Schafer: Target missing an opportunity to take the lead on Bangladesh

Target has been lying in the weeds since the late April collapse of an eight-story garment factory killed more than 1,100 workers near Bangladesh's capital city of Dhaka.

It was mostly good luck that no Target products were sewn in that building, as Target is very much part of the industry that buys clothes made in the world's cheapest garment-labor market. And with the spotlight on others who weren't so fortunate, including the hot Canadian retailer Joe Fresh and the Children's Place, Target is content to keep very quiet.

But you would only have to go back to December 2010 to find Target apparel linked to one of these high-profile disasters in Bangladesh — the fire at a Ha-Meem Group factory that killed at least 29.

Minneapolis-based Target declined to make an executive available to discuss what it is doing to help make sure these appalling events stop happening. Instead, the company sent two lengthy e-mails describing its efforts to monitor its Bangladeshi suppliers for safety, but it's perfectly clear Target's leadership views Bangladesh as a no-win topic of conversation.

Perhaps the company has concluded that nothing good can come of having an executive get asked about buying clothes made where the average wages are reportedly $64 per month and factory fires have been happening more or less routinely.

Target is missing an opportunity, in its business and its public relations. It could be leading efforts to push Bangladesh into developing its political and physical infrastructure, and developing its contractors into true global suppliers.

Then workers who may never get close to North American-level wages would at least be able to go to work in a reasonably safe place.

Instead, Target and other American retailers, the likes of Wal-Mart Stores, Gap and J.C. Penney Co., met the Wednesday after Memorial Day to start drafting their own plan.

Target has spent so much time and energy differentiating itself from Wal-Mart as the cooler brand and more progressive retailer that falling in quietly behind Wal-Mart on an issue like this is at least curious.

What Target said it has been doing in Bangladesh since 2011 is stepping up auditing of its suppliers and narrowing the list of contractors, in part to make it easier to ensure that its products come from places that meet safety standards. "We do not believe that low-cost production should come at the expense of social responsibility and workplace safety," it said, and a follow-up note stressed its effort to monitor and crack down on unauthorized subcontracting to other factories, too.

Terry Taylor, professor at the Haas School of Business at the University of California, Berkeley, has studied the effects of buyer audits and found widespread efforts to undermine them by skillfully coached factory staff.

"When hiding is prevalent," Taylor said, "increasing auditing can backfire by increasing hiding effort and reducing a supplier's effort to comply with labor and environmental standards."

The production of most apparel is not capital intensive and requires relatively low skills, part of the reason why high-volume production moves from low-wage countries to even lower-wage countries. Bangladesh, at least for the near term, lies at the end of that road.

Bangladesh may have congested traffic, an uncertain political environment and spotty electric service, but it also has an abundance of the world's cheapest garment labor.

Reuters reported in May that the average wage in Bangladesh garment factories is $64 per month, vs. the next-cheapest labor pool in Cambodia at $80 per month base wages and $154 to $230 per month minimums for garment workers in China.

Researchers familiar with the industry in Bangladesh describe it as highly fragmented with perhaps 5,000 factories, with buyers representing the big Western retailers playing one job-shop against another for best price and delivery terms. There is little long-term thinking beyond filling the current purchase order and ample incentive to cut corners, including in worker safety and facility maintenance.

Kingshuk Sinha, a professor of supply chain management at the University of Minnesota's Carlson School of Management, said what's important to ask is "What now? What do we do differently?"

What's needed, he said, is what he called "true supply chain thinking," leading to long-term relationships with vendors and a commitment to the vendors' growth and success. It means sharing information and sharing risks and rewards. That approach has brought gains to workers in other countries.

An example is Nike, the sports shoe and apparel company. In the 1990s Nike was rocked by well-documented cases of child labor and other abuses at its vendors' facilities, and its initial response — not my factories, not my fault — fueled outrage.

Nike then established a compliance effort and worked with factories in Asia on labor management and compliance, according to Drusilla Brown, associate professor of economics at Tufts University in Massachusetts.

"That's a firm that has been really aggressive about trying to develop long-term relationships with its vendors," she said. "Nike sees that as a strategy for protecting its reputation."

There's no reason why Ban­gladesh has to remain the wild West, she said. American retailers like Target can, over months and years, develop the Bangladeshi supplier base into far more reliable and capable manufacturers with better working conditions, and force the government to elevate its enforcement efforts, too.