Peter Needle shares his thoughts with us In a WhichPLM exclusive article, originally running in our Annual Review 2014. Needle serves as Managing Director for Segura Systems, where he leverages his experience of helping retailers and brands achieve true supply chain transparency. In this exclusive feature, Peter examines the financial damage, loss of life, brand tarnishing, and other catastrophic outcomes that can stem from a lack of insight into our complex global supply chains.
April 24th 2014 marked one year since the Rana Plaza factory building in Dhaka collapsed, killing more than 1,100 workers and sending shockwaves through the global garment industry. Many of the headlines written on this unhappy anniversary focused on a perceived absence of genuine change and the slow rate of progress in Bangladesh – workers still vulnerable, authorities not brought to account, victims’ families insufficiently compensated.
Of course, the process of repairing the damage done by Rana Plaza is far from complete. When reporters returned to the scene of the disaster earlier this year, they found that the site remains a pile of rubble and twisted wreckage – a powerful reminder that the work required to right this wrong has only just begun. However, some great strides have been made in the short period since that tragic day in 2013.
For the families of those killed or badly injured in the incident, we know that no financial or regulatory victory can compensate their loss. But there can be little doubt that Rana Plaza will come to be remembered as a major turning point. We’ve already seen signs of real progress, from the success of global initiatives like the inaugural Fashion Revolution Day to the growing realisation among clothing brands that achieving real and lasting change will mean moving beyond the compliance-led mentality to embrace a truly ethical way of doing business.
Many observers have recognised the growing relationship between compliance, ethical sourcing and PLM. Another tool that garment retailers now have at their disposal is the production tracking platform. While not strictly a PLM solution, it addresses many similar requirements – production visibility, supply chain transparency and the ability to provide retailers with “a single version of the truth” about their products.
The campaigners behind Fashion Revolution Day and the #insideout social media campaign have stated that one of their goals is to “reconnect the broken links in the supply chain”. A production tracking solution strives for the same thing. It is designed to ensure that apparel brands maintain the quality – and retain control – of every link in their supply chain.
The collapse of Rana Plaza had a seismic impact on the garment trade not only because of its scale (it is considered the worst industrial disaster of modern times), but because the story surrounding the tragedy – the events that immediately preceded and followed the accident itself – provided a grim encapsulation of the industry’s shortcomings.
Several distressing sub-plots emerged from the rubble. Among them was the realisation that many western brands lacked an understanding of exactly how their supply chain networks intersected with the eightstorey factory complex. Primark was the first to admit responsibility and begin the process of compensating victims, but another 27 brands were linked with the building. Few others proved willing to come forward – partly due to reluctance about stepping into the glare of media and public outrage, but partly because they simply did not know whether clothes bearing their brand were being made at Rana Plaza.
To a fashion industry outsider, the idea that a high-end brand or high-street retailer would lack knowledge of where its clothes are produced may be shocking. Sadly, it’s a common scenario when complex supply chains extend into developing countries. Brands typically have access to a vast network of factories, and choose which locations to bring on-stream based on the incentives they can offer in terms of price and turnaround time. For manufacturers looking to stretch margins by taking on more work from demanding western brands, the urge to subcontract parts of an order to another supplier is often too great to resist. Furthermore, the increased use of agents has brought an additional layer of complexity to traditional supply chain relationships, weakening the link between retailers and the factories producing their goods.
Production tracking technology can restore this link. Furthermore, it has the ability to shine a light into every corner of a retailer’s supply chain, removing the conditions that enable – or tacitly encourage – unwanted and unauthorised subcontracting.
Ernst & Young’s report, Human Rights and Professional Wrongs, published earlier this year, explored the adequacy of corporate social compliance in the wake of the Rana Plaza disaster and fatal garment factory fires in Pakistan. In a section entitled ‘What needs to change?’, E&Y recommended that retailers tighten procurement systems to prevent orders being placed with unaudited factories and make a concerted effort to bring “agents and intermediaries” in line with the expectations of retailers.
These goals are certainly achievable. To reach them, garment retailers must nurture transparency throughout their supply chain relationships (see diagram). In many existing supply chains, the retailer/brand owner works with a garment manufacturer and a packaging supplier to produce its clothes (as mentioned, an agent may also be employed as the link between retailer and manufacturer/ supplier). Once purchase orders are logged and packaging specifications sent to the respective parties, the retailer is always at risk of being left out of the loop in terms of exactly how, where and when the items that make up a particular garment are produced.
A retailer may regularly audit the factory where the cloth is cut and stitched, but what about the secondary supply chain – the zips, buttons, labels and packaging that are added to create the final product? Can the retailer verify that each item was produced in a safe and compliant factory, by workers earning a fair wage? If not, the retailer’s supply chain poses a risk. And if some parts of the garment are produced in a factory that fails its next audit or falls victim to an industrial accident, the potential outcome is not only disruption, but a huge amount of negative publicity and reputational damage.
How can this scenario be prevented? By enforcing greater visibility and transparency at the heart of the triangular relationship. Just as PLM functions as a window into a product’s entire lifecycle, production tracking systems are created to provide a complete view of the retail supply chain. Non-approved parties are excluded from entry, as all orders must be placed with a legitimate supplier that features on the retailer’s approved database.
All order data is then processed via the tracking platform, which means a retailer is immediately alerted if any part of an order is completed by an unauthorised supplier. Manufacturers cannot deliberately over or underestimate orders as a way to increase margins, while greater transparency also means that inefficient and unreliable suppliers can be removed from the supply chain.
Of course, it will take more than production tracking to remove all opportunities for abuse from garment supply chains. If the tragedy of Rana Plaza is to have a positive legacy, encouraging behavioural and cultural change at the top of the industry is just as vital as technical advances. The shift from a compliance mindset to an ethical mentality will be crucial in the coming years. However, we believe this process should start by enabling retailers to root out unauthorised supply once and for all. In doing so, we can challenge the tick-box approach that allows unethical sourcing to continue beneath the surface, unnoticed and unpunished.