Over 15 % of Wal-Marts Bangladeshi suppliers failed safety inspections
After the disastrous and tragic events in Bangladesh, U.S. Wal-Mart has been stepping up its round of inspections at suppliers sites in that country
More than 15 % of the inspected companies failed their audits and had to initiate improvements to keep the business from Wal-Mart. Wal-Mart states, according to the Wall Street Journal – that most of the three dozen factories were able to correct the problems, or are in the process of complying. One seven story factory had to knock down an illegally added eighth floor. With two companies Wal-Mart is no longer doing business because the audit failed and they could not fix the problems. One factory had to close down. The cost of these audits amount to USD 4.0 million and are not completed yet.
The effort on the supplier’s side is considerable, for instance fireproof doors and materials are not available in Bangladesh, and they have to be flown in from abroad. In addition local manufacturers have to be taught on how to manufacture fireproof doors. All in all, these are costly operations but destined to save lives in case of emergencies such as the one taken place before. It has to be added that the cost factor might have an influence on future goods originating from Bangladesh which would hamper the country’s competitiveness.
Wal-Mart’s head of ethical sourcing will increase the staff by 40 % and add a team of 10 engineers to the company’s Bangladesh sourcing office to regularly inspect factories. In addition the company will start to incorporate safety standards into merchants’ incentive based compensation and train buyers to take safety into account when placing orders with factories. Wal-Mart is offering up to US 50 million in low interest loans to help factories to make building improvements, but so far, no factory owner made use of it.