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

Thanks for sharing your perspectives.

You have raised some rather interesting observations related to prioritization of supplier audit goals. It would seem that prioritization can be muddled by all of the different social and business related forces being brought together by the various stakeholders involved in apparel sourcing, particularly involving Bangladesh. Hopefully, some entity will take the lead.

Regarding engaging workers in a social audit process, this seemed to work effectively when the Fair Labor Standards group was engaged by Apple to audit its suppliers in China.

Perhaps other of our readers can share their experiences with both prioritization of audit needs and effective use of worker focused social audits.

Bob Ferrari

In fact, I would argue that what’s needed now is not social audits at all: 2 of the factories at Rana Plaza were audited apparently. But the auditors are now claiming that they weren’t structural engineers, so it is not their problem. I can’t argue with that, but I can argue that given it is well known that over 700 Bangladesh workers have died through unsafe buildings (building collapses and fires) – and this figure does not include Tazreen or Rana, so is more than likely to double – why are brands sending in auditors to check that workers are being paid when the factory they are in is a death trap? Surely we must prioritise here, fix the building safety issues, pressure the government to enforce stricter permit laws, then deal with pay, discrimination, overtime etc

I would also add that given the scale – 5000 factories – accepting that factory owners are hardly likely to tell the truth – we should at least try to engage the workers in any social audit process. Not on the periphery, but front and centre and systematically. We are working with brands on this, but Bangladesh offers the perfect place to innovate the social audit process that has so far and so often proven to be ineffective at best.

A brief but important update regarding our Supply Chain matters commentary on the tragic factory collapse in Bangladesh.

The death toll has now reached nearly 400 while hope for finding more survivors is fading fast. Unfortunately, heavy rescue equipment was not moved to the site until yesterday. Meanwhile an elite paramilitary unit in the country apprehended the building’s owner as he tried to flee into India. Sohel Rana had been on the run since the collapse. Mr. Rena allegedly did not obtain the mandatory building permits required when building the complex, which was apparently built on land of a former pond.

There are also reports that the owner of Phantom Apparels Ltd., a factory housed on the fifth floor, and the owner of Ether Tex Ltd., which was located on the third floor have both been arrested by authorities. Two other factory owners have surrendered to authorities.

Garment factories accross the region had been closed because of protesting workers but were expected to open some time this week.

Bob Ferrari

Thanks so much for sharing the academic perspectives for preparing students for rewarding careers in supply chain management.

I totally agree with the statement that the advancement of the field requires a vast understanding of the technical, analytical and personal skills required in today’s workplace settings. I would add that from my perspective, colleges and universities need to also broaden the curriculum to include more a more inter-disciplinary focus that blends functional and team leadership skills.

Dividends will indeed be paid to those institutions that broaden the skills curriculum.

Thanks again for sharing your comments.

Bob Ferrari

An update related to the above commentary regarding the continued product recalls of meat products in Europe because of concerns for composition of horse meat.

The Wall Street Journal reports today that Europe-wide tests of beef products conducted after the recent horse meat scandals has now found nearly 5 percent of supplies were contaminated with horse meat. That percentage was even higher in specific countries such as France and Greece. Nearly a quarter of all positive tests across the 27 EU nations occurred in France. Greek samples accounted for as much as 20 percent of positive tests.

An EU health commissioner is quoted as declaring that the findings confirm that this is a matter of food fraud and not of food safety. EU officials are reported to be proposing revised controls along the food chain in line with the lessons learned in this incident.

Needless to state, European food producers and distributors will likely feel the effects of new controls as a result of these incidents.

Bob Ferrari

A brief update regarding the labor strike affecting the Port of Hong Kong. According to news reports yesterday, this work stoppage is now into its third week. Hundreds of striking dock workers moved their protests to the offices of Li Ka-shing’s Cheung Kong Center.

According to news reports, workers have rejected a 7 percent pay raise offer. They are seeking upwards of a 23 percent pay hike from a current hourly base rate of $7 per hour. Government arbitrators have now been brought in to facilitate further negotiations.

Meanwhile, about 300 additional crane operators have instituted a work-to-rule action, slowing existing loading and unloading operations at the port.

Ocean container carriers continue to re-route traffic to other nearby ports including Shenzhen.

This work stoppage is reported to be costing the port millions of dollars.

Bob Ferrari