Wal-Mart tightens up on suppliers

Wal-Mart tightens up on suppliers

Subcontractors must have firm’s approval, it says by Anne D’Innocenzio (Associated Press) January 23, 2013

Bentonville, AR. Wal-Mart has alerted its global suppliers that it will immediately drop them if they subcontract their work to factories that haven’t been authorized by the discounter.

Wal-Mart’s stricter contracting rule, along with other changes to its policy, comes amid increasing calls for better safety oversight after a deadly fire at a Bangladesh factory that supplied clothing to Wal-Mart and other retailers. The fire in late November killed 112 workers at a factory owned by Tarzeen fashions. Wal-Mart has said the factory wasn’t authorized to make its clothes.

Garment found in Bangladesh fire

Garment found in Bangladesh fire

In a letter sent Tuesday to suppliers of its Walmart stores as well as Sam’s Clubs in the U.S., Canada, and the United Kingdom, the company says it will adopt a “zero tolerance” policy on subcontracting without the company’s knowledge, effective March 1. Previously, suppliers had three chances to rectify mistakes.

Wal-Mart also said it plans to publish on its corporate website a list of factories that haven’t been authorized to manufacture goods for Wal-Mart.

Also, starting June 1, suppliers must have an employee stationed in countries where they subcontract to ensure compliance, rather than relying on third-party agents.

“We want the right accountability and ownership to be in the hands of the suppliers,” said Rajan Kamalanathan, Wal-Mart’s vice president of ethical sourcing, said in an interview with The Associated Press. “We are placing our orders in good faith.”

Wal-Mart will hold a meeting for clothing suppliers from the U.S. and Canada on Thursday to explain the new policy changes.

Kamalanathan said Wal-Mart is looking to create a fund that factories can use to improve safety.

Critics quickly dismissed Wal-Mart’s moves as inadequate and said that the retailer needs to do more.

“It shows that Wal-Mart is feeling a great deal of pressure in the wake of public scrutiny,” said Scott Nova, executive director at Workers’ Rights Consortium, a labor-backed advocacy group. But he noted the company’s response isn’t adequate unless Wal-Mart and others pay their suppliers more so they can cover the costs of repairs.


Editor’s Note

I am not one that takes potshots at Wal-Mart but these “corrections” and “zero tolerance” are truly lame, like the one where the supplier has to be, at least, in the same country as the company that subcontracts with them. Wow, that is laying down the law. Of course, Wal-Mart is no stranger to public outcry over their labor practices both within the U.S. and outside the United States. How many recall the one big hubub when Kathy Lee Gifford had a line of clothing at Wal-Mart and it was discovered that this clothing was all made by child labor? Well this “new policy” pales especially in the light of the following article:


Profits over Safety

Retailers passed buck in Bangladesh to prevent factory fires by Allen G. Breed, Anne D’Innocenzio and Scott Mayerowitz (Associated Press on December 16, 2012) About a year and a half before a fire at a clothing factory in Bagladesh killed 112 people in November, executives from Wal-Mart Stores, GAP and other big retailers met nearby to discuss ways to prevent the unsafe working conditions that have made such tragedies common.

Bangladesh garment factory fire

Bangladesh garment factory fire

Representatives from a dozen of the world’s largest retailers and fashion labels gathered with labor groups and local officials in April 2011 at the three-day meeting held in the 15-story, glass-walled headquarters of the Bangladesh Garment Manufacturers and Exporters Association in Dhaka, the capital. They were considering a first-of-its-kind contract that would govern fire safety inspections at thousands of Bangladesh factories making T-shirts, blazers, and other clothes Americans covet.

Under the terms of the agreement, each company would be required to publicly report fire hazards at factories, pay factory owners more to make repairs and provide at least $500,000 over two years for the effort. They would also sign a legally binding agreement that would make them liable when there’s a factory fire.

