have a more sustainable operation.
were *to be borne
People elect Government to take care of all basic amenities provided to them. Ensuring safety is a government responsibility but that does not absolve big players to make sure their employee either direct or indirect have proper working conditions. It is not new that many apparel manufacturers have their plants in developing countries to take the benefits of cheap labor. This is a great business for developing countries where they suffer from high unemployment rate. Given the amount of high savings these manufacturers are getting from such countries providing safety to employees shouldn’t t be a up for discussion. In todays age, majority of consumers are environmentally and socially conscious of the products they use. In the past Nike faced a lot of backlash from the consumers sighting the improper working conditions for its labor. So if a Giant enters a developing country and get their job done without even thinking about the safety of its employees it is only a matter of time until things unwind and the consumers gets to know. Therefore the poor enforcement and associated costs to get safety standards implemented should be included as part of sourcing costs and be paid by the importer. Global cooperative audit group is a great initiative but involves a lot of money. In the long run this audit group could help any other entering as well. Therefore all the MNCs importing from a particular country can contribute to this Audit group.
First and foremost, the Government has the sole responsibility to take care of the citizens of a country. Government should enforce strict rules to keep a check on any kind of damaging activities within the country. All that considered, all major importers should also be willing to help improve the labor standards, as in case of any catastrophe the entire supply chain will go to a major halt that would effect the big importers by losing a lot of customers. Before this happening these importers must take a leap and try to lend a hand in improving the manufacturers’ lives. Therefore, I would basically say it is the prime responsibility of the govt first and then importers must also volunteer to avoid any future catastrophes
Yes, I believe the importer should pay for the associated safety and sourcing costs, because the importer benefits greatly is benefiting from the low labor costs. Hence they should take it upon themselves to strive for strong safety measures and any poor working conditions. This would also help the company retain a good image in the current business landscape, where people are holding ethical practices in higher and higher regard. Any bad news could be detrimental for the company. However, it is hard for an importer to ensure these rules and regulations and standards are followed, simply because they are abroad.
This is where Bangladeshi government steps in and takes responsibility for the enforcement of safety. The government should set laws and regulations that the suppliers should follow and the importer has to comply with and assist local factories to negotiate with buyers such as Walmart to carry out only ethical business practices. Governments should have this responsibility for all business in the concerned country.
A global cooperative audit group across retailers can be permitted to certify working conditions before a supplier is used,, but I don’t believe it should be done with the risk of antitrust violations. Rather, this can be done in cooperation with the government and importer to keep the local industries’ best interests in mind, so as to follow all local rules, without violating any ethical regulations.
Safety is the responsibility of each entity and person involved in producing for the customers. Government regulations will surely help boost the enforcement of safety practices at all production facilities, irrespective of apparel. In this case, all the global retailers importing from Bangladesh have a moral obligation to ensure the safety of workers at each location, this translates into brand equity and customer trust.
Safety practices can be enforced through relationship building, safety training, supplier evaluation, sourcing policies and contract provisions
As a global player, it is the responsibility of the company to ensure that its suppliers are maintaining the safety and quality standards required. Companies must put in checks and audits in place and the frequency of the audits can be changed depending on the conditions in the factories of suppliers. Proper fines and rewards must be decided in the contract to ensure that each safety infraction has a financial impact on the supplier so that the suppliers have an incentive to maintain the required safety conditions.
In my opinion, there should be a common code of conduct or labor management which should be created by the government. These laws can be tailored based on the industry and certain exemptions can be provided to the companies. But the responsibility of creation and enforcement of laws must lie with the government and a monitoring agency can be setup to track the progress and malpractice if any.
This will ensure adherence directly from top level and the companies who operate from Bangladesh needs to follow it in order to continue their business.Also while this will increase costs for the company doing business in Bangladesh, ideally its a one time cost and will be insignificant compared to the business revenues which the company will generate.
The government of a country has the sovereign right to regulations over safety and fair wages. However, in a developing country like Bangladesh this is not always the case. In situations like these, importers should pay of part of these costs.
I do not think the factory owners have the required funding to improve the factory conditions on their own. With the lack of support from the government, it is imperative that retailers take up the responsibility of certifying working conditions and preventing any unwanted incidents.
Also, large MNCs such as Walmart and Kroger can setup audit groups to certify working conditions before a supplier is used. The costs for setting up the audit groups can be borne by all the companies together. This will help in reducing the audit costs incurred by each retailer.
Just raising the minimum wage or adding new regulations will not solve the issue for either party whether it be importers, suppliers, or local workers. The entire problem of providing greater quality of life for workers must be addressed in a systematic manner in order to make productivity rise in accordance with income. Joining forces with local suppliers and the government to promote reform in Bangladesh is a stance that many importers/suppliers have taken. Several of the world’s leading clothing firms have agreed to legally binding minimum wages and safety standards with their suppliers. Making international alliances with importers who have specific standards for their suppliers would go a long way.
