Over the weekend, I came upon a webinar that gives a relatively nice overview of the issues surrounding social compliance audits, particularly in Asia. It was shot by a new company called Mosaic. If I had to summarize it, I'd use these three words: Fear of brands and retailers -- they try to collect evidence of serious due diligence, to "cover their ass" in case their products are found in a factory that burned, that hired kids, or that otherwise did something shocking. The objective is … [Read more...]
Brands and Retailers: Please Stop Doing Social Compliance Audits in Asia
Finbarr Bermingham and Cissy Zhou wrote an interesting article in the South China Morning Post, entitled Bribes, fake factories and forged documents: the buccaneering consultants pervading China’s factory audits. An interesting Linkedin discussion ensued. There is so much evidence of wrongdoing, nobody can deny social compliance audit reports are highly unreliable. As I wrote nearly 10 years ago, Social compliance audits don’t work! Worse yet, they push the factory to work with … [Read more...]
3 Common Ways Factories Try to Cheat Inspectors/Auditors
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...]