â€œWalmart Warns Suppliers
on Stricter Measuresâ€
[[BENTONVILLE, Ark. (AP) â€” Wal-Mart Stores Inc. 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 Tazreen Fashions Ltd.
Wal-Mart has said the factory wasn’t authorized to make its clothes.
In a letter sent Tuesday to suppliers of its
Wal-Mart 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, but that
is still in discussion. However, he also said local governments and other
suppliers and retailers have to do their part in boosting factory 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. However, 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.
“The upfront commitment from brands and
retailers is essential if we are going to see real change,” Nova added. Nova’s group is one of several organizations
trying to get retailers and brands to sign a first-of-its-kind contract that
would govern fire-safety inspections at thousands of Bangladeshi factories
making T-shirts, blazers, and other clothes Americans covet. The contract would call for companies 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.
PVH Corp., a New York City-based company that sells
the Calvin Klein and Tommy Hilfiger brands, last March signed the agreement
after a national TV news report that chronicled the dangerous conditions in one
of its Bangladesh factories. However,
PVH pledged to start the program only if at least three other major retailers
sign on. So far, only one has: A German coffee chain named Tchibo that also
sells clothes. Nova said that his organization is in discussion with other
Wal-Mart says it has no plans to sign on to the contract.
Brooke Buchanan, a Wal-Mart spokeswoman, says that the company can make a
“positive impact on our global supply chain by both by raising our own
standards and by partnering with other stakeholders to improve the standards
for workers across the industry.”
Nova also noted that Wal-Mart needs to disclose a
list of all the suppliers it currently works with so they can be monitored by
independent groups. It also needs to disclose the results of all its factory
inspections. Richard Locke, head of political
science at MIT and an expert in global supply chains, said that Wal-Mart also
needs to re-evaluate its purchasing practices so its demands are not putting
excessive pressure on factories to cut corners on safety. It also needs to
provide better technical assistant training for factories so they can run their
Wal-Mart ranks second behind Swedish fast
fashion retailer H&M in the number of clothing orders it places in
Bangladesh. Before the fatal fire there, Wal-Mart had taken steps to address
safety, such as mandating fire safety training for all levels of factory
management. 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.
1 (400 words, 35 marks)
Explain Wal Martâ€™s
perspective(s) of power in dealing with its suppliers (15 marks). Elaborate on this explanation using evidence
from the case study (20 marks).
Question 2 (400 words,
From your understanding
of the case study, outline what Wal Martâ€™s source(s) of power are (15
marks). As suggested in the case study,
elaborate on how Wal Mart might take advantage of its power source(s) in managing
its supply chain (20 marks).
Question 3 (350 words,
Assume the role of a
supplier whose business has been affected Wal Martâ€™s new policies. Outline the kinds of negotiation episodes expected
of Wal Mart (15 marks). Explain how
would you deal with these episodes and how would you go about negotiating with
the giant retailer (15 marks).