Assume you are a newly appointed accountant in a local fashion company -RTXM Clothing Company (RTXM) – based in Melbourne, Australia. This is a private family business with 20 shareholders. Currently, the company has seven different departments, include Accounting and Finance, R&D (product design and development), Sales and Marketing, Human Resources, Information Technology, Distribution and Logistics, and Merchandising, with a total of 130 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company’s profit, and all the other employees receive the fixed salary package. The company pays taxes to Australia Taxation Office (ATO) on a regular basis.
Originally, the business offered only t-shirts and jeans. As the business was trying to join the growing fast fashion industry, it expanded its product lines to include dress, trousers, shorts, hoodies & sweats, socks, shoes, and bags. The objective was to provide a wide selection of product lines in order to reach more fashion conscious consumers. A characteristic of them market is consumers are mainly attracted by low price, and frequent new styles and designs, so the company also seeks to find the suppliers with low prices. The business has retail stores in the major city across Australia and online store. Since the company expanded its product line, managers from different departments found the number of complaints received from customers have tripled. Most complaints are related to the product quality (products are either defective or damaged), items consistently out of stock, online shopping experience (delivery of wrong items and long response time to emails), and in-store experience (lack of attention from sales representatives), and some customers have posted complaints on RTXM social media.
In order to enhance the overall performance, the company is considering using a range of key performance indicators in managing its performance. This is to ensure that the company keeps track of its performance and to achieve the objectives they set for the identified issues.
In addition, the CEO and senior management decide to find new suppliers to improve the product quality, however, they encountered a dilemma. On the one hand, they found a supplier in Bangladesh, Super Cheap who can provide a large range of products to fit in their business expansion plan with a competitive price and all products can be supplied in a short time frame. However, after a careful investigation into this company’s background, they found this supplier has a major issue with labor conditions throughout their supply chains, including the use of child labor, low wages, and health and safety hazards, and long working hours. In terms of the environmental aspect, Super Cheap consumes a few thousand litres of water to produce a cotton t-shirt and over ten-thousand litres to produce a pair of jeans, and wastewater discharge into the local river, and it did not take any action to solve this issue. The polluted water is no longer fit for drinking or laundry, fishes no longer exist in this river, and local residences complain that their homes are flooded by dirty water.
On the other hand, RTXM has another potential supplier, called Green Fashion, who only provides limited product range with a higher price, and products can be supplied in a reasonable time frame. However, Green Fashion takes account of sustainability and makes it as part of their business, and their sustainability agenda has been presented on its website, including fashion designs that is kind to the environment, they also ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met. The CEO and management of RTXM learnt that Green Fashion has very similar values and sustainability agenda. RTXM considers sustainability as part of the business. It is reported on their websites that the company wants to rethink fashion designs so that they are kind to the environment, to ethically source materials and labour, promote work-life balance of the employee in the retail business, and provide incentives to their local and outsourcing partners and their employees if their targets are met.