Supplier audits remain essential

AsiaInspection (AI), a global provider of quality control services for businesses importing from the Pacific Rim, maintains that logistics managers should pay more attention to risk—irrespective of region.

By ·

a global provider of quality control services for businesses importing from the Pacific Rim, maintains that logistics managers should pay more attention to risk—irrespective of region.

The report surfaced just after Apple’s Far East supply chain came under increased pressure due to an incident involving the mishandling of liquid nitrogen at one of its dynamic random-access memory (DRAM) chip suppliers. The event could not have come at a worse time because the production of iPhone handsets was just ramping up.

Mishandling liquid nitrogen can present a number of serious hazards, ranging from suffocation to severe burns from its super-cooled gas. However, it’s just one of many risks that can be mitigated with thorough audits, say AI analysts.

The Hong Kong-based consultancy has just released its “2017 Q3 Barometer,” a quarterly synopsis on outsourced manufacturing and quality control measures, indicating that supply chain transparency is far from adequate nearly everywhere in the Pacific Rim’s emerging markets matrix.

“Major differentiating factors between emerging nations can be the reliability of the infrastructure, safety and political stability, all of which can result in unpredictable delays and factory shut downs,” says , AI’s founder and CEO.

Halfway through 2017, AI’s onsite inspection and supplier audit statistics paint a picture of the ongoing struggle between old-school sourcing giants and their up-and-coming competition.

By contrast, in South Asia—where countries continue to see reduced economic growth in 2017—inspection and audit demand remained more sluggish, with the exception of Pakistan, which achieved 6.6% year-over-year growth this quarter after a rough start last winter.According to AI, China is still keeping ahead of its projected economic growth of 6.5% in 2017, with inspections and audit volumes rising by more than 15% compared to this time last year. Its competitors in Southeast Asia are not far behind. Indeed, inspection demand in Vietnam and Cambodia in the second quarter of 2017 rose by 10.4% and 25.4% respectively, in line with recent projections for the region’s robust economic growth in the medium term.

“From the data our auditors collect on the ground every day over the course of thousands of audits, it’s obvious that significant progress of ethical compliance in global supply chains is still uneven and won’t happen overnight,” observes Breteau. “It’s a long-term game of incremental improvement.”

Breteau adds that regular onsite follow-ups and close supervision are required if real lasting impact on working conditions in factories is the goal.

However, AI data from the second quarter of 2017 shows that manufacturers must remain vigilant regarding ethical compliance across many industries and sourcing destinations.

"Manufacturers must remain vigilant
regarding ethical compliance across many
industries and sourcing destinations."

During the past quarter, up to 32.5% of factories were scored “red” for critical non-compliance (vs. an average of 27% in 2016). The percentage of fully compliant “green” factories dropped several percentage points to 27.5%, while 40% of factories received an “amber” ranking, indicating that they still required improvement.

It’s also interesting to learn that regional disparity of ethical scores was less pronounced this quarter. In China, factories appear to be on a downward trend, as average ethical scores decreased by 3.8% in 2017 year-to-date compared to 2016, to an average of 7.6.

Apple comes out shining in a separate AI study that posits the rhetorical question: Are supply chains truly ready to go beyond audits?

Here, researchers note that Apple uncovered bonded labor in their supply chain during 2016, with subcontractors among the main offenders. First-tier suppliers are also sometimes guilty of labor violations, but Apple reports that virtually all serious violations occur during a first assessment, and repeat violations are very rare. The company paid a total of $2.6 million to over 1,000 supplier employees to cover cases of bonded labor.

Apple’s example shows that even after working toward sustainability for years, brands can still find themselves lacking accurate supply chain information. Despite cutting-edge technologies available to brands today, “boots on the ground” often remains the only way to investigate and map the reality of complex, multi-tiered structures that represent today’s global supply chains.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [ protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.

Article Topics

China · Pacific Rim · Supply Chain Risk · All Topics
Latest Whitepaper
2019 Top 5 Trends of Enterprise Labeling
This year’s sixth annual Top 5 Trends in Enterprise Labeling report outlines significant shifts in labeling that are impacting businesses and global supply chains at an unprecedented level.
Download Today!
From the April 2019 Logistics Management Magazine Issue
This month we roll out the findings of Logistics Management’s 35th Annual Salary Survey, a research project conducted by American Truck Research Group (PRG) that serves as the foundation of our best-read editorial feature of our publishing year. And it’s no surprise that the full study is also the most downloaded PRG report.
Next-Generation Data Capture Emerges
2019 Air Cargo Roundtable: Volumes and pricing gathering speed
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly newsletter!
Latest Webcast
Case Study: Enabling the Autonomous Supply Chain
During this webinar Nucleus Research and One Network will dissect a global company's strategy to leverage a multi-party network to enable the autonomous supply chain.
Register Today!
35th Annual Salary Survey: Compensation matters more than ever
While job satisfaction remains the primary reason for today’s logistics managers to stay with one...
2019 Rate Outlook: Pressure Builds
In 2019, the world economy will enter a third straight year of broad-based growth, but many...

2019 Transportation Management Systems (TMS) Market Update: Keeping pace with the times
The transportation management systems market is growing right along with the number of challenges...
The Logistics News that Shaped 2018
Every year at this time, group news editor Jeff Berman combs through the mountain of news that was...
у нас