Every day in China, in Vietnam, in Bangladesh, and in India, thousands of inspectors and auditors take a bus or a car to a factory. And, in some of those factories, managers are plotting how to cheat those unwelcome visitors. Let's look at 3 very common ways this is done, so you are warned and ready to avoid unscrupulous suppliers like this... … [Read more...]
Global Supply Chains: Transparency Drives Compliance Risks Down
The French Chamber of Commerce organizes the Made In Asia conference every year. I missed last year's edition, but I attended this year. The theme was transparency in sourcing. Here are my notes. What drives transparency in the supply chains? A speaker from Puma pointed to these 4 major forces: Consumer safety regulations such as REACH. Bad press, or the risk of bad press -- show the reality to avoid wrong accusations or over-generalizations Social media -- a different beast from … [Read more...]
How To Comply with Standards that are Impossible To Reach?
Importers are often stuck between a rock and a hard place. They are asked by customers or by regulators to comply with very tough (and sometimes unrealistic) standards, and at the same time they need to ensure business continuity -- keep selling similar products and make a margin. This is quite common when a retailer sets very tough standards for social compliance. For example, Walmart writes that they will terminate any business relationship if they find out production was subcontracted to … [Read more...]
Minimizing and Identifying Frauds and Corruption in a Factory
I took part in an interesting event organized by the European Chamber of Commerce in China, with the participation of 3 members of EY's Fraud Investigation & Dispute Services department. Are you worried about shady practices taking place inside your company, or in some of your suppliers' factories? This article is for you. Here are common ways fraudsters can get money out of a manufacturing operation: In the factory construction phase: using grade B concrete instead of grade A … [Read more...]
Environmental Concerns in China Are Reaching a High Point
A friend working in Beijing wrote this a few days ago: With less than 1 meter visibility, my dog was disappearing from the haze when I took it for a walk. It seems like I was only holding the leash in the air. Now I stay indoor all day long. Last month, the government issued a prevention and control guideline about reducing haze in the community; they suggest avoiding pan-frying or deep-frying during serious haze pollution. Does it really help?? It is a severe public health issue. Berkeley … [Read more...]
The Risk Assessment Approach in China Manufacturing
In a previous article (The Horrendous Safety Record of China’s Manufacturing Sector), I noted that safety-related audits were not really effective. A more effective approach is to work with the manufacturers on a risk assessment approach. I thought it would be nice to show an example related to a common operation, arc welding. A risk assessment form might look like this: (For those familiar with FMEA analyses, you will notice there are many parallels here.) To understand this … [Read more...]
The Horrendous Safety Record of China’s Manufacturing Sector
According to the National Bureau of Statistic of China, the death toll from work accidents amounted to 66,182 people in 2015. That's over 10 times the number in the US and the UK combined. In fact I would bet the number is much higher. I heard of many 'accidents' or suicides that happened in a factory setting and were not reported to the authorities. The boss often gives money to the family as a "compensation". But why are there so many accidents? I like James Palmer's take on this in his … [Read more...]
6 Steps and 1 Key To Reduce Subcontracting Risks in China
I wrote before that the vast majority of Chinese manufacturers find it natural to subcontract certain orders. There are two main problems with this: It seems like a disproportionate number of quality issues occur on batches on which a key process was subcontracted. Walmart and other retailers are driving transparency and are ready to cut a supplier out if production is found in a non-approved factory. You can expect this trend for openness to gain in momentum in the coming years. This is … [Read more...]
Why the Kunshan Zhongrong Blast is Only the Tip of the Iceberg
A severe accident took place last weekend in Kunshan (very close to Shanghai). Many good articles have covered it and exposed the facts. It was apparently triggered by poor ventilation that allowed dusk to accumulate and cause an explosion. Over the past few years, very little attention has been given to the topic of worker safety in Chinese factories. The focus of buyers and journalists has been on the following elements: Child labor (which is a rare occurrence, like in most communist … [Read more...]
The Value of Worker Interviews during Social Compliance Audits
Worker interviews is a typical part of social compliance audits. This is something auditors arrange in a closed room, one on one. They ask about the pay, the working time, the working conditions, the accidents, and so on. It gives them another perspective, in addition to management's claims. There are obvious limits to this method, though. Typically, all workers are briefed by their management before an auditor arrives. In some cases, they are promised a bonus and they are told they need … [Read more...]