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Do emerging economies understand supply chain visibility?

Posted by Peter Needle

03-Sep-2015 11:00:00

Secondary supply chain visibilityDo emerging economies understand supply chain visibility? can be difficult to achieve, particularly when these suppliers are based on the other side of the world. Ethical, environmental and quality standards can differ wildly from region to region, and manufacturers in emerging economies may have issues in meeting western expectations.

Ethical clothing companies can lead by example

Reputable brands and retailers can collaborate with manufacturers to help improve production standards, and improve ethical practice in their own supply chain and far beyond.

Kevin O’Neill, ethical policy manager at BBC Worldwide, explained to edie.net that his brand must deal with “an expectation from the British public and around the world that we are going to somehow be doing the right thing.”

BBC Worldwide merchandise is produced in accordance with a rigorous ethical compliance policy, and factories must meet certain minimum standards before any orders are placed with them. However, emphasis is placed on collaborating with suppliers and supporting gradual improvements.

“Comply or die is not the way to solve things,” explains O’Neill. Instead, he endorses transparency and working with factories over time to improve ethical practices. Supply chain visibility can improve if manufacturers do not feel under pressure to cover up issues that cannot be fixed immediately.

“Collaboration is the only way to make it work,” he states. “Otherwise it’s just an endless cycle of wash, rinse, repeat.”

Factory auditing is on the rise

AsiaInspection (AI), our auditing partner, recently announced its 2015 Q3 Barometer for the quality control services industry. AI examined the period of July 2014 to June 2015 in comparison with July 2013 to June 2014, and found that inspections are rising across South East Asia at a massive rate.

According to the barometer, inspections in Cambodia grew at an unprecedented 227% year over year, while Vietnam experienced an increase of 172% and Myanmar saw inspections rise by 133%. Indonesia, Thailand and Bangladesh also witnessed a similar trend. Most of the growth in these emerging economies is fuelled by a rise in garment exports, as Western retailers take steps to secure supply chain visibility across their new suppliers.

Over the past 12 months, Vietnam achieved an ethical audit score of 6.7 out of 10, the highest of the big four in Asia ahead of India at 6.6, China at 6.2 and Bangladesh at 6.5. Health and safety issues were consistently found to be the main reason for failure of ethical audits, followed by problems regarding working hours and employee compensation. Despite steps taken in the global garment industry following the Rana Plaza collapse, it’s clear that ethical standards still need to improve.

This problem is made worse by unauthorised subcontracting. This common practice can lead to orders being sourced from unknown and often unaudited suppliers, in order for garment manufacturers to cut costs or relieve pressure created by tight deadlines.

According to research by New York University, there are around 5,000 to 6,000 facilities in Bangladesh producing for the export garment sector. However, the Bangladesh Accord on Fire and Building Safety and Alliance for Bangladesh Worker Safety encompass less than 2,000 of these factories, and as many as 2,000 are entirely unregistered facilities. 

Segura and Asiainspection collaborate on supply chain visibility solution

Factory inspections play a huge role in achieving end to end supply chain visibility. We’ve formed a strategic partnership with AI, enabling Segura users to request audits directly through our software platform. Inspectors can arrive on-site within 48 hours of an order being placed online, and issue a detailed report on the same day.

With this information fed directly into Segura’s platform, we can build a personalised database of approved suppliers, and give supplier visibility to brands who can take control of future sourcing operations. If any orders are fulfilled outside of the approved database, real time alerts can inform the retailer and provide them with an opportunity to address the situation.

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Topics: supply chain transparency