Question

The Cost of the Cheap Shirt Conduct some research about the working conditions and regulatory environment in clothing factories in Bangladesh. Economists warn about quick fixes for wages and the imposition of U.S. safety standards on foreign factories. They offer the following figures to illustrate that the issue of labor conditions in other countries is complex. In Bangladesh, clothing factories get about $6.75 per shirt. These are the factory costs: $4.75 for the fabric and thread $1.00 for the shirt’s labels $0.38 wage costs for each shirt (workers earn $70 to $80 a month) $0.15 per shirt for laundering That leaves $0.47 per shirt for facilities, shipment, marketing, and perhaps the interest on loans. The cost of living in Bangladesh is $40 per month for rent, and food per adult is $13 per month. Milk for a child is $5 per month. Those who work in the factories are generally the main wage earners in their families because no other jobs pay as well. Given this analysis, where do you see some fixes for the safety and wage issues? What needs to be done besides instituting codes of ethics and factory and labor standards? Assume that you are a manager for a clothing firm in the United States and you are being sent to Bangladesh to select a new manufacturer for your clothing lines. Discuss some of the issues that will affect your decisions about choosing a new facility to work with.

Answer 1

This is mainly because of Globalization impact, all the countries are open for trade with minimum restrictions.

Now in the case of above example to fix the safety and wages issue as per suggestions from economist it is better to redefine the cost of labour on the basis of cost of living by multiplying with the fixed factor and implementing minimum wages policy.

Also need to take care of increasing such minimum wages on the basis of inflation factor on yearly basis to avoid future issues.

Now coming to final point what if we choose new facility from Bangladesh -

1. We need to think the industry involved as these clothing is basically related to base level employees with minimal education having very limited opportunities outside world, so country should think about domestic production irrespective of cost. If and so GDP of country is getting reduced and import restrictions initiated we will not have any control on the supply and business will impact adversely.

2. Quality assurance will be great issue.

3. Trading & Transportation cost will increase.

4. Delay in deliver schedules and impact on inventory cycles during global issues.

5. Lack of proper control and dependency on cross country economy for our business.