How to accomplish affordability and ethics for a clothing manufacturer - Essay Example

AFFORDABLE & ETHICAL SOURCING PURPOSE I am pleased to provide advice on achieving a balance between affordability and ethical practices as Starburst continues to grow. To respond to your concerns, I will first a provide a general consensus on the business the environment of the apparel industry, then focus upon the ethical issues at hand, provide options for your consideration, make a recommendation and close with a cursory overview of a plausible implementation plan. As set forth below, it is a realistic and attainable goal to maintain good value plus fair and safe working conditions. BUSINESS ENVIRONMENT The apparel industry is characterized by fast fashion, increasing competition and constant change in style. Cost, quality and timing are three critical elements in product offerings [Faf10]. The demand for low-cost products coupled with the labour intense nature of apparel products effectively requires companies such as Starburst to outsource manufacturing to overseas suppliers. There is direct evidence on the importance of strategic sourcing in sustaining affordability as well as the positive impact it has on firm’s performance due to the cost and timing benefits [SuJ12]. However, offshore manufacturing is becoming a major cause of social and economic issues in the vendor countries. The credibility and culpability of the apparel industry is under scrutiny due to the frequency and magnitude of the human tragedies associated with overseas garment production. With this awareness, retailers and customers are rightfully seeking evidence of practices and industry efforts to better the working conditions, pay and safety in offshore factories. Ethical sourcing is becoming an essential business practice. ETHICAL ISSUES There is a clear recognition of the fact that effective overseas sourcing plays the pivotal role in a company’s success; however, it has recently been at a high social cost. Given the 2012 fire incidences at the Tarzeen Fashions factory and the textile factory in Pakistan all overshadowed by the 1,127 deaths in the April 2013 Rana Plaza factory collapse, the reality is extremely hazardous and poor working conditions persist [Nor13]. Factories put production schedules before safety or workers’ rights [Str13]. Beyond the basic safety issues, labour practices such as low pay and overtime without pay have been observed in many of the vendor countries. In some cases, human rights violations and sexual abuse are occurring[Ker11]. Essentially, the business model of low price and rapidly changing style is creating the situation [Dud13]. But this business model is not the only cause; corrupt governments and poor ethics are also at the center of this controversy. According to Farah Kabir, Country Director of Action Aid Bangladesh, these conditions exist even with governance. There are active inspection programs & labour standards in Bangladesh but these programs are wrought with corruption. Model companies are set up for testing, but the real work is happening elsewhere under terrible conditions. Companies are further defrauding the system by keeping two sets of books and punishing labour associations that attempt to file grievances.[The13]. Beyond the poor business model and governance, some fail to recognize that boycotting presents ethical considerations as well. If international companies opt for boycotting, the poor living conditions in these countries are likely to increase. Workers that once had a form of income would lose their jobs and fall further into poverty. It would be even more unethical to simply stop ordering from overseas manufacturers. Instead, it is a socially responsible course to help correct these conditions and become agents of change[The13]. OPTIONS With the ethical dilemmas in mind, there are 3 options to consider: Sourcing all products domestically Sourcing all products from overseas manufacturers Hybrid domestic and overseas sourcing Sourcing from Domestic Producers Manufacturing products exclusively in Canada is not a viable option due to the cost factor of the main inputs textiles and labour. Textiles made in Canada are significantly more expensive due to the strict environmental regulations [Ber13]. Labour costs are multiple times higher than in developing countries. Higher costs lead to higher prices and therefore, the affordability objective is not met. Starburst’s target market is extremely sensitive to price. Price is the number one driver in the teen and preteen customer segmentation [Faf10]. High pricing could severely impact your ongoing sales if it exceeds the value this target market is willing to pay. Overseas Sourcing Complete overseas sourcing would be an underutilization of your design background and leave significant style exposure to the capability of the supplier selected. Full offshore production leaves the risk that you may not like the design, there is a misinterpretation of the style or worse it is not well accepted by your customer. Starburst’s involvement in the design and finish process is the critical element of your brand and should not be left to others to interpret. Hybrid of Domestic and Overseas Sourcing The recommended option which addresses both affordability criteria and ethics is a hybrid of domestic production and ethical overseas sourcing. This recommendation is based upon the following: Maintains affordability by overseas sourcing of certain components Promotes good ethics & change Provides consumers with the products & ethics they demand at an acceptable price Utilizes the existing expertise of Starburst in the critical design & final assembly processes This approach incorporates the cost effectiveness of offshore sourcing and combines it with a verifiable ethical supplier, all while leveraging the benefits of your domestic talents. According to Sean Norris’ recent article in the trade journal Print + Promo, “….most