Discussions seemed promising. Then, on the second day, Sridevi Kalavakolanu, director of ethical sourcing for Wal-Mart Stores, spoke up. “In most cases very costly and extensive and costly modifications would need to be undertaken to some factories,” Kalavakolanu was quoted as saying in the minutes of the meeting obtained by The Associated Press. “It is not financially feasible…to make such investments.”

The statement from the world’s largest retailer, with $447 billion in annual revenue, essentially sucked the air out of the room, witnesses said. It also set the tone for the rest of the meeting, which ended the next day without a single company agreeing to the plan.

I think that really had quite an impact on…everybody who was in the room,” said Ineke Zeldenrust, who was at the meeting representing the workers’ rights group Clean Clothes Campaign. “It was quite clear that we were far from a solution.”

Retailers often claim they know little or nothing about conditions at factories, because the long and intricate manufacturing chain runs through several contractors and sub-contractors. Wal-Mart and others whose garments were found in the ruins of the fatal Tarzeen Fashions on Nov. 24 say they had severed ties with the factory or were unaware their clothes were being produced there.

Auditors hired by Wal-Mart, based in Bentonville, Ark., inspected the Tarzeen factory in 2011, giving it an “orange” or high-risk rating. Months later, the third-party auditor did a second inspection, giving it another “orange” rating. And early this year the factory was no longer authorized to produce merchandise for the retail giant. The company said a supplier – who has since been fired – had moved Wal-Mart production there without its knowledge.

Building fires have led to more than 600 garment work deaths in Bangladesh since 2005, according to research by the advocacy group International Labor Rights Forum.


More Editorial Comment about Wal-Mart inspections (Numbers from “The Wal-Mart Effect” published 2005)

In 2004, Wal-Mart bought products directly from fifty-three hundred factories in sixty countries around the world and Wal-Mart reports that every one of those factories are inspected at least once. They also audited twenty-three hundred factories of its vendors – factories producing goods technically for other companies, but whose merchandise ended up on the shelves of Wal-Mart’s stores (like Tarzeen?). Wal-Mart inspectors did more than 30 factory inspections a day – 12,500 in 2004.

And the results? In 2004, violations were serious enough at 108 factories that they were banned from doing business with Wal-Mart (Boy, that must have been bad – that must have been the “red” light violations). Another 1,211 factories had serious enough violations that they were disqualified from doing business for some period (probably the “orange light” violators like Tarzeen); 260 of those corrected their violations and were permitted to come back as suppliers.

The Wal-Mart Effect by Charles Fishman

The Wal-Mart Effect by Charles Fishman

Of the 12,500 inspections, 92% were announced and 8% were surprise inspections. (The gold standard is unannounced inspections as well as interviewing workers off-site with the use of independent third-party auditors – none of which are followed by Wal-Mart.) Wal-Mart reported 9,900 of the inspections resulted in violations serious enough to either suspend a factory or put it on notice. (If every one of those 1,000 surprise inspections brought 1,000 serious violations, there would still be 8,900 serious violations at facilities that knew inspections were coming).


Wal-Mart’s job is to deliver low prices and obey the law. It does not worry about the environment or pollution around the factories, it does not have to worry about the working conditions or the safety of its workers – their notion is that it is the problem of the companies they contract with, even though Wal-Mart is the root of the problem. “Because of the pressure of cost,” says S. Prakash Sethi, an export on global factory conditions, “factories do everything to save on the third decimal of a penny. Wal-Mart is one of the primary, if not most important, engines that pushes those costs down.”

Quotation by Charles Fishman, author of The Wal-Mart Effect

“Wal-Mart is not just a store, or a company, or a powerful institution. It is also a mirror. Wal-Mart is quintessentially American. It mirrors our own energy, our sense of destiny, our appetite for bigness and variety and innovation. And Wal-Mart is not just a reflection of American society and values. It is a mirror of us as individuals. In a democracy, our individual ambivalence about such a concentration of economic power, even when that power is ostensibly on our side, is a signal. Both as individuals and as a society we have an obligation to answer the unanswered questions about Wal-Mart. Otherwise we have surrendered control – of our communities, of our economy, of some measure of our destiny – to decisions made in Bentonville.”


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