chain governance and subcontracting in textile and garment industry

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The role of chain governance in subcontracting practices in the textile and garment industry 24 December 2015 Jantine Brandemann International Development Management – Sustainable Value Chains Year 3 Lecturer: Jan Hoekstra Van Hall Larenstein – University of Applied Sciences

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  • The role of chain governance in subcontracting

    practices in the textile and garment industry

    24 December 2015

    Jantine Brandemann

    International Development Management Sustainable Value Chains Year 3

    Lecturer: Jan Hoekstra

    Van Hall Larenstein University of Applied Sciences

  • 2

    Introduction One year ago I went to Bangladesh with other young persons on a journalistic research trip to see

    what has happened with the textile and garment industry in Bangladesh after Rana Plaza collapsed

    one and a half year before. Rana Plaza was a building which was meant for living, but it was mostly

    used as a factory with heavy machines like sewing machines. As well the building had too many floors

    than was allowed, and this was not mentioned to the local government. In the end this caused a

    collapse and more than 1,100 persons passed away, of which most were working in the garment

    factory. Bangladesh knows a lot of factories like this.

    With the collapse of the Rana Plaza building a lot of garment brands got a bad name and they were

    put on a black list because they produced in the Rana Plaza factory. This means that nowadays

    brands have to know carefully which factories are stable enough and to which factories they can give

    their demand. But do brands always exactly know in which factories their garments are produced? Is

    the textile and garment chain always transparent enough?

    During the trip we talked to owners of some unorganised factories which did not know where exactly

    the buyers of the textiles and garments came from. They told us that they had a subcontract and had

    to work very cheap, otherwise the competition with other subcontractors would be too high.

    According to H&M it was no subcontracting of the production for the international market what we

    saw, but this Swedish brand told that these garments were made for the local population of

    Bangladesh. According to H&M all these garments were produced for the domestic market. This

    experience with subcontracting practices in the textile industry in Bangladesh and the response of

    H&M can be seen in the video clip which has been made.1

    Anyways, our local translators told us there is a lot of subcontracting being done if we talk about

    western brands. Subcontracting can be done in different stages of the textile and apparel industry,

    but this article will focus on subcontracting in the apparel manufacturing.

    History

    About one hundred years ago we produced textile ourselves in the Netherlands. A museum and a

    school for textiles in Enschede leave their footprints behind. After World War II the globalisation

    came, together with cheap labour in developing countries. This had the effect that the production

    process moved to those countries. An example of this is happened recently, when H&M settled a

    garment factory in Ethiopia.

    Content

    This article will provide more information on subcontracting in the textile and garment industry. To

    explain all the factors involved, three cases will be elaborated, which are about the city of Bareilly in

    western Uttar Pradesh, India, about mistrust in the Bangladeshi textile and garment industry and on

    the competition between contractors in Bangladesh.

    First the problem thesis will be explained, where after the methodology is told. In the results part

    five different aspects of subcontracting within the textile and garment industry will be explained.

    1 Altijd Wat, 2014. Reportage: Bangladesh sluit 26 kledingfabrieken na ramp Rana Plaza. [online] Available at:

    http://altijdwat.ncrv.nl/seizoenen/2014/afleveringen/07-10-2014/fragmenten/reportage-bangladesh-sluit-26-kledingfabrieken-na-ramp-rana-plaza. [Accessed 24 October 2015]

    http://altijdwat.ncrv.nl/seizoenen/2014/afleveringen/07-10-2014/fragmenten/reportage-bangladesh-sluit-26-kledingfabrieken-na-ramp-rana-plazahttp://altijdwat.ncrv.nl/seizoenen/2014/afleveringen/07-10-2014/fragmenten/reportage-bangladesh-sluit-26-kledingfabrieken-na-ramp-rana-plaza

  • 3

    To what extent does chain governance play a role in subcontracting practices in the textile and garment industry?

    Market:

    - National/domestic

    - International/export

    Reasons for subcontracting:

    - Production speed

    - Expertise in other factories

    - Bargaining position

    Negative impact of subcontracting practices:

    - Labour

    - Transport

    - Trust

    - Transparency

    Stakeholders:

    - Labourers

    - Trade unions

    - Sub-contractors

    - Contractors

    - Brands

    - Local government

    - EU & western government

    - Consumers

    Governance:

    - Control over the work process

    - Control through social structures

    Those five aspects will focus on the market, the reasons for subcontracting, the effects of

    subcontracting, the actors and stakeholders which are involved in implementing chain governance

    and on chain governance itself. An overview of those aspects can be seen in the Conceptual

    framework, which can be seen below.

