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Can Factory Subcontracting Be Stopped?

The proliferation of subcontracting has turned out to be one of the biggest challenges to regulating Bangladesh’s ramshackle factories. While two separate international consortia of Western garment retailers have quickly mobilized to improve the factories’ decrepit conditions, it’s proven exceedingly difficult to track the shifting of orders from primary factories to other, more dangerous and generally unscrutinized ones.

The EU led Accord on Fire and Building Safety in Bangladesh has plans to inspect the approximately 1,000 factories that directly supply them with garments while the US brokered Alliance for Bangladesh Worker Safety intends to cover another 500. Problematically, the totality of Bangladesh’s garment factories exceeds 5,000 in number, many of them falling under the regulatory radar.

Overall, the combined efforts of the two parallel alliances will cover about 25 percent of all of the factories that directly export to the signatory nations. Many of the remaining factories still indirectly subcontract business with both the alliances’ members, particularly the EU led one.

Keeping track of a factory order can require painstaking detective work but it’s not impossible. There are certain telltale signs that work is being dispatched from the factory of origin to some other work location. Zulficar Ali, the executive director of the Dhaka office of Synergies Worldwide, a global sourcing firm, noted that subcontracting is often the result of factory delays. Sometimes orders are held up when a garment maker encounters problems securing the line of bank credit necessary before fabric can be turned over to a factory. Other times production schedules are stymied by costly worker strikes.

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Mr. Ali says, “If I get raw material on time, I am 50 percent safe that my shipment will be on time.”

Tracking the fabric once shipped to a factory requires a  heightened measure of diligence, according to Rubana Huq, managing director of Bangladesh’s Mohammadi Group, which manufactures for retailer H&M. “Paperwork in a factory should indicate that the raw material has been shifted from its original factory to another factory for subcontract,” he said.

Other firms aggressively discourage subcontracting but enforcing those wants demands great vigilance. Some firms, like Synergies Worldwide, will install their own on-site quality control  managers to oversee the movement of the fabric along the supply chain. Ralston Fernandez, vice president of operations at ZXY Apparel Buying Solutions Ltd., says, “They always have the figures with them: how many lines are producing for us, what is the daily output, when they are going to finish production, how much of the fabric is ready, how much of the cutting is done. So they will have all the details, they can see for themselves if it is happening in the factory.”

Some argue that subcontracting in a place like Bangladesh is simply unavoidable given its vulnerability to capricious conditions: tempestuous weather, worker strikes, political unrest, and generally unreliable infrastructure all make subcontracting nearly inevitable. Others believe subcontracting is necessary to supplement the training of the more than four million factory workers in Bangladesh. Labor leader Babul Akhter asks, “Where will you get experienced workers? For creating your four million work force, there was no training institute. They have been trained by the small subcontractors.” He contends, rather than ban subcontractors, the government should invest in bringing them up to code. “The labor law is the same for export factory and subcontract factory. Why are you giving subcontract to factories that don’t follow Bangladesh law?”