In his latest article, entitled “Shining a Light on Subcontractors”, WWD correspondent Evan Clark writes about the dangers of unauthorized subcontracting. He highlights how Gap’s problem in India last year brought media attention to an issue that has grown in importance and frequency as today’s global supply chains have grown in complexity.
Clark explains how some brands are responding by enforcing corporate compliance programs, spacing out their orders, or moving towards consolidation among other things. But even these measures are not enough to guarantee safety from unapproved subcontractors.
Here’s what our research team had to say on the subject:
Panjiva Inc., a New York-based firm that helps brands evaluate factories, trolls governmental data for suspicious spikes in production so that companies using its service can follow up. Of the roughly 38,500 suppliers in Panjiva’s database, almost 3 percent, or 1,107 factories, shipped 50 percent more in August, September or October than they had during any previous month. That is a 33 percent increase from a year earlier.
There are legitimate reasons for such a jump in production — new capacity, for instance — but dramatic increases might also be picking up unauthorized subcontracting.
“There are spikes [in production] on a regular basis,” said Josh Green, chief executive officer of Panjiva. “This is a trend that is clearly increasing in terms of frequency.”
Continue reading “Shining a Light on Subcontractors”.
Learn more about our analyses of subcontracting behavior in the apparel industry by contacting our research team at email@example.com.
China has long been a haven for multinationals looking to reduce their manufacturing costs. Thanks to a seemingly endless supply of cheap labor, firms have grown accustomed to outsourcing their most basic business activities there. However according to a joint study released last week by Booz Allen Hamilton and the American Chamber of Commerce (AmCham) Shanghai, if companies truly want to reap the rewards of sourcing from China, they need to get their hands dirty.
Entitled “China Manufacturing Competitiveness 2007-2008”, the study highlights how businesses approaching China as “both a growth market and a market for lower-cost labor and sources” post an average profitability rate two-thirds higher than those assuming a more myopic view. Yet despite the favorable returns, only one out of four companies combine a “strong in-country market growth effort with their manufacturing and sourcing operations.”
Certain unavoidable trends like a changing currency structure, rising labor costs, and an increasingly innovative market economy are sure to pressure foreigners into reassessing the way they invest in China. While some are countering inflation of directly sourced products by finding creative ways to improve internal productivity, others are taking a “simpler” route by expanding their operations to Vietnam and India where lower costs and tax breaks remain prevalent. Still, a sizeable 83 percent of the companies surveyed say they plan to stay in China because of its vast domestic market and solid infrastructure.
Whether MNCs begin embracing the dual approach delineated by this new study only time will tell, but for now these findings have raised an intriguing debate.