    This article is written for interesting young and junior professionals in the field of Sustainable Value

    Chain and has the objective to create a clearer view on subcontracting practices in the textile and

    garment industry and the extend chain governance plays a role in it.

    The conceptual framework, which has been made before writing this article and is the guideline of this article, can be seen below. The article contains five chapters, all explaining the answer on the problem thesis, which stands in the middle. In the article, references will be made towards the conceptual framework.

  • 4

    Problem thesis The problem thesis for this article is:

    To what extent does chain governance play a role in subcontracting practices in the textile and

    garment industry?

    The leading question to answer the problem thesis is: What can the lead firm, in this case the

    western clothing brands, do to get more power in the chain? This is called vertical governance, which

    is needed when horizontal governance cannot be handled. In the case of the textile and garment

    industry, often the Bangla governance has too low power so horizontal governance cannot be

    handled. Especially chapter 5, about Governance, will answer this leading question.

    This article is about chain governance in the textile and garment chain, with a focus on

    subcontracting practices.

    Definitions

    Subcontracting can be defined as follows:

    With the advent of technology-based goods, high-volume manufacturing services can be

    subcontracted to third parties that act as agent, not as independent producer, for branded

    products.2

    Chain governance can be explained with the following definition:

    Value chain governance refers to the relationships among the buyers, sellers, service providers and

    regulatory institutions that operate within or influence the range of activities required to bring a

    product or service from inception to its end use. Governance is about power and the ability to exert

    control along the chain at any point in the chain, some firm (or organization or institution) sets

    and/or enforces parameters under which others in the chain operate.3

    Methodology This research has been done through meta-research, which means that researches from previous

    researches have been analysed and conducted. Those previous researches have been written by

    other researchers. The researches have been compared with each other based on the problem thesis

    of the article. Before writing the article, a conceptual framework has been made to conduct were to

    focus on. This conceptual framework is the guidebook in this article.

    Results Five different aspects of subcontracting within the textile and garment industry will be explained.

    Those five aspects will focus on the market, the reasons for subcontracting, the effects of

    subcontracting, the actors and stakeholders which are involved in implementing chain governance

    and on chain governance itself. Those five aspects reflect five chapters, all explaining the answer on

    the problem thesis. An overview of those aspects can be seen in the Conceptual framework.

    2 Bierce and Kenerson, 2015. Manufacturing. [website] Available at: http://www.outsourcing-

    law.com/services-outsourced/other/manufaturing/. [Accessed: 15 October 2015] 3 Microlinks, n.d. Value Chain Governance [online] Available at: https://www.microlinks.org/good-practice-

    center/value-chain-wiki/value-chain-governance-overview. [Accessed 16 October 2015]

    http://www.outsourcing-law.com/services-outsourced/other/manufaturing/http://www.outsourcing-law.com/services-outsourced/other/manufaturing/https://www.microlinks.org/good-practice-center/value-chain-wiki/value-chain-governance-overviewhttps://www.microlinks.org/good-practice-center/value-chain-wiki/value-chain-governance-overview

  • 5

    1. Market The first part of the results will be about the market, both on national or domestic scale as on

    international or export scale. Often, employers face difficulties employers when they entry or leave

    the international industry, as the export market is risky and uncertain to work in, due to strict

    controls by time and quality management. The money that is being obtained through export

    products is not high enough to compensate those risks.

    Buyer-driven commodity chain

    According to Gereffi and Korzewienicz (1994, pp. 95-122), the production of goods where

    subcontracting is being involved, can be done by two different commodity chains: producer-driven

    commodity chains and buyer-driven commodity chains. Producer-driven chains are being used in the

    car industry for example, where the design and the production are being done by skilled, expertized

    persons. In the textile and garment industry the buyer-driven chains are being used. Large retail

    companies, brands and buying agents have the power over the network, which set the criteria

    concerning quality and time, have the ability to create mass consumption through strong brand

    names and their reliance on global production strategies to meet this demand. This means that

    buyer-driven chains are mainly seen in the production of labour-intensive goods, of which textiles

    and garments are examples. The garment industry is a very fast growing industry and is mainly

    export-oriented. Bangladesh is one of the top countries with a high percentage of exporting

    garments. The agents involved in the textile and garment industry mostly belong to both national

    and international chains.

