Following the building collapse accident that is now estimated to have claimed over a thousand lives, the Bangladesh government shut down eighteen factories last week. According to a story in the Wall Street Journal, “the government said…it was temporarily closing 18 factories until safety improvements were made, without providing details. A Labor Ministry document…showed that three of the factories belong to the Nassa Group, while the other 15 are owned by smaller companies.”
The article also suggests that Nassa Group has been an historic supplier to Wal-Mart, Kmart and Sears, among others. In the past, the company was even named a “top international supplier” to Wal-Mart, the WSJ suggests. From a global sourcing perspective, such factory closings are rare indeed, despite the relative frequency of factory accidents in Asia involving fires, collapses, production accidents and the like.
Yet they are representative of the growing supplier management challenge when it comes to corporate social responsibility (CSR) related issues. These include enforcing supplier codes of conduct, as well as health, safety and environmental (HSE) concerns that extend beyond the four walls of an organization. As the WSJ observes, “The closures of facilities belonging to a major Bangladeshi company was another indication of the difficulty Western retailers face in making sure their manufacturing partners are providing safe working conditions.”
Concerning developing markets where safety and building standards are not up to Western standards, what should procurement organizations do to stay on top of potential accidents in their supply base both before and after they happen? Getting more aggressive with factory auditing and focusing on physical buildings as well as on labor practices would certainly be one area. But another is monitoring local media more closely. This extends to social media (including local language blogging and micro-blogging), where organizations can look for signs of safety violations and worker discontent.
In the global supplier management and risk equation, piecing together unstructured data can be valuable as a leading risk indicator. Going one step further, companies should monitor import and export data from sources such as Panjiva, Zepol, Import Genius and Datamyne to understand if competitors are shifting dollars away (or to) different manufacturers. Organizations with a strong supply chain CSR reputation might be good ones to follow when it comes to working with suppliers that meet or exceed desired standards.