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The Socially Responsible Supply Chain: An Imperative for Global Corporations

Recent press reports about unsafe work conditions and the loss of life in apparel factories in Bangladesh have highlighted the need for greater oversight over sourcing in low cost countries. That is especially so for companies with a commitment to corporate social responsibility, or CSR. However, many Western enterprises are unsure how to manage a socially responsible supply chain and provide an umbrella for their brands in regions where regulatory standards are lax and monitoring suppliers is difficult.
By Andreas Wieland and Robert Handfield
Andreas Wieland, Dr. rer. oec., heads the Kühne Foundation Center for International Logistics Networks, Technische Universität Berlin. He can be reached at .(JavaScript must be enabled to view this email address). Robert Handfield, Ph.D., is the Bank of America University distinguished professor of supply chain management and co-director of the Supply Chain Resource Cooperative at the Poole College of Management, North Carolina State University. He can be reached at .(JavaScript must be enabled to view this email address).
September 01, 2013

On April 24, 2013, the deadliest garment factory incident in history occurred when the Rana Plaza manufacturing plant collapsed in Savar, Bangladesh, near the capital city of Dhaka, killing more than 1,120 people. This incident occurred just five months after another fire at a garment plant in Dhaka killed more than 100 people. That facility was operated by Tazreen Fashions Ltd. and produced sweater jackets for C&A, shorts for Walmart, and lingerie for Sears.

Had these incidents not occurred (See Table 1), these enterprises would be considered textbook cases for highly efficient global supply chains. In today’s market, supply chains compete against supply chains, global brands concentrate on their core competency (marketing activities) and suppliers in Bangladesh offer high flexibility and cheap labor costs. This has allowed global brands to create extremely responsive supply chains and bring lower priced apparel to store shelves. Further, the time to design and delivery of new garments to the market has been reduced from more than one year to just a few weeks.

More efficient processes, cheaper products, and happier consumers appear to be a winning combination. Yet something is wrong with this picture. As these cases demonstrate, best practice supply chain thinking seems to have overlooked the social aspects of running a global supply chain. Disasters such as these put companies at risk of damaging their reputations and tarnishing their brands. The recent incidents, for instance, led to rallies and protests against Walmart, Gap, Loblaws, and other retailers that are purchasing from these sources.

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On April 24, 2013, the deadliest garment factory incident in history occurred when the Rana Plaza manufacturing plant collapsed in Savar, Bangladesh, near the capital city of Dhaka, killing more than 1,120 people. This incident occurred just five months after another fire at a garment plant in Dhaka killed more than 100 people. That facility was operated by Tazreen Fashions Ltd. and produced sweater jackets for C&A, shorts for Walmart, and lingerie for Sears.

Had these incidents not occurred (See Table 1), these enterprises would be considered textbook cases for highly efficient global supply chains. In today’s market, supply chains compete against supply chains, global brands concentrate on their core competency (marketing activities) and suppliers in Bangladesh offer high flexibility and cheap labor costs. This has allowed global brands to create extremely responsive supply chains and bring lower priced apparel to store shelves. Further, the time to design and delivery of new garments to the market has been reduced from more than one year to just a few weeks.

More efficient processes, cheaper products, and happier consumers appear to be a winning combination. Yet something is wrong with this picture. As these cases demonstrate, best practice supply chain thinking seems to have overlooked the social aspects of running a global supply chain. Disasters such as these put companies at risk of damaging their reputations and tarnishing their brands. The recent incidents, for instance, led to rallies and protests against Walmart, Gap, Loblaws, and other retailers that are purchasing from these sources.

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