    International or export market The international or export market is being managed by lead firms such as brands. Those lead firms have the power over the chain and because of the fast growing demand from the consumers side, the lead firms set strict criteria concerning time. Fashion changes always and has a cultural expression. It communicates who we are. That is why the demand from consumers is rising very fast. They want the textiles and garments as fast as possible, which gives high pressure on contractors, who feel forced to use subcontract. The western market changes twice or sometimes even fourfold per year, which causes the fact that consumers want even more and the contractors and labourers have to produce even more. Because the labourers get paid per piece of garment they produced, they have to work harder which often results in bad qualified textile and garment. National or domestic market In the national or domestic market subcontracting is being used as well, but not always. There is a limited time pressure which causes less force for the contractors to outsource the production to subcontractors. Even the competition between brands and between contractors is lower compared to the international market. Those facts will make the quality better, because it gives more space and time to the contractors and employees.

    According to Gereffi and Korzewienicz (1994) it is important for developing countries to enter the global production networks of lead firms such as brands. This can upgrade the economy of developing countries because high value services and manufacturing capabilities will be obtained.

  • 6

    2. Reasons for subcontracting There are several reasons why subcontracting in the textile and garment industry takes place. Those

    reasons are shortly being mentioned in the Conceptual Framework, but in this chapter the reasons

    will be explained.

    Production speed

    The orders which contractors get from brands have to be ready in a certain amount of time. The

    production speed is time bound and often too high for the contractors. This means they have to

    subcontract part of the orders.

    Low bargaining position

    The competition between brands themselves and between contractors themselves is very high, so

    the bargaining position is low. This means that brands want textiles and garments as cheap as

    possible, so they can offer cheap textiles and garments to the consumers. This causes the fact that

    the consumers price is too low. As well the contractors want to produce as cheap as possible,

    otherwise the brands will go to other contractors. In this case, cheap production means cheap

    labour. The contractors do not get enough money from the brands to pay their employees.

    3. Negative impact of subcontracting practices The negative impact of subcontracting practices is big and occurs at different stages of the textile and

    garment supply chains. Several actors and stakeholders face a negative impact but especially the

    actors with the lowest power in the chain loose most. In the Conceptual Framework the impacts are

    mentioned already shortly, but this chapter explains those impacts.

    Case Bareilly: Expertise in other factories

    As we see in the Conceptual Framework, another reason for subcontracting is that the expertise

    of certain things lies in other factories than the factory the order is given to. For example this can

    be the case when there is an order where a specific machine is needed, for instance when lace-

    work has to be done. Another example could be that the factories which get the orders from the

    brands do not do the ironing. This reason for subcontracting could be legal when it is being

    noticed to the local government. When those factories will be audited, it will be seen that other

    factories have to be involved in the process as well, so those factories can be audited as well. This

    reason for subcontracting can be explained by a case of the city of Bareilly in western Uttar

    Pradesh, India. This city has cheap labour and its labourers are known for the specific kind of work

    they can do, for example embellishment. Embellishment is an important tool in the garment

    industry as it almost doubles the price of the garment so it gives high value. At the other hand,

    those labourers lack the access of alternative employment opportunities which weakens their

    bargaining position. They cannot work anywhere else so they have to work in the garment

    industry, although they earn far too less. As well, the embellishment is too expensive in a contract

    factory, so it has to be subcontracted to be cheaper.

  • 7

    Cheap labour

    As already explained in part 2, labour will be cheap due to subcontracting. The factories which work

    with a subcontract do not get audited so neither it will be audited whether the contractors and the

    labourers, the employees of the contractors, get a minimum or even a living wage.

    More transport

    Subcontracting means more transport, because the textiles and garments have to be transported

    from the first factory to the second. This means higher transport costs, more time needed, and a

    higher impact on the environment. As well the transport from the first factory to the second is not

    being mentioned to the brands and the local government, so this neither will be audited. This means

    that it is unknown whether the truck drivers get a minimum wage.

