Companies push for more supply chain safeguards

on Wednesday, December 12, 2012

Companies push for more supply chain safeguardsAfter a factory fire in Bangladesh killed more than 100 workers, companies that worked with the facility are under scrutiny for claiming they had no idea the noncompliant manufacturer was producing their garments. Companies such as Wal-Mart and Sears have stated that their suppliers subcontracted Tazreen Fashions, whose facilities were rife with safety hazards and noncompliance issues, without their knowledge or permission.

With their vast global supply chains, many corporations have little knowledge of exactly where their merchandise is being produced, as the suppliers they hire often subcontract work to factories who can complete the projects for a cheap price. This cost-cutting measure is critical to many company business models. Wal-Mart is known for its inexpensive merchandise, which can't be sold at such low prices when production costs rise.

The need for new strategies
In light of this scandal, some of these companies are vowing to develop strategies that will better their supply chains and ensure similar events do not occur again. Wal-Mart has admitted that it can do more to ensure the only facilities making its clothing are authorized to produce goods and have sufficient safety measures in place. The company told Reuters it currently has tight control over its supply chain, but only up to a certain step, at which point it relies on its suppliers.

"If a supplier or an agent chooses to subcontract without informing us, then that is a problem," said Rajan Kamalanathan, Wal-Mart's president of ethical sourcing. "We can put all kinds of controls in place, but if they don't tell us where they're putting our order, then that is a problem."

Many corporations currently take measures to ensure the factories that produce their clothing take the steps necessary to ensure worker safety and prohibit unhealthy or unreasonable working conditions. According to Reuters, Wal-Mart developed its factory certification program in 1992, and conducted more than 9,000 compliance audits in 2011.

Working to ensure compliance
However, many companies have taken some steps to ensure there are safeguards in place for manufacturers that want their business. Wal-Mart pointed to its procurement auditing processes and ratings system for factories that prohibit certain manufacturers from producing its merchandise. The company has also referred back to its history of working with the Bangladeshi government and industry groups that help protect employees and ensure working conditions are acceptable throughout their supply chains.

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