Weak links in the supply chain: Risk can never be outsourced

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Small players: they are the weakest link (h/t Supplychainer).

This was the finding of an independent report commissioned by the EU, Evaluating Business and Safety Measures in the Toy Supply Chain, which concluded that China has taken steps to address safety concerns after the recalls of last year, yet small players all round - both among Chinese manufacturers and European importers - tend to be the soft spots in the supply chain. According to the report's independent expert authors, final product testing alone is insufficient to guarantee product safety (which instead has to be embedded in the entire supply chain), and Chinese enforcement authorities should continue to strengthen supervision of the Chinese toy industry, especially focusing on weaker manufacturers. One example of these would presumably be Guangzhou Dongxin Electronics Co., Ltd., which turned out to be the only substandard toy maker in a recent review of the Guangzhou market undertaken by the Guangzhou Municipal Quality Inspection Bureau before International Children's Day. (For children's apparel, however, the review found 30% of clothing to be substandard).

Yet because of these weak links in the supply chain and the substandard products that have menaced consumers, as an indication of how the debate on outsourcing has shifted, serious quality and safety concerns in outsourced products have led consumers and regulators to question whether products using global suppliers are of sufficient quality for end-users. And these intense discussions, as Ben Heineman writes at Forbes.com, have moved outsourcing to the top of the globalization agenda and focused attention on the need for more regulation. And while the role of sourcing countries, such as China, in setting and enforcing standards have likewise been emphasized, for Heineman this should not obscure the fundamental point with regulation, namely
Businesses are responsible for their products and must have sourcing disciplines which ensure their products are free of safety and quality defects...This basic responsibility exists whether the business is sourcing a finished product or components...or whether it sources from one supplier or must rely on second- and third-tier suppliers...
With today's elaborate global supply chains, moreover, the deverticalization of the manufacturing process through off-shoring and outsourcing does not change that ultimate responsibility of companies to take things in their own hands through all stages of the sourcing process,
from solicitation of bids to qualification of suppliers to monitoring, auditing and testing by the ultimate seller of the product before it enters the market. Due diligence...is required to navigate the many shoals of shoddy businesses in the developing world - and to pierce the first-tier supplier, drilling back to the practices of second- and third-tier suppliers.
In global supply chains, therefore, as Bob Ferrari points out at Supply Chain Matters, the only thing that companies cannot outsource is risk.

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» Can you outsource risk? from Jan Husdal

This article, at the China Sourcing Blog, points at what is probably the weakest link in global supply chains: the fact that the more you outsource, the less control you have over your supply chain. If everything goes right, the cost are low, but, if s... Read More

2 Comments

husdal Author Profile Page said:

Thanks for an interesting article. In essence, by outsourcing, you give someone else control over your supply chain. It easy to loose oversight, assuming that everything will be perfect, and that every link in the chain will be bound by the contract you made with your first-tier supplier...you could not be more wrong! The ultimate responsibility always lies with the sourcer, not with the source.

I agree with your comments - at the end of the day, you are ultimately accountable no matter what your supply chain strategy.

I wrote about this previously here:
http://blog.kinaxis.com/2007/10/the-era-of-revitalized-command-is-upon-us/

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