    No transparency

    Due to subcontracting, auditing every factory is difficult. This means that there is no way near

    transparency in the garment and value chain. This is exactly the point which is important with chain

    government: that there is transparency.

    4. Actors and stakeholders Actors and stakeholders in the textile and garment chain play a role in chain governance and they all

    have their responsibility, actually a corporate responsibility is needed. They are interlinked with each

    other. To obtain the best governance in the chain, each stakeholder has to take its responsibility. The

    responsibilities of some actors and stakeholders in the textile and garment industry will be

    mentioned.

    In Annex I, a problem tree of the textile and garment industry can be seen. It is put as an appendix to

    make the information being told in this chapter clearer. The textile industry and the clothing and

    garment industry are close related to each other, which can be seen in Annex II. Because of this

    complexity it can be difficult to insert chain governance properly and problems occur or cannot be

    easily managed. The complexity of the chain is seen in this chapter as well.

    Labourers

    Labourers just have a little say in the textile and garment chain. They are dependent of the actors

    and stakeholders who have more power than themselves. This means that they cannot choose the

    best and most advantaged for themselves. Their employers decide what they have to do, for how

    Case Bangladesh I: Mistrust

    The Conceptual Framework shows another negative impact of subcontracting practices, namely

    mistrust, which contains of two main elements: corruption and nepotism. Several contractors

    and subcontractors know each other and they want to work together. This is what we heard in

    Bangladesh during the research trip. The manager of one of the trade unions we visited said that

    the local government knows factories who work with subcontracting, but nothing is done to

    solve the problem because almost every factory owner has a friend or family member working

    in the local government. This causes a lot of mistrust between other contractors and

    subcontractors.

  • 8

    many hours and money. Often the labourers cannot join a union, because then they might lose their

    job or even worse: their life.

    Trade unions

    Independent trade unions have more power than the labourers, but just a little more. Often the

    contractors or brands set up a trade union, but these are dependent on the contractors or brands

    and they do not do much for the labourers. These fake unions only are set up for greenwashing the

    performance and to mislead the auditors.

    Sub-contractors

    The contractors cannot produce the orders for the brands within the limited time and with a limited

    amount of money so they have to work with sub-contractors. Often the brands do not know this, nor

    do the auditors. This means that a lot of factories are not being audited. The responsibility of the

    sub-contractors is that they need to subscribe themselves to the local government so they are legal

    and can be audited.

    Brands

    For producing textile and garments, brands search for the best opportunities to work as cheap as

    possible. Brands want to earn too much money and they ask their contractors to work cheaper than

    they actually can do. This means that the contractors do not have enough money to produce the

    textile and garments and they have to subcontract the work. The brands have the responsibility to

    deliver orders which give the contractors a fair price.

    Local government

    The local government knows the industry within its country the best and it earns money with the

    export of textile and garments, so it can invest money in the industry as well. This can be done by, for

    example, subsidize auditing organisations and to build steady factories and make a clear, strict policy

    about buildings. The local government is the actor in the chain which has a say about buildings and

    safety within those buildings. If there is a plan to build more floor on a building while it is not

    Case Bangladesh II: Contractors

    The contractors get orders from the brands, as we see in appendix I. These orders often have to

    be produced for a too low cost price and within a strict amount of time, so the brands can sell

    the garments cheap and they can earn a lot of it. If a contractor refuses to produce the order, the

    brands will go to another contractor. This gives a high pressure to contractors not to refuse

    orders but to produce every order they get, although it is too expensive for them. If they do not

    get a fair price, they cannot pay a fair price to their labourers. An example of this have I

    experienced in Bangladesh when we went to one of the numerous garment factories. We did as

    if we wanted to do business, otherwise they would not let us in. We negotiated with the

    contractor about the price to see how easily he would switch to a lower price. He said that his

    employees could work a bit longer and harder for a lower price. It was an eye opener that the

    contractor stands between the brands above him and his employees, the labourers, below him.

    The contractors feel the pressure and if they would get a fair price for the orders they deliver,

    they can pay more to their labourers.

