Barred by Wal-Mart, Bangladeshi clothes suppliers feel left on the shelf
Being on the largest US retailer's 'red' list of unauthorised suppliers costs firms dearly
The day after Wal-Mart Stores published Simco's name on its list of banned Bangladesh suppliers, the garment maker learned it had lost an order from US retailer J.C. Penney for 500,000 pairs of pyjamas.
Khurrum Siddique, Simco's head of operations, thinks this is no coincidence. He said his factories, named along with dozens of others on Wal-Mart's "red" list of unauthorised suppliers first published on May 14, have become pariahs for Western brands that are trying to play it safe in Bangladesh after a litany of deadly workplace accidents.
The reputational blow dealt to these businesses exposes a dilemma for multinationals since the April 24 collapse of a building outside Dhaka that killed 1,130 people, most of them low-paid seamstresses. Is it better to sever ties with long-time suppliers that may pose a safety risk, or stay and try to lift standards?
"What Wal-Mart is doing at the moment is nothing but saving its own skin. As a responsible business partner, they should stay with us and help improve working conditions for the safety and security of workers," said Reaz Bin Mahmood, a representative of the Bangladeshi garment industry. "For so long, they made huge profits. Now the time has come to join friendly hands with us."
Simco's four factories appeared on Wal-Mart's list even though they had never failed a safety audit in 22 years of supplying the world's biggest retailer.
Wal-Mart said Simco was banned for unauthorised sub-contracting of an order to a factory called Tazreen Fashions where 112 workers died in a fire last year. Simco said it had subcontracted to Tuba Garments, which was an authorised Wal-Mart supplier at the time, but Tuba then shifted the order from its mother factory to Tazreen.
Tuba's managing director, Delowar Hossain, confirmed in a letter he gave Siddique to show Wal-Mart that his company had diverted the work to Tazreen without Simco's knowledge.
Last month, Siddique was stunned to learn that an order he received to make pyjamas for J.C. Penney had been cancelled. The news came in an e-mail from the US chain's Chinese supplier, Wuxi Jin Mao, which said J.C. Penney was following Wal-Mart's unapproved factory list.
"Normally the big retailers in US share such information with each other," Yang Nan, an executive at Wuxi Jin Mao, wrote in the e-mail. "JCP, Target, etc. will follow Wal-Mart's unapproved [factory] list this time, and suspend these 245 [factories] in Bangladesh for now."
J.C. Penney confirmed it had suspended Simco as a supplier - for reasons it would not make public - but said that decision was taken before it even knew a Wal-Mart register existed. US discount retailer Target also denied it was following the Wal-Mart list.
Wal-Mart, which stepped up factory inspections in response to the series of deadly accidents, said it was not seeking to influence the business decisions of any other companies. But several retailers and brands, including Spain's Inditex, owner of the apparel chain Zara, said they had followed up with their own checks of the named factories.
A reporter found last month that an unapproved factory where Wal-Mart and Inditex inspectors had spotted cracks in the wall was still making Wrangler shirts for the world's largest apparel maker, US-based VF Corp. VF said its philosophy was to stay and try to improve working conditions.
"We believe this provides the necessary balance between providing needed jobs and safeguarding employees," it said.
Bangladesh relies on garments for 80 per cent of its exports. The country is now second to China in the global ranking of apparel exporters. Wal-Mart takes more than 10 per cent of Bangladesh's garment exports, worth US$19 billion a year.
The firm has been the most aggressive in spotlighting substandard suppliers. It changed the wording in the "red" list published on its ethical sourcing website to specify that unauthorised subcontracting was grounds for inclusion on the list. When asked whether this was in response to Simco's concerns, Wal-Mart said only that it had updated the language to add "greater clarity" on the types of violations represented on the list.
Siddique said Simco had about 1,500 workers at its peak but now employs 600.
"We do not want to work for Wal-Mart in future," he wrote in a cease-and-desist letter to Wal-Mart dated May 17.
"But your putting us on this list and implying it is because of so-called 'electrical, fire, and building safety' issues is not only a false misrepresentation but will cause us serious financial damage, because other customers … are following this list."
Tom Holland is on holiday