“Understanding what better wages in global
supply chains mean and how companies can
implement them’
Doug Miller, Emeritus Professor Worker Rights in
Fashion, University of Northumbria, UK
Structure
• Some ‘home truths’
• Options for buyers
• Review the Issues
• Some possible ways forward
Home Truth 1
• Poverty wages and other wage violations in
the industry continue to be collectively
caused.
• This is predominantly the result of ‘buyer
driven’ value chains: poor costing/fob
pressure/lengthening of payment
schedules/forced discounts
Home Truth 2
• The responsibility for administering the
payment of the wage rests with the national
employer
• The responsibility for paying a living wage is a
collective one (cf. Ruggie)
Home Truth 3
• In a multi-buyer outsourced make to order
globalised production system, unless a brand or
retailer owns a factory outright or has a stable
and substantial commercial relationship with a
supplier, it cannot achieve the payment of a living
wage on its own
• We can only talk in terms of specific
consignments/orders between buyers and their
suppliers
Current buyer approaches
• Unconditional extra payment to the factory = Retailer/brand takes a
hit on profits (Switcher/Knights Apparel)
• Price increase is passed on to the consumer (Fairtrade/Yunus)
• Retailer seeks other cost savings in Critical Path (Gap)
• Buyer engages with factory process upgrading – productivity
initiative (M & S, New Look, Asda George) - Supplier pays more
• Buyers urge government to increase the minimum wage towards a
living wage worker target figure.
Unilateral and Unconditional extra
buyer payment
• Lump sum?
• Costed on the basis of a national living wage
figure?
• Implementation issues
COSTING GARMENTS AND COSTING
LABOUR
Current buying practice...LDP/FOB/CMT
CMT
Cut Make and Trim Cost
Labour
cost
Over
head
Factory
Profit
• Establish ‘Standard Minute Value ‘ (SMV) on
specific garment garments
• Clarify factory payment system and benefits
• Determine the ‘living wage’ element on the
minute labour cost
SMVs
E.g. Bangladesh
• NMW plus benefits / available minutes per
month
• Current NMW target = 8,114 BDT per month ?
T Shirt SMV = 10.565
• Available Minutes In A Month = 12480
• Average earnings ex O/T 5,000
• 1 Minute Currently = 5,000/12480 =.4 BDT
• .4 x 10.565 = 4.2 BDT = 5 cents
Sustainable labour costing
• Double the unit labour cost to meet NMW
demand
• New Unit Labour cost - 10 cents
The issue of efficiency
• SMV x Line efficiency varies
• 80% is almost optimal
• Actual – between 35% and 70%
• If we do not factor in efficiency – there will be
non compliances
Passing the price on to the consumer
• Fairtrade model
• Price escalation issue
Critical Path Savings?
• Streamline the supply chain e.g reduce
number of agents thus freeing up extra money
• Does not solve the question of
implementation
Process Upgrading - Efficiency savings
Lean Manufacturing in a Bangladesh Factory – Polo Shirts
Items
Total Team-Workers
Sewing Operators per team
Total Wages
Produced Pieces
Working hours (one-worker)
Working days
Total working Team-hours
Average Cycle Time per Piece
Cost per produced Piece
Values
Unit of Measure
Taka/Month
Pieces/Month
Hours / day
per month
Hours/Month
Minutes/Piece
Taka/piece
Conventional
57
44
344,850
46,904
10
26
14,820
18.96
7.35
Lean
21
18
127,050
24,804
10
26
5,460
13.21
5.12
Improvement from Practices
Cost Reduction per Piece
Taka per piece
Cost Improvement ratio
Percentage
Total Saving per month
Taka / Lean Team
Average Saving per worker
Taka / Month
Average Saving in comparison to
Percentage
average monthly wage
2.23
30%
55,315
2,634.06
44%
Buyers collectively urge the Govt. and
employers to increase the NMW
• ‘ As responsible businesses our purchasing practices will
enable the payment of a fair living wage and increased
wages will be reflected in our f.o.b. prices, taking also into
account productivity and efficiency gains and the
development of the skills of the workers, carried out in
cooperation with the unions at the workplace level’
Joint (8) brands letters to Cambodian Govt. and GMAC
• Disingenuous if buying practices do not change
IMPLEMENTATION AND
UPSCALING: 3 MODELS
Current Model
Buyer A
Employers
Association
Fob
Buyer B
Buyer C
Buyer D
Fob
Factory
Supplier
Fob
Fob
Buyer E
TUs
Minimum Wage
Fob
Govt
Sectoral Agreement
Buyers
TUs
Cambodia
2014-15
Employers
Association
Jobbers’ Agreement
Global
Unions
National
TUs
Buyers
Employers
Sectoral Jobbers’ Agreement
Global
Unions
National
TUs
Buyers
Labour Minute
Value
Manufacturers’
Associations
INTERIM AGREEMENTS
Supplier seeks agreement with key
buyers
Buyer A
Supplier
Buyer B
Buyer C
Buyer D
Targeting Large National
Manufacturing Groups
TB
ETI
Member
firms
?
?
FWF
?
FLA
?
ETI
?
ETI
SAI
?
Manufacturing
Group of
Companies in
country x
SOME ISSUES AND QUESTIONS
•
•
•
•
Do we need a buyer’s code of conduct?
How do we address the issue of efficiency?
How do we facilitate sectoral bargaining?
What is the objection to non-victimisation
guarantees?
• Can labour cost be uncoupled from the CMT
to avoid price escalation?
• ‘If you carry on tweaking business as usual
and finding nice examples to follow we’ll still
be here in 20 years holding the same
conversation.’
Jenny Holdcroft, IndustriALL.