When multinationals outsource manufacturing to less developed countries like Bangladesh, they do it for one primary reason-cheap labor and slashed infrastructure cost for their physical facilities. It is apparent that these significantly lower costs are a consequence of compromised standards in safety and maybe quality standards in certain areas. While designing the contract, companies ensure that their product quality is retained, but they don’t emphasize the maintenance of the quality of the work environment the workers will get be exposed to, because why would they? It doesn’t directly affect their profitability.
It’s true that the foremost responsibility lies with the government to ensure safe and ethical practices for its people. But on humanitarian grounds, companies must leverage the dominant positions they hold to ensure the welfare of its employees and they can do it by devising strategic contracts that require the factories to meet a good level of safety standards in order to qualify as a supplier. This will also influence the company’s goodwill and promote the overall practice of maintaining good safety standards for the employees, even at the bottom-most level.
globalization allows the international retailers to utilize the sources and reach to the cheapest sources around the world. Safety issues should be considered, but in reality, it was hard to achieve. Developing countries attract investors through cheap raw materials or labor costs. these countries rely on those investments to achieve industrialization and industrial transformation. The negotiation power is very weak for undeveloped areas. the competition among areas is fierce, and the switching costs are pretty low for manufacturers or international companies. In that case, global standards might be a more practical way to ensure a more safe working environment.
Nowadays, procurement standard will not only focus on the price and cost, but also foucs on suppliers working conditions and suppliers reputation. Nike is one example of this issue. Nike used to purchase material from suppliers who hire children labors who suffer from bad working environment. They also overwork under unreasonable command with extremely low paid that could not even afford to buy a pair of Nike shoes that produced from these miserable children labors. After people knew the truth of this, they started blame Nike for supporting these inhuman actions. Fortunately, Nike put much more attention to this issue and stopped purchasing from these “bloody” suppliers. Therefore, procurement team should also consider law enforcement and safety of their plants to secure human right of these labors, and at the same time also secure good repuation. It is also important that local government has a authority to put some related laws into practice that can terminate unqualified plants, because government has responsibility to take care of plants at the countries, and that will also be a metric for importer or procurement team to select their suppliers. It is also recommended to have an global audit team for this issue. After all, double security could be better to make sure most mistakes would be solved and barely no chance for a tragedy happen and cause damages and casulties.
Outsourcing your production to a country that has cheaper labour charges is beneficial on the monetary front but it poses a few risks to the organization. maintaining safety for the workers. While there are government-specified instructions and laws in countries like Bangladesh, but to mitigate the risk of safety and making the organization a good place for the workers to work, the organization should design and implement the safety measures and audit those measures.
A county’s natives’ safety is also a responsibility of the government and government should enforce strict measures to prevent any safety hazard to happen in the first place.
I believe that this is primarily government’s responsibility to ensure safe working conditions in their country. That being said, I know that government’s (specially from poor countries) tend to overlook these duties when a big multinational company either decides to invest in the country or start sourcing from local suppliers. This fact, paired with softer regulations end up creating lower working conditions for the workers there that are difficult to change from the government side.
I do believe that companies have to keep decent working conditions for their direct employees but also they have a responsibility to look at how their suppliers produce. But I feel that companies will not do anything unless pushed to do it from customers.
Nike is just an example.
I agree with what has been said above, multinationals can pool resources and in that way they can absorb those costs to give safety to supplier’s workers better.
From my perspective, although the safety enforcement should be the Bangladeshi government’s responsibility, but it’s also necessary for Walmart to keep a safe environment. Reputation is as important as reducing sourcing costs, especially for large multinational corporations. If any safety problem appears in Walmart’s factory, the reputation of Walmart will be damaged. Walmart could cooperate with the government to find solutions for safety enforcement and outsourcing the security tasks to local security company, thus they have a security team which familiar with the local environment and support from the government. But I don’t the cost associate with the safety enforcement should be paid by the importer, such safety enforcement is also a kind of social responsibility for Walmart, the efforts they made for safety could be a good advertisement for the company.
Companies sourcing products from areas such as Bangladesh should want to enforce safety standards for the companies they are working with not only because it reflects moral responsibility but it reflects the overall image of that company’s brand. Companies like Walmart do not want to be deemed as a negligent organization, especially when it comes to buying products from areas that mistreat employees and keep them in unsafe work environments.
I don’t believe a global cooperative audit group is a realistic option for these problems. I do however, pose more responsibility on the governing bodies of areas such as Bangladesh to put more stress on fixing these issues. I think at the end of the day the government will have the greatest impact on these situations. Along with the government, I think everything comes back to the companies and their ability to make a difference in the working conditions of their suppliers business.