industry suppliers are already proactive in a hybrid approach” [Nor13]. Fairtrade Canada sees a growing trend in consumer support for this approach [Fai11]. Even the Canadian government effectively underwrites a hybrid of domestic/overseas production with the “Made in Canada” certification requiring only 51% to be produced domestically [Lig14]. Consumers understand what Fairtrade is and correctly associate it with high expectations for companies to act responsibly when working in poor countries and believe in the power of ethical consumerism to address global challenges. It is reported that close to half of Canadian customers value and buy products from ethical companies. JUSTIFICATION Maintains Affordability Starting with affordability, the lower wages of overseas production allows the price to remain competitive. As discussed earlier, it’s a necessity to outsource production overseas if Starburst’s line is to remain affordable. Promotes Good Ethics and Change By requiring ethical offshore sourcing, Starburst becomes a catalyst for necessary change. Ethical offshore sourcing is accomplished by using certified products and by negotiating strict contract terms regarding safety, fair labour standards, grievance processes, encouragement of labour associations and independent third party monitoring. Making standards more important than production quotas effectuates change. Also independent third party monitoring overrides the corrupt governmental inspections. Besides being, the right thing to do, socially oriented companies can successfully leverage their reputation to market products with high symbolic values [Cas09]. The industry has monitoring and change mechanisms in place to assist in your endeavor. Third party certifications known as Fair Trade and supplier certification websites are an example. Provides Customers with the Certified Products They Demand at a Fair Price Fairtrade Canada states, “Simply put, consumers are looking for them (certified products). They’re also expecting companies to be able to prove it” [Fai14]. The 2011 Globescan survey concludes that “There is also a strong consensus among consumers (71%) that third-party certifications, such as that provided by the Fairtrade system, is the best way to verify a product’s claims” [Fai11]. At the 2013 Fashion Sourcing at Matrix trade show, exhibitors clearly displayed computer printouts, certificates and signs showing their social compliance credibility. Vipin Sethi, director of Fashion Matrix stated “that basically indicates you are following all the social, ethical, health and safety norms…You basically cannot exist without it now” [Wom13]. However, certified products have a higher price. Manufacturers have to pay better wages, adhere to safety standards and pay for the costs of monitoring needed to certify their products. However, a motivating factor is the evidence that shows how consumers are willing to pay a more for ethically produced products. Although, this segment of the market is particularly cost sensitive, studies show that 10% premium in price is the acceptable level [DeP05]. Accordingly, the extra costs involved in ethical sourcing can be partially mitigated by a slightly higher price. Utilizes Starburst’s Expertise The final justification is that a hybrid approach capitalizes on your design background and utilizes your current manufacturing team for final assembly and quality control. Design is the area of greatest added value[Lig14]. Keeping your current team employed is also the responsible approach. The combination of these advantages results in a far superior product, meeting the demands of your consumers, promotes social change and results in an affordable, ethical product. IMPLEMENTATION To be successful, an implementation plan is necessary. The domestic components of the plan are currently in place, it’s the ethical overseas sourcing component which requires the focus. There are several avenues to accomplish this. 1. Make strategic offshore sourcing a corporate priority 2. Utilize social credibility compliance checks to monitor suppliers. Organizations such as Global Market, Trade good, Social Accountability International and the Worldwide Responsible Accredited Production have programs in place[Wom13]. 3. Negotiate strict accountability and transparency clauses in your supplier contracts including: Pre-established labour terms such as those set forth by the International Labour Organization [Int14] Independent third party inspections Labour associations clauses protecting labour rights and providing grievance procedures Short term contracts with renewals based upon adherence to labour and safety standards Visit your suppliers if possible[Won13] CONCLUSION Affordable and ethical products are achievable and are clearly what both you and your customers want. Employing a hybrid domestic and overseas approach to sourcing and production is the answer. It capitalizes on the strengths of your design experience and current manufacturing team while keeping costs down due to the economies of overseas manufacturing processes. Using supplier credibility checks, recognized trade certifications, strong contract negotiations and closely monitoring the process, a hybrid approach actually acts as a catalyst for change. Starburst has the opportunity to “do good while doing good business” [Fai14]. I look forward Starburst’s future success and growth. Bibliography Faf10: , (Fafadia, 2010), SuJ12: , (Su, 2012), Nor13: , (Norris, 2013), Str13: , (Stroumboulopoulos, 2013), Ker11: , (Kernaghan, 2011), Dud13: , (Dudley, 2013), The13: , (The Current, 2013), Ber13: , (Berman, 2013), Fai11: , (Fairtrade International, 2011), Lig14: , (Ligaya, 2014), Cas09: , (Castaldo, 2009), Fai14: , (Fairtrade Canada), Wom13: , (Women's Wear Daily, 2013), DeP05: , (De Pelsmacker, 2005), Lig14: , (Ligaya, 2014), Wom13: , (Women's Wear Daily, 2013), Int14: , (International Labour Organization, 2014), Won13: , (Wong, 2013), Read More