  • 9

    obligated because it will bring safety in danger, the local government has to prevent it. Another

    responsibility for the local government is to record every factory, even sub-contractors. This means

    that it will be on paper and the brands and auditors will know it as well when it is about sub-

    contracting and the concerned factories can be audited as well. This means the local government has

    a quite large say about the governance in the textile and garment industry.

    EU & western governments

    The European Union and the western governments do have a say in what they import. This means

    that their task is to control how the chain exactly works and how and where the imported garments

    have been produced. They can outsource this task to expertized, independent and trustworthy

    organisations, but the European Union and the western governments have to subsidise this and have

    to take the lead.

    Consumers

    When the consumer goes shopping, he or she has to ask the shop assistant, manager or owner where

    the garments come from and how they have been produced. This will create more consciousness,

    even for the questioner as to the person who gets the question. As well, consumers have to be aware

    with what they buy. Talking about garments, it can be said that the consumer has to buy sustainable

    garments, which has been produced in an organic and/or fair trade way. A label means the garment

    has to be controlled, so if a garment is produced in a sustainable way, it has a label and the actors in

    the chain will be controlled. Another responsibility of the consumers is that they should not want

    everything as cheap as possible. After World War II, the western economy rose and made consumers

    desirously. Often the consumers want too much for a too low price, which has a negative effect in

    the whole chain.

    5. Governance As we saw in the previous parts of the article, a lot of problems can be seen in the textile and

    garment industry, due to subcontracting. Therefor it is needed to create (better) governance over

    the chain. This can be done by mapping the chain in terms of the production process and through the

    network of agents. This helps to identify two different types of governance that can be obtained:

    control over the work process and control through societal institutions. Those two types can be

    found in both the national or domestic market and the international or export market.

    Chapter 5 focuses on the question what the lead firm, in this case the western clothing brands, can

    do to get more power in the chain. This is the leading question to answer the problem thesis. Vertical

    governance, is needed when horizontal governance cannot be handled. In the case of the textile and

    garment industry, often the Bangla governance has too low power so horizontal governance cannot

    be handled.

    Control over the work process

    Control through design

    What agents at the bottom level of the chain, especially labourers, earn depends largely on the

    design. When a design is more complex or heavy the earnings are higher. When the design is not that

    complex or heavy, the labourers will earn less which has a negative result for them, as they have to

    produce more garments. As a result those designs will be subcontracted to labourers who will earn

    even less. Governance is needed in controlling whether not all the garments with a minimum amount

  • 10

    of embellishment will be subcontracted. When there is more governance, the contractors can earn

    more for a minimum amount of embellishment.

    Control through lead time

    Another control in the work process is control through lead time. In every buyer-driven chain the

    lead time is very short, shorter than in producer-driven chains. It has an impact on the whole supply

    chain, which is especially heavy on the labourers (Ludvic, 2008). The lead time means the time

    starting from the sending of the order to the delivery of goods. It consists of three processes, namely

    pre-production approval, production of goods and delivery of goods. The pre-production approval is

    a kind of method of control which gets the brand, the retailer or the buying agent the right to get a

    final approval of the sample before the production starts. This control method can be repeated

    several times if things such as the fit or the printing have to be improved and it this method takes a

    lot of time, but it secures that the production in bulk will have a good quality.

    The lead time will be calculated before the production process starts and the time each process

    needs will be calculated. But when the conditions are disappointing, when a dyeing machine is

    broken for example, it will take more time to deliver the goods and the whole calculation is

    disrupted. The buyer really has to maintain the control over the lead time with this method.

    With this method the contractors struggle to deliver on time. If the products are not delivered on

    time, the contractor has to pay high discounts, and often the orders are cancelled. Often, the costs of

    those cancellations are going to the labourers. They get a lower wage and sometimes the labourers

    are left with the products, for which they hardly can find buyers in the domestic market if it was an

    order for the international market. When an order for the domestic market is being cancelled, the

    products can be sold to the domestic market for a slightly lower price, but it will be sold, in contrast

    with orders from the international market.

    Control through quality checks

    When subcontracting is been used, the contractors will check the textiles and garments on quality

    when they receive it back from the subcontractors. A minor fault can often be repaired by the

    labourers of the contractor, but when there is a major fault the textiles or garments have to go back

    to the subcontractors to repair or re-do the production. This costs a lot of time and wages, so it is

    important that the contractors go to subcontractors who are trust-worthy and skilled.