Multinational corporations like WalMart and Sears have the responsibility of their employees safety regardless of how the jurisdiction in each individual country enforces it. Multinational corporations can build workplace safety standards and targets into the sourcing contract when seeking to outsource manufacturing or other functions. The use of third part auditors should be to check compliance with the sourcing contract to ensure the safety of their employees. It can be built into the contract that if the safety standards are not met that the contract is void. In an area such as Bangladesh where many manufacturing firms are competing for the same business, this would put pressure on them to step up their game to keep earning business and the lack of jurisdiction in Bangladesh would no longer be a problem. As employees at shops where safety standards are not improved talk to employees of shops where safety standard are improving the employees will become upset and you might see the formation of unions to fight for employee rights. If it is possible, the multinational countries should seek to work with governments such as Bangladeshi government to educate the about the importance of workplace safety and to encourage them to enforce the standards.
Or should a global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used, even at the risk of antitrust violations?
I believe cost associated to get safety standards should be included in overhead cost for production and the company. The cost should be implied in the price of the product and would be shared between the importer and the production company as it seem fit.
Enforcement of safety practices should be a responsibility of the government and the government should have the power to seize operations and fine companies for not following regulations. An audit group would not seem fit in this situation as the risk of antitrust violations could heavily impact a company’s operations.
From my perspective, the poor enforcement and associated costs to get safety standards implemented should be paid by the government. The Bangladeshi government should request a certificate of the manufacturing site to guarantee safety environment. All the global retailers importing from Bangladesh have a moral obligation to ensure the safety of workers at each location, this translates into brand equity and customer trust, and the efforts they made for safety could be a good advertisement for the company.
Ensuring high safety standards especially to prevent fire Hazards in an apparel and textile industry is the responsibility of the importer as well as the local government. The safety of low wage workers should be an important cost driver in the price of the product. Instead of having a high profit margin, due to sourcing from Asian countries being cheaper, importers should put the safety of its workers above numbers. From a business perspective, this can also be a marketing strategy to attract more customers (A company that pays for the cost associated with the safety of their manufacturers, will be attractive for customers due to the noble initiative). The importer must comply with industry standards of safe working conditions for their workers and the local government must enforce these policies and regulations as well as to conduct regular audits to check the importer’s compliance. The manufacturing site must be compliant to safety standards and have all features for adequate disaster management.
Supply chains when talked in global context tend to face a lot of issues and one important issue among all these is the incapacity of companies to ensure ethical sourcing of raw materials or components. Most companies specifically in developed nations, in order to earn low cost benefits and cheaper labor turn towards developing or under developed nations for their raw materials or manufacturing. However, the issues of workplace safety, following other regulations, standards and labor rights are usually ignored by the employer in these nations. Even when these nations have almost all necessary legal norms in place, they are hardly enforced and followed. Pressure from the destination buyer companies can prove to be a substantial force to ensure that these rules are followed. Supplier selection based on this criterion can be significantly used to create an effective brand image and strike a chord in the hearts of people by propagating this agenda. Having a global cooperative audit group is certainly a good initiative to ensure if the supplier is adhering to the contractual norms
Undoubtedly, safety standards and practices should be standardized globally. I believe that growing or developing economies do not give as much importance to norms and jurisdiction as long as there is a growth in the jobs and there are more companies coming in the country. Global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used, even at the risk of antitrust violations would prove to be beneficial in this scenario. Safety rules and standards need to be maintained world wide even if the labor costs are low in a particular country. These can be mandated and regularized by an unbiased organization.
I think the importer should pay partial associated costs in order to improve safety standards. I also agree that the government should be responsible for the enforcement of safety.as well. The regulations and rules from government will help in supervising the whole environment especially protecting the people and assisting local business. It is good idea to have a global cooperative audit group across retailers be permitted to certify working conditions before a supplier is used, even at the risk of antitrust violations. However, everything has both sides. It is even more important how to weigh the pros and cons, the priority and secondary. For long term development, to gain stable business the company should consider those steps mentioned above to standardize the process and prioritize the functions in different fields.
I believe that it is the manufacturer’s responsibility to ensure that their employees are safely working in their factories. The cost of maintaining safety measures and equipments needs to be factored into the cost structure offered to customers. Having said that, it is the government’s responsibility to enforce safety standards at the optimum levels across all factories in their country. Only if enforcement is strict will all manufacturers attempt compliance. Often, corruption ensures that compliance standards are different and this impacts on the overall cost of goods. Lastly, as responsible retailers, companies need to act in an appropriate way and work together with manufacturers to ensure long term safety of associates. They might benefit in the short term by not enforcing safety measures, but that can come back to bite them in the long term in the form of law suits / accidents etc.
In conclusion, I would recommend that all parties have a crucial role to play in order to prioritise safety and there is a long way to go before we can confidently say that this has been achieved, especially in developing nations.