WHEN TRAGEDY STRIKES SUPPLY CHAIN: A CASE

STUDY ON RANA PLAZA

ASSIGNMENT
OPERATIONS MANAGEMENT

Under Prof. Amit Kundu

Date: 31/10/2018

Name: Avishek Bhattacherjee

Roll No: 71
Dept.: Transportation & Logistics
Course: MBA-PS
College: IISWBM
BRIEF INTRODUCTION
The Tiny & Tots Company is an American child clothing retail store operates
predominantly in the US and erstwhile looking to commence its operation in the
European Union, especially in the UK, France & Spain. The CEO of the company is
Miss Laura Cronenberg & COO of the company is Jim Zappa. The company had a
strong fiscal year with linear growth of 5%. The manufacturing hubs of the company
are in Southeast Asian countries like China, Bangladesh, Cambodia, Vietnam, etc.
Recently the company went through a colossal catastrophe which shook the operation
and supply chain structure of the company bringing the decision making authorities
of the company into a dilemmatic state to choose between business ethics or prolific
measures.

THE INCIDENT
One of the garment factories in Bangladesh that had been producing packaged
merchandise for T&T over an aeon had collapsed in the middle of a typical working
day. The building had been constructed quickly and cheaply with substandard
materials on a filled in the pond. The scene around the ramshackle building was
horrific with injured bodies being rescued from the debris while the closed ones of
the employees were in terror and panic. The sight of the entire situation reflects the
political and financial corruption that the country is grappling with over the years
which subsequently jeopardizes even the corporate investments and business
environment. More than 2000 workers lost their lives in that implacable accident. The
ramifications of the incident boiled down to three immediate actions:

 Providing support to the workers

 Finding replacement facilities for "Fall line" production.
 Tighten up of the supply chain
BANGLADESH - PROS & CONS
With the wake of the incident, the immediate thought that came to the minds of the
decision makers were whether to shift the operation to a different country or improve
the working condition in Bangladesh itself.

 Bangladesh has cheap labours and transportation cost.

 Quality of production is reasonably good.
 Factories are clustered in one small area.
 Bangladesh has duty free access to European Union which China & Africa
doesn't.

BUT,

 Bangladesh is grappling with poor worker safety standard & regulation.

 Corruption & Chaos
 No infrastructure guarantees.

CHINA - PROS & CONS

However, if the operation has to be moved to China it still faces some valid cons such
as:

 Already 36% of merchandise is produced in China and if it can handle more

pressures of operations is a debatable issue.
 Due to competition from other retailers, it is very common to have restyling
done in 4 weeks, hence to handle such production pressures for a single
manufacturer zone will be tedious.
 Labour cost in China is increasing day by day.
 Lastly, if the Bangladesh operation gets shifted to China, then 50% of the
merchandise operations will be confined to a single nation thus it will be highly
vulnerable to political and economic risks, counterfeit and in case of any
disaster or accident half of the goods will be delayed or destroyed which will
put an immense toll on revenues.
THE GREAT DILEMMA
Lets us take the perspective from various dimensions and chalk out alternatives on
behalf of T&T:

 The company can keep the operation in Bangladesh but in that case, it has to
legislate a strong worker safety coalition as per industry standard by mutually
collaborating with all the foreign companies that have manufacture hubs in
Bangladesh. In that process, it has to involve the Bangladesh government,
other manufacturing sectors and Banking sectors. Various measures like
Insurance, Safety equipment, Compensation schemes, routine inspection of
infrastructure as per guidelines have to be in place. However, this will take
enough time for implementation.
 Secondly, it can move the operation to China which will expedite the operation
process and revenue build up. But the company must shield itself from high
labour cost by outsourcing the labours from cheaper nations and automation of
50% operation which will reduce the labour requirement. Here it can adopt
make to order process to reduce the inventory cost and fight against the
counterfeit risk.
 Thirdly, it can divide the destroyed Bangladesh operation between other
contractors of Bangladesh and Chinese contractors in a 60-40 ratio. This way it
can test the production pressure handling capacity of already busy hubs of
China. If it can very well handle the pressure then slowly it can increase the
share and in the meantime developing the working condition and workers
safety measures in Bangladesh which is itself a time-consuming process. Then
the cost of labours will be under budget.
 Lastly, the Bangladesh labours who are experts in making the clothes over the
years can be brought to a Chinese factory to make the clothes. This will reduce
the problems of labour cost in China and also as per the business ethics, the
company will provide employment to Bangladesh workers thus indirectly
helping in shaping the GDP of Bangladesh.
CONCLUSION
It is always important to keep business ethics while competing in the modern world
for the sake of employer branding and keeping the trust of the customers. But at the
same time losing revenues in business should be taken care with utmost diligence and
sincerity and proper strategy. We have seen over the years how reputed firms have
gone bankrupt due to ethical scandals or losing out to competitors and last but not the
least, political reasons. Companies can only play with operation procedure in
standing out among other companies because it is one important metrics which can be
moulded as per situational requirement.

• Tots & Teens should stay in Bangladesh and support victims and their families.

• They should build up a new plant and start afresh and rebuild the supply chain.

• Develop a competitive advantage.

• Being with workers ensure their decent wages and rise standard living.

• Once T&T take care of supply they have to rethink about strategy to shift to another
country.

The company has a moral responsibility to support factory workers, give them safer
workplaces, and contribute to the community. It would be unethical to pull out in the
wake of the building collapse. But if T&T wants to make real changes in Bangladesh,
it has to do a lot more, beginning with ensuring that workers make a decent wage and
it can’t be done without the govt.’s help.

But though it sounds rude they are here to do business and not charity, higher pay
will raise the standard of living, and GDP will grow as a result but can anyone really
ensure that in next 5 years there won’t be any more incident like this ?. Once that
happens, the government should have the funds to improve the country’s
infrastructure along with the business development situation by strengthening law and
order—so that it could come to a win-win for both Bangladesh and the companies
that do business there.

So I would like to conclude that after the current situation is taken care of the
organisation must take a bold step in shifting its unit from Bangladesh to other
preferable south East Asian countries