Bangladesh factory fire highlights the human cost of cheap clothing

After a fire at a clothing factory in Bangladesh claimed 112 lives, the big-name brands who cashed in on its cheap labour face uncomfortable questions.

Walmart's Faded Glory label can be seen on a piece of clothing lying among equipment charred in the fire that killed 112 workers at the Tazreen Fashions factory, on the outskirts of Dhaka.

In the charred remains of the Tazreen Fashions factory in Bangladesh, familiar labels and logos - sewed and printed in scarlet and royal blue - beckon from the ashes.

Even in the ashes, there's no missing the fact that these T-shirts and jeans were intended for US stores and shopping trolleys, designed as bargains too good to pass up, or gifts just in time for the holidays.

But almost a week after the blaze on the outskirts of Bangladesh's capital Dhaka killed 112 workers last Wednesday, questions remain unanswered.

How, exactly, did brands worth fortunes end up being made in such a place? And what does the odyssey that transports them to markets across the globe say about the everyday economics most consumers in the West take for granted?

Retailers and brands whose clothes were found among the embers - including Walmart, Sears and Disney - are carefully vague in explaining the reasons.

But piecing together the puzzle through business records and the insight of apparel and sourcing experts reveals a complex and ever-changing supply chain, in which Tazreen was just a single, interchangeable link. It is a chain that provides a combination of ultra-low labour costs, maximum flexibility and delegated authority, offering undeniable advantages.

But it also comes with considerable and deadly risks.

"A lot of people go into the store and see 'Made in China' or Bangladesh or India or whatever and it's almost like this magical thing - that somebody said, 'I want to make some shirts,' and it shows up the next day," says Vinod Rangarajan, who advises clothing companies on product development and sourcing for the consultancy Kurt Salmon. "But it is a lot more involved than people would imagine."

There is no single answer as to how and why so many branded garments from Tazreen reached US consumers, because that is precisely the advantage of the global supply chain: it never has to be one size fits all.

Some big retailers buy clothes directly from scores of such factories, searching for the production capacity to meet the demands of the coming season's fast-changing fashions. Others work through supply-chain managers, independent suppliers or in-country agents.

Even so-called "vertical manufacturers", who produce much of their product line in-house, will turn to a factory such as Tazreen to handle speciality items that fall outside their areas of expertise.

"There are lots of companies who exist between brands and factories and their job is really just to take technical specifications on an order and turn around and make sure that there is a poly-bagged, perfectly folded item that comes with a SKU (stock-keeping unit) number and a price tag," says Kevin O'Brien, a partner in Ethix Ventures, a distributor of "ethically sourced" clothing in the US state of Massachusetts.

That explains why paperwork found in the shell of the burnt-out factory and its parent company bear the names of clothing companies all but unknown to consumers.

They include businesses such as NTD Apparel, which is based in Montreal, Canada. It sells T-shirts and other goods printed with licensed characters, such as Hello Kitty and Angry Birds, to JC Penney, Urban Outfitters and other merchants. It was identified as the recipient of a 2011 auditor's report that branded Tazreen a "high risk".

Or MJ Soffe of Fayetteville, North Carolina, US, which makes items such as cheerleaders' outfits and fleece tops. It was identified by an order book photographed inside the factory. Both companies were also named in shipping records, compiled by the trade platform Panjiva, showing they had received orders from Tazreen or its parent.

NTD executives declined to be interviewed. In an email, its president, Michael Eliesen, said the company was not working with Tazreen at the time of the fire.

NTD said it hired auditors to ensure factories that made its clothes complied with local health and safety laws. "Any violation is dealt with according to the sensitivity of the issue and in consultation with our audit partners," it added, without explaining how it had dealt with hazards found at the ill-fated plant.

Robert Humphreys, the chief executive of Soffe's parent company, Delta Apparel, said he had never heard of Tazreen and did not know what his company had made there.

That points to the complexities of the clothing business, he said, and the fact that Delta, whose own factories in North Carolina and Central America focused on items that changed little from season to season, normally only outsourced work for the fringes of its product line.

"Maybe we make 80 per cent of what we ... sell and then you have outlying products that maybe are just for the season or a fashion run," said Mr Humphreys, whose plants turn out 3 million items each week. "This is why it gets so complex and there's so much misinformation. But the apparel industry is a very big, complex marketplace."

That complexity means there are secrets behind every label that passed through Tazreen, sewed into garments by people working a six-day week for the equivalent of Dh1 an hour, packed between row after row of sewing machines on floor after floor of a building in which exits were locked or blocked to prevent stealing or unauthorised breaks.

Such conditions were also common in the United States until a fire achingly similar to the one in Bangladesh killed 149 workers at New York's infamous Triangle shirtwaist factory on March 25, 1911.

But today, the globalised economy allows retailers and consumers in First World countries to turn to Vietnamese or Honduran or Bangladeshi workers to do those jobs, a role largely overlooked until a system that runs with formidable efficiency is upended by tragedy.

"You have to remember that there is a problem which we face in a globalised economy, which is that if one country enacts really strict safety guidelines that raise the cost of manufacturing, buyers have the option to take their business elsewhere and ... have demonstrated a tendency to do so," said Josh Green, the chief executive of Panjiva Inc, an online data platform used by international marketers and producers,

The supply chain's flexibility makes it particularly well-suited to the clothing trade's repeating cycle of design, order, production, shipment and sale. Companies plan new lines a year before they arrive on shelves but creativity quickly gives way to number-crunching, as executives set sales targets and try to figure out which producers can deliver within their required profit margins, said Mr Rangarajan.

So the pressures at work in Bangladesh, now second only to China among the world's largest exporters of clothing, continue because it is part of a global production economy with interchangeable parts.

Making clothes requires relatively low-skilled labour and equipment that is easily relocated or replicated, making it "uniquely susceptible to geography hopping", says Mr Green.

That gives big buyers of clothing significant leverage. When a major retailer buys a garment, about 50 to 60 per cent of the cost is for materials, 15 to 25 per cent is for labour, and the rest is split between transport, overheads and expenses such as import duties, says Mr Rangarajan. Other than labour, all of the costs are largely beyond buyers' control. "Continually chasing low-cost labour is one of the big levers you have to pull," he added.

The result is a production system that has rapidly replaced business methods of the past, when clothing companies owned the factories and the workers were on their payrolls.

Now, a company such as Walmart or Sean John need not own a single factory, and the plants they rely on can change from year to year. This shifting creates the new challenge of keeping tabs on conditions where the work is being done.

The complexity of the global supply chain helps to create a dynamic that allow factories such as Tazreen to keep operating, says Mr Green.

"All of these layers, which I think represent rational decisions at an individual level, result in a system that is pretty irrational, where you have a real lack of transparency about exactly what is going on," he says.

"And when you have a lack of transparency, you have a lack of accountability."