The Year of Social Accountability in the Supply Chain?

Hong KongJan. 14, 2014AsiaInspection, a provider of quality control services for businesses importing from Asia, Africa, southern Europe and Latin America, announced its 2013 Q4 Barometer, offering a year in review of outsourced manufacturing and the quality control services industry.

Asia Manufacturing, Life After Rana Plaza

2013 was a challenging year for brands and retailers worldwide in the face of increasing supply chain social issues, most notably the Rana Plaza tragedy in May in which a factory collapse in Bangladesh took the lives of 1,129 people.

Strikes and riots erupted throughout the year in factories across India, Bangladesh, Cambodia and Myanmar with workers demanding higher wages. In Bangladesh, the minimum wage is half that of China; Cambodia is currently $80 per month, increasing to $95 in April 2014.

Child labor[1] was put back in the spotlight when a report was published by the U.S. Department of Labor in October 2013, reporting 78 million children are engaged in child labor in the Asia and Pacific region[2].

Figures from AsiaInspection reflect brands and retailers are taking action, showing a 61 percent increase in audits in Asia for 2013 compared with 2012. While Bangladesh was in the spotlight, buyers took to securing their supply chain in all sourcing regions, with audits in Bangladesh up 47 percent year over year, China up 58 percent and India up 112 percent.

As a result of the tragic incidents in Bangladesh and its predominant apparel-manufacturing sector, news emerged of buyers starting to look for alternatives in the region. AsiaInspection-ordered inspection figures support this. While inspections in Bangladesh, the largest exporter for apparel in volume after China, were up 36 percent year over year, India exceeded this with 44 percent inspection growth, Vietnam by 71 percent and Cambodia by 114 percent.

With Christmas Behind Us, Are Chinese Toys Finally Safe?

China continues to dominate toy manufacturing with more than 80 percent of all toys sold in western countries being made in China. With another Christmas season behind us, which is when up to 70 percent of all toy sales occur, consumer safety was on the agenda last quarter.

In November, 200,000 dolls made in China were seized at U.S. ports for containing high levels of phthalates (a banned chemical used in plastic). The same happened this December in France with 30,000 non-compliant Chinese toys destroyed by customs. Concurrently, a U.S. Public Interest Research Group analyzed 50 toys and found lead 29 times the safety limit, banned phthalates, excessive levels of cadmium and choking risks.

AsiaInspection data on the toys and recreational industry shows a worrying trend with the number of failed toy inspections in Asia rising from 27 percent in 2012 to 33 percent in 2013. While most failed inspections were for minor, non-life threatening issues, more than 4 percent of toy testing by AsiaInspection did not pass safety standards.

Sourcing Power: China vs. the Rest of the World

Despite fears that China’s competitiveness would be eroded by the appreciation of the renminbi (RMB) and wage inflation, China’s exports continue to set new highs. November was up 12.7 percent compared with a year earlier and for the period of January to November 2013 showed a 9.3 percent increase compared to 2012. This puts China on track to report the largest annual trade surplus since 2008.

AsiaInspection’s inspection figures mirror this with a 17 percent increase in ordered inspections in China in 2013 compared with 2012. In 2013, China remained by far the largest sourcing region used by AsiaInspection clients. To put it in perspective, Bangladesh exports amounted to a mere 1 percent to that of China.

In terms of percentage growth, 2013 confirmed the trend for new sourcing regions with Africa seeing a 47 percent increase in the second half of the year. Vietnam was up by 71 percent and Cambodia doubled despite protests over wage concerns.

What to Expect in 2014 Global Sourcing

2013 was the year when supply chain management, or rather the lack thereof, made headlines and became a concern not only for sourcing professionals, but for consumers as well. The Rana Plaza tragedy, the horsemeat scandal in Europe and repeated food safety horror stories in China raised awareness globally on the need for stricter end-to-end supply chain management.

According to Sebastien Breteau, CEO of AsiaInspection, “Major names like H&M, Apple and HP have published the list for all or part of all their approved suppliers. We will see more of such initiatives with major brands taking back full control and enforcing visibility over their suppliers. Expect 2014 to be the year transparency becomes a reality in global supply chains.”


[1] The study defined children as 17 years of age or younger. 

[2] U.S. Department of Labor Bureau. Findings on the Worst Forms of Child Labor. January 6th, 2013.
http://www.dol.gov/ilab/reports/child-labor/findings/ 

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