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Sourcing the truth about Bangladesh

OutsourcingRiskConsumer goodsCorporate social responsibilityEthicsAsia PacificRetailHealth and safetyDisasters and UnrestOffshoring and OnshoringSupply DisruptionBlog+-
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Last Friday, terrorists stormed a restaurant in Dhaka, Bangladesh, killing 20 people in an attack which has been claimed by Islamic State. 18 of the 20 victims were foreign nationals from Italy, Japan, the US and India, many of whom worked in factories supplying clothing and textiles to Western retailers.

 

While the level of terrorist attacks in the country has been creeping up, with 50 terrorist-related deaths in the last 3 years alone, the targeted nature of the attack towards foreign nationals working in the Bangladeshi garment supply chain has caused more businesses to wake up to the reality of the issue. This last week, the world’s media has stirred up fears that this latest attack is sending out a very clear message: extremists do not want Bangladesh to be a key supplier market for Western businesses.

 

This direct attack on the nation as an outsourcing opportunity comes as another blow to the Bangladeshi garment industry, after the graft it had put in to overhaul the industry in the wake of the Rana Plaza factory collapse in 2013.

 

And the response of retailers outsourcing to the region has mixed implications to suppliers.

 

Fast Retailing, owner of Japanese retail brand Uniqlo, announced almost immediately that it was pulling staff out of Bangladesh, suspending all non-critical travel to the country and telling staff based in the region to stay indoors. Many others, including Swedish clothing chain H&M, are weighing up their options of what to do next.

 

All things considered, this to some extent marks a step, if not a gigantic leap, forward to see Western retailers putting the wellbeing and safety of their suppliers ahead of delivery schedules, order fulfilment and revenue streams; a drastic change from just three years back, when brands couldn’t distance themselves quickly enough from the victims working in the Rana Plaza factory. The outlook of the optimistic observer would be to say that industry demands for change haven’t fallen completely on deaf ears.

 

However, pulling outsourcing out of the nation where 80% of its exports involve supplying clothing and textiles to other countries may do more damage than good to the economy and the international clothing supply chain. The temporality or permanence of these supply disruptions still remains in the balance. Will Western retailers pull out of the region altogether and outsource to other, less volatile low cost markets such as Vietnam or reshore to their domestic markets where they can monitor market volatility and risk more closely?

 

This would provide a major blow to the world’s second largest garment supplier market.

 

Businesses should not jump ship and abandon suppliers in their hour of need – not only from an ethical standpoint, but for selfish reasons, businesses don’t want to lose access to the wealth of skills and suppliers in the region.

 

Yet, continuing to outsource to the country is perhaps no higher up in the stakes of corporate social responsibility. After all, expecting workers in supplier factories to risk their lives at the hands of terrorists when travelling to and from work cannot be held up as any sort of improvement on them risking their lives at the hands of unsafe buildings within the workplace.

 

Meanwhile, if you pull foreign nationals out of the supply chain but keep sending domestic Bangladeshi workers into the factories, the last three years’ worth of progress in terms of building better relationships with suppliers and workers, implementing regular factory visits and audits, and generally getting to know their supply chains better may all come rapidly undone in no time at all.

 

Time and again it comes back to the same premise that businesses must take greater action to improve the conditions for workers in their supply chains.

 

Rather than lose the hard work you’ve put into supplier ethics in the country, it becomes the responsibility of the procurement function to manage higher security in times of risk. One solution is to hold supplier meetings outside Bangladesh, such as in Hong Kong or Singapore – an approach that some businesses are already taking. This way the business can mitigate the risk of entering a volatile region whilst maintaining close relations with the supplier.

 

Whatever the approach, there is no denying that, to face the worst garment industry disaster in the modern world one year and then three years later be disrupted by a terrorist attack, Bangladesh and the industry deserve a bit of a break. Procurement needs to be careful not to take its foot off the pedal of its social responsibility focus in the region. Issues are not all but solved but there is a clear need to not abandon the nation as a major outsourcing opportunity.



This article is a piece of independent writing by a member of Procurement Leaders’ content team.

Rachel Sharp
Posted by Rachel Sharp

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