    Control through dual system of hiring

    A dual system of hiring is about two different labourers: hired labourers and home-based workers.

    Hired labourers work in enterprises and often get the urgent work orders and the products which

    prefer a high quality. These hired labourers are paid per time rate because the time is an important

    factor in these urgent orders. Home-based workers work at home, as the name says. They get paid

    per piece and usually produce the products for which fewer skills are needed. The distinction in those

    methods of payment results in the fact that hired labourers earn more than home-based workers on

    a daily basis.

    Control through age

    An important method when child labour is not preferred, is to control through age. This can be

    difficult because often the children do not know exactly when they are born and what their age is.

    When the age and the experience increase, the wage will increase as well. Often that is the reason

  • 11

    that young labourers are being kept. Another reason for that is that young labourers can see a lot, in

    contrast to labourers who have worked in the textile and garment industry for a long time already.

    Often it is dusty in the factories and there is not much sunlight, so the visibility of the labourers goes

    backwards when they are working in the industry for a longer time. Older labourers have to go back

    on unskilled labour with lower wages.

    Control through casualization

    Casualization means the replacement of permanent employees by temporary workers. The amount

    of work an order needs is not stable, which means that the contractors do not know how much

    employees they need. If an order requires a lot of work, there are more labourers needed, but when

    an order requires not much work, there are too much labourers, which costs money for the

    contractor. To prevent that, the contractors work with temporary workers instead of permanent

    workers more and more. Therefor it is important that the contractors write down which labourer has

    worked when, so it can be audited easier and it can be made legal.

    Control through social structures

    Religion and Caste

    Unni and Scaria (2009) show that in Bareilly, a part of India, the embellishment industry is mainly

    segregated in terms of religion and caste. The unorganised sector of the embellishment industry,

    which contains workers, sub-contractors and contractors, is largely dominated by Muslims. The

    organised part consists mainly of non-Muslims like Christians and upper caste Hindus and is about

    wholesaling and exporting. Among Muslims, there are three categories of garment workers. This

    categorizing also reflects in the earnings. Unskilled labourers from a lower caste earn less than skilled

    labourers from a higher caste. As well agents from the organised sector earn relatively more than

    agents lower in the chain. For example, wholesalers earn more compared to sub-contractors. The

    difference between earnings from domestic and export products is small.

    Gender

    The bargaining position of workers depends highly on gender. Women face job market

    discrimination, which reflects among others in their earnings. Most of the home-based workers are

    women, while on the other hand, hired workers, sub-contractors, contractors, wholesalers and

    exporters are only men. As well the number of days people work is linked to gender, as home-based

    workers earn just half the wage compared to hired workers and it is reported that they work a fewer

    number of days than hired workers because they have less time to work than men. The difference

    between men and women in the textile and garment chain is largely due to the difference in the

    products outsourced to home-based workers. Mostly products that need fewer skills and are less

    expensive are being outsourced to home-based workers. This means that they earn less. Often

    contractors source products out to sub-contractors who have home-based workers with them.

    Home-based workers are more interested in working on domestic products since those products

    have lower risks. Domestic products have fewer rejections on the basis of quality parameters and

    delivery time compared to export products, as the export market requires high delivery times and

    high quality products.

    The way of payment is difference between men and women as well. Home-based workers are paid in

    per piece of garment while hired workers are paid per hour. The piece rates are dependent of the

    design and the type of product. As well home-based workers have a weak bargaining position. They

  • 12

    are paid less but they know that when they refuse to produce or when they bargain, the contractors

    will go to the next home-based worker. The home-based workers, who mainly are women, are

    integrated to vertical sub-contracting. This means that they are more dependent on middlemen to

    get work. Male hired workers, on the other hand, are less dependent and after a certain point of

    time, upgrade themselves to contractors. As a contractor, they often have employment for about six

    to eight months a year. The rest of the year they mostly work as home-based workers. The male

    workers are less dependent then the female workers so they have more options for upward mobility

    in the chain.

