Suppliers pass on costs of unauthorised absences

Will Green is news editor of Supply Management
10 January 2014

Suppliers are passing on costs of more than £40,000 per 100 workers to retail buyers due to unauthorised staff absences, according to a study.

Responsible Trade Worldwide (RTW), in Achieving Supply Chain Transparency: From Compliance to Engagement, said high levels of absence indicated poor working conditions and meant suppliers were on average passing on costs of £42,000 for every 100 workers in the form of higher prices.

The study covered more than 1,700 workers in global retail supply chains making products such as food and clothing. It found on average 5.6 days are lost for each worker every year for reasons beyond sickness, holiday and maternity leave, equating to a total of 9,520 lost days across all the respondents.

RTW said high absence levels were a “red flag” and indicated “poor working conditions, low worker satisfaction, lack of job security, insufficient training and low pay”.

The study also revealed a labour turnover rate of 34 per cent, which “could also create additional risk in the supply chain”.

Rebecca Taylor, business development manager at RTW, said: “Our research shows that it is critical that retailers know about operational standards from the perspective of workers across the supply chain and this requires a shift from a compliance-based approach to one which embraces greater engagement with suppliers and workers.

“Retailers need to get to grips with working hours, wages, company culture, environmental policies and community engagement activities of their trading partners. This will provide a more complete view of a supplier and in turn will highlight areas of risk, and inform the business case for change.

“Not only is unauthorised absence generating a direct cost in the supply chain, which is passed upstream, it does not take into account the cost of potentially irretrievable damage to a company’s brand reputation if it significantly heightens risks in the supply chain.”

RTW said globally there were 200 million child labourers, 21 million people trapped in modern slavery and 3 billion workers surviving on less than £1.50 a day.

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