The Bangladeshi factory collapse is a stark reminder that complex and global supply chains can leave retailers vulnerable.
The Bangladeshi factory collapse is a stark reminder that complex and global supply chains can leave retailers vulnerable. Without meticulous controls, an accident or a lack of transparency as to where materials are sourced and processed can be a dangerous risk to retailers - especially their brand’s value and reputation in the market.
Sourcing cheap materials abroad is commonplace, not only in the garment industry but more widely in the retail sector, but where the businesses’ accountability lies in the supply chain can be confusing. Different jurisdictions and legal frameworks, not to mention language barriers, can all contribute to miscommunication and at worse, unsafe working conditions or a faulty and dangerous end-product.
To avoid this, contracts must measure up. The recent concerns over the legitimacy of product information helps to demonstrate a real need for retailers to have in place appropriate rights in their contractual relationships with suppliers to ensure they have the best possible information when it comes to the origin and authenticity of products brought to market.
A key element which should be included in supply contracts concerns rights to sub-contract work to third parties. It is all very well having robust sanctions against a primary supplier, but if the actual work is then sub-contracted out, there needs to be adequate protections to ensure the enforcement of standards is passed down the line. Requiring express permission to sub-contract is a useful way to ensure the retailer knows who they are dealing with at all times and will allow some form of vetting procedure.
Building in risk management into supply chains has often been limited as businesses look at reducing costs, but it’s highly recommended that rights to audit and inspect a supplier’s operations are included in contracts. Although to provide an effective protection it will cost to physically carry out such inspections and ensure standards are being met. However, the stark commercial reality may well be that more resources must be devoted to ensure the supply chain is adequately managed and policed. And as the recent tragedy shows, it is essential in ensuring employee as well as consumer safety.
- Roland Hutchins is partner in the corporate team at national law firm Weightmans LLP