    Place

    Most of the hired workers are based in the rural areas, while exporters and wholesalers are mostly

    based in metropolitan cities like Delhi. The earnings between workers from the rural areas and

    workers from the urban areas, differ. The wages in rural areas are relatively lower compared to the

    wages in urban areas, both for home-based workers and hired workers. This difference between

    wages in rural and urban areas, is because of the difference in the type of products outsourced. Most

    of the less expensive products, which dominate the export market, are outsourced to rural areas. At

    the other hand, expensive export and domestic products such as tops with complicated designs

    which require higher skills, are mainly outsourced to urban areas.

  • 13

    Conclusions The conclusion we can draw is that it is really hard to implement chain governance in the textile and

    garment industry, because a lot of actors and stakeholders are involved and they all want to earn

    enough money. As well they all have their own responsibilities, but as long as the most powerful

    actors do not face (much) problems, they will not easily take their responsibility to solve the

    problems the actors lower in the chain face.

    Subcontracting is only good when it is audited in a proper way by external auditors. When there is

    subcontracting because there is a lack of certain needed skills at the contracting factory, it does not

    definitely mean that there is no good chain governance, but it has to be audited and changed if it is

    not according certain rules, which have to be set by the external auditor. But mostly subcontracting

    is done because of other reasons, as we see in the conceptual framework. Production speed,

    expertise in other factories and lower wages are important reasons for subcontracting. But

    subcontracting has negative impacts such as cheap labour, more transport, mistrust and no

    transparency. Chain governance plays a too small role in subcontracting activities in the textile and

    garment industry and it should become a bigger role to keep chain governance and that the many

    actors playing a role in the textile and garment chains take their own responsibility. A lot of actors

    are involved in those chains, which can be seen in appendix I. Those actors are the labourers, both

    sub-contracted as home-based workers or hired workers, trade unions, sub-contractors, contractors,

    (western) brands, the local government, the EU and the western government and the consumers.

    They all have to take their own responsibility to solve the problems in the chain. But the actor with

    the most power is the lead firm, in this case the western clothing brands. The question is whether

    they get more power in the chain. This is called vertical governance, which is needed when horizontal

    governance cannot be handled. In the case of the textile and garment industry, often the Bangla

    governance has too low power so horizontal governance cannot be handled. Chain governance is

    needed, both by control over the work process and control through social structures. Control over

    the work process can be done through design, lead time, quality checks, dual system of hiring,

    through controlling the age of labourers, or through casualization. As well chain governance can be

    realized by control through social structures, like by religion and caste, gender and the place. The

    lead firm has the most power to make improvements in the chain and to solve the problems we face

    in appendix II.

    Three cases have been short explained in the article: a case about expertise in other factories in

    Bareilly, India, one case about mistrust in Bangladesh and the last one about contractors, as well in

    Bangladesh. These cases are examples of subcontracting in the textile and garment industry.

  • 14

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  • 15

    Appendices

    Appendix I

    The textile industry and the clothing/garment industry are close related to each other, which can be

    seen in the figure below. Because of this complexity it can be difficult to insert chain governance

    properly.

    * For some particular fibres that includes dismounting and cleaning ** includes dry-cleaning and printing *** includes other events Material and services flow Information flow The direction of the arrows indicates a system driven by demand. The information flow begins with the consumer and set the base for what and when is being produced. It is also worth mentioning that, in many cases, information flows directly from retailers to textiles facilities.4

    4 Gardetti, M.A., Torres, A.L., 2013. Sustainability in Fashion and Textiles: Values, Design, Production

    and Consumption. [online] Available at: http://www.greenleaf-

    publishing.com/content/pdfs/fashion_intro.pdf. [Accessed 28 October 2015]

    http://www.greenleaf-publishing.com/content/pdfs/fashion_intro.pdfhttp://www.greenleaf-publishing.com/content/pdfs/fashion_intro.pdf

  • 16

    Appendix II

    Below a problem tree of the textile and garment industry can be seen. It is put as an appendix to

    make the information more clear.

    Problem tree

    Brands do not have

    enough control in the

    chain

    The consumers

    price is too low

    Retailers + brands

    want higher prices

    Factory owners are forced to pay too

    little to their workers

    Factory owners are forced to source

    out to factories which can produce

    below their own cost price

    The outsourcing factories earn a bit

    No transparency in the chain

    Brands do not pay

    enough to factory

    owners

    More transportation costs