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At what point does the lowest price have too high a cost?

Even when retailers and brands have a decent code of conduct requiring their suppliers to meet international labour standards, their own purchasing practices can send contradictory messages to suppliers and undermine efforts to improve working conditions in their supply factories. Low prices paid to suppliers, footloose sourcing practices, and overly tight production timelines can all lead to labour rights abuses at the factory level.

Low prices

Downward pressure on prices paid to the suppliers who manufacture apparel and sportswear products can seriously impact the ability of suppliers to meet basic labour standards at their factories.

The reality of fierce international competition is exploited by some individual companies to bring supplier prices down or to extract other concessions from suppliers without regard for the impact on the supplier's ability to meet labour standards. The use of internet ‘reverse auctions' or ‘e-purchasing', open-book costing and other methods all put immense pressure on suppliers to lower prices. Most retailers or brands seem to assume that a supplier will not bid a price which cannot be met without violating labour standards. In a competitive environment, the reality is often different.

If sustainable compliance with international labour standards is a company's goal, it cannot be pursued without understanding and addressing the potential impact purchase price has on the ability to comply with basic labour standards, including wages.

Footloose production

The apparel industry is notoriously ‘footloose' - that is, most brands and retailers do not make long term commitments to produce their goods in any particular factory.

The lack of long-term commitments to specific suppliers and factories can send negative signals to suppliers on labour standards compliance. There is little incentive for a factory to make substantial investments in health and safety or other labour standards improvements on behalf of an international buyer that may or may not source orders from the factory once improvements are made.

Factory owners may resist taking measures that have the potential to impact on their bottom line unless there are clear commitments from brands, retailers and their sourcing agents to continue or even increase orders from the factory once improvements are realized.

For example, factory owners often resist unionization efforts by their employees, violating their right to freedom of association and collective bargaining, out of a fear that improvements in wages and working conditions will make their factory less competitive and unattractive to footloose buyers.

Production timelines

Ever shorter delivery lead times, rush orders, last-minute changes, and abrupt order cancellations can contribute to factories requiring illegal overtime hours, subcontracting and informalization of labour.

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