Wal-Mart to Adopt ‘Zero-Tolerance’ Policy With Suppliers

by Christopher Freeburn | January 22, 2013 10:37 am

walmart store 300x180 Wal Mart to Adopt 'Zero Tolerance' Policy With Suppliers[1]In the wake of a fatal fire at an overseas production facility, Wal-Mart (NYSE:WMT[2]) is moving to tighten outsourcing restrictions on its suppliers[3].

The nation’s largest retailer announced that it will take a “zero tolerance policy” for suppliers that disregard its outsourcing policies. The move comes after 112 workers died in a November fire at Bangladesh garment factory that was producing Wal-Mart’s Faded Glory brand of apparel. Bangladesh officials said the factory wasn’t safe, The Wall Street Journal noted.

Wal-Mart said it was unaware that its clothing were still being produced at the factory before the deadly fire.

The tougher new rules replace an earlier “three strikes” policy, under which the company would warn suppliers three times of policy violations before ending its relationship with them. Suppliers will receive a 10-page letter from Wal-Mart outlining the changes.

Beginning in March, Wal-Mart suppliers will have to conduct a safety audit on new factories before they can be used. Suppliers who subcontract production without informing Wal-Mart will be terminated. Additionally, the retailing giant will lis ton its website a number of overseas factories that suppliers are forbidden to use.

Labor activists criticized the new rules as insufficient and said Wal-Mart paid its suppliers too little to ensure safe production facilities. Wal-Mart has been facing increasing pressure from labor activists in the U.S. over wages and benefits, including a union-backed effort to stage strikes at its stores on Black Friday last year[4].

Shares of Wal-Mart slipped fractionally in Tuesday morning trading.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2011/06/walmart-store.jpg
  2. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  3. moving to tighten outsourcing restrictions on its suppliers: http://online.wsj.com/article/SB10001424127887323301104578256183164905720.html?mod=WSJ_hp_LEFTWhatsNewsCollection
  4. union-backed effort to stage strikes at its stores on Black Friday last year: http://investorplace.com/2012/11/wal-mart-files-complaint-over-black-friday-strike-threat/

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