Through a special arrangement, presented here for discussion is an excerpt of a current article from The Journal of Trading Partner Practices (JTPP), the official online publication of the Vendor Compliance Federation (VCF), the Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
We are living in an era of 24-hour a day, as-it-is-happening news that comes streaming to us via the internet, TV and radio, where recalls of lead-tainted toy products and salmonella-laced peanut butter receive maximum exposure. Even unproven allegations receive 24/7 coverage, forcing costly recalls of perfectly good product and negative publicity that can sink a manufacturer and its reputation. Combine this with new Consumer Product Safety Commission standards for lead and phthalate content in products and plastics and manufacturers have more reasons to get maniacal about product design, strategic site selection, supplier-risk exposure, managing procurement contracts and implementing supply chain what-if models that prepare them for disruptions.
Manufacturers need to be reaching out to reliable and trustworthy partners in their efforts to develop quality products and a seamless supply chain. After years of sourcing products on its own, Liz Claiborne decided that the risks (and costs) of going it alone were too great and it reversed course and hired Hong Kong-based Li & Fung to handle its sourcing functions. Claiborne's CEO William McComb said, "Managing our large, complex sourcing strategies and teams throughout Asia in a cost effective and brand appropriate manner from the U.S. does not offer the flexibility we need to meet the demands of our consumers efficiently and to deliver to them the best designs with the best price-value and quality."
Given the increased burden on the company to oversee product quality and factory conditions at facilities in China and the increased requirements to know which product materials are being used and where they are coming from, Claiborne decided it was best to retain a trusted partner for the task. It determined that this was the best way to reduce its exposure to risk while retaining product quality.
In a move that underscores this trend, apparel retailer Talbots is also in discussions with Li & Fung about outsourcing its manufacturing functions.
Ultimately, having a risk-mitigation plan in place means having supply chain partners you can collaborate with. Whether it is Claiborne and Li & Fung, or a U.S. importer and Chinese supplier, there is little room for error. Managing your supply chain partners should not be about seeking leverage and advantages, but about seeking solid relationships. Those who succeed will be those who implement collaborative risk-mitigation best practices that ensure product safety and quality and keep them out of the headlines.
Discussion Question: Do you agree that the way news and rumors now speed across the media has increased production risks? Do you believe the best course for manufacturers is to hire third party sourcing companies? Which should consider this approach and which should not?