Insight: Barred by Wal-Mart, Bangladesh suppliers feel left on the shelf

Thu Jun 6, 2013 6:10am EDT
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By John Chalmers

(Reuters) - The day after Wal-Mart Stores Inc published Simco Group's name on its list of banned Bangladesh suppliers, the garment maker learned it had lost an order from U.S. retailer J.C. Penney Co Inc for 500,000 pairs of pajamas.

Khurrum Siddique, Simco's head of operations, thinks this is no coincidence. He said his factories, named along with dozens of others on Wal-Mart's "red" list of unauthorized suppliers first published on May 14, have become pariahs for Western brands that are trying to play it safe in Bangladesh after a litany of deadly workplace accidents.

The reputational blow dealt to these businesses exposes a dilemma for multinationals since the April 24 collapse of a building outside Dhaka that killed 1,130 people, most of them low-paid seamstresses. Is it better to sever ties with long-time suppliers that may pose a safety risk, or stay and try to lift standards?

"What Wal-Mart is doing at the moment is nothing but saving its own skin. As a responsible business partner they should stay with us and help improve working conditions for the safety and security of workers," said Reaz Bin Mahmood, a vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). "For so long they made huge profits. Now the time has come to join friendly hands with us."

Simco's four factories appeared on Wal-Mart's list even though they had never failed a safety audit in 22 years of supplying the world's biggest retailer.

Wal-Mart said Simco was banned for unauthorized sub-contracting of an order to a factory called Tazreen Fashions where 112 workers died in a fire last year.

Simco said it had subcontracted to Tuba Garments Ltd, which was an authorized Wal-Mart supplier at the time, but Tuba then shifted the order from its mother factory to Tazreen. Tuba's managing director, Delowar Hossain, confirmed in a letter he gave Siddique to show Wal-Mart that his company had diverted the work to Tazreen without Simco's knowledge.

Simco says it is being unfairly punished for that lapse.   Continued...

People walk past a Wal-Mart sign in Rogers, Arkansas in this June 4, 2009 file photo. REUTERS/Jessica Rinaldi/Files