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Li & Fung Ltd to launch new unit for buyers & factories

images (2)Li & Fung Ltd, the buying agent for retailers including Wal-Mart Stores Inc. and Target Corp., said it is setting up a new unit to provide buyers and factories with consulting services, financing and insurance to bolster compliance with safety codes, according to a WSJ report.

The industry has come under pressure to improve safety at the factories it relies on to cheaply produce apparel in the wake of the fire at the Tazreen Fashion factory in the country, which killed more than 100 workers in 2012, and the collapse of the Rana Plaza building last year, which killed more than 1,100 people.

Li & Fung’s main business leaves it at the center of the controversy. The Hong Kong-based middleman helps Western brands find vendors, negotiate contracts and handle the complex logistics involved with delivering T-shirts and sweaters from factories in places like Bangladesh and China to store shelves in the U.S. and Europe.

Clothing sourced through Li & Fung was found in the charred remains of the Tazreen factory. The company was among the few to pay compensation to families of deceased workers.

“While we already had many compliance and safety programs in place, the events in the last 18 months, particularly as it relates to worker safety, caused us to rethink our role in the global supply chain,” Rick Darling, executive director of government and public affairs at Li & Fung, said in an interview in his New York offices. “We don’t see it as a large portion of our revenue, at least in the foreseeable future, but it answers a need in the marketplace.”

The newly created Vendor Support Services group will report up to William Fung, chairman of the company, which currently works with 15,000 factories in 46 countries. Li & Fung has yet to hire for the group and plans to provide more details of its offerings in March, when it formally announces its business plan for the next three years.

Garment factory disasters in recent years, along with increasing labor and materials costs, have prompted some retailers to move away from such matchmakers and bring more of their sourcing in-house. For instance, Wal-Mart canceled much of a deal with Li & Fung in 2012 to supply goods for its overseas stores in a move to buy more of its products directly from factories. Li & Fung still handles a substantial part of Wal-Mart’s U.S. and Canada business.


Source : Financial Express

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