Bangladesh has over 5,000 factories that manufacturer low-cost garments that you would see in big discount stores. About half of these are prime garment suppliers with the major retailers or distributors, but the other half are subcontractors and in numerous cases unsupervised. These subcontractors may be several layers down the supply chain – out of sight of the overseers. No inspections for quality or worker conditions. Starting salaries run $40/month, about one-fifth that of China. When a major fire broke out in November 2012, girls shorts for WalMart were found in the ruins that took the lives of 100+ workers. Who is watching the store?
It appears that a common practice in the garment sub-contract community there are to overbook up to 200% of capacity. Prime subcontractors are under tremendous pressure to meet delivery goals, ship by sea and meet delivery deadlines. Penalty to miss the ship date results in penalty fees via reduced profits and for product to be shipped by air at the subcontractors expense.
I’m having difficulty appreciating the chaos that must be inherent in a 200% un-restrained capacity plan. One can imagine that they over subscribe to assure the future continuity of work (backlog) but at what price? What value do they give to their delivery reputation as a reliable supplier if they don’t achieve their production targets. Apparantly they are not using the latest tools and technologies available to help them run their ops plan (VCP).
Sources: Wall Street Journal, July 24, 2013 pg. 1; Huffington Post, 10 Dirty Secrets of the Bangladesh Garments Industry, July 25, 2013