For many retail brands, it’s impossible to tell exactly where their products have come from. Most will know who their primary supplier is, and are likely to have audited this factory and imposed ethical and quality standards. However, it can be very difficult to achieve secondary supply chain visibility - and the further down in the tiers you get, the harder it becomes.
Now, companies all over the world are becoming increasingly aware of supply chain risk, and the impact that it can have on their brand reputation and even on their legal status. We’ve taken a closer look at the biggest sources of supply chain risk today, and considered what effects they can have on a retail business.
WHERE ARE THE BIGGEST SUPPLY CHAIN RISKS?
The latest Risk Index Report by the British Standards Institution (BSI) identified China, India, Vietnam, Bangladesh and Myanmar as the five countries currently posing the highest risk of human rights violations.
As labour costs in China continue to rise, many companies have started looking to other countries in South East Asia for affordable sourcing opportunities. However, emerging economies such as Bangladesh and Myanmar bring their own supply chain risks in the form of low ethical standards.
The five highest risk countries as identified by the BSI account for 53% of global apparel exports. It’s therefore clear that garment retailers are particularly under threat - but with over half of all clothing exports in the world originating from these countries, how can real change be implemented?
CHILD LABOUR STILL POSES A RISK
The BSI warned that efforts by Asian governments to boost their national economies may lead to a greater prevalence of child labour abuses.
Child labour is illegal in most countries, yet around 260 million children are in employment around the world according to the International Labour Organisation (ILO), 170 million of whom are engaged in child labour. ILO estimates that child labour declined by 30% between 2000 and 2012, but still affects 11% of all children today.
Child labour can be present at any stage of the garment supply chain, from the production of raw materials to manufacturing. Children are unlikely to protest against suffering or fight for better working conditions, and complex sourcing patterns can mean that their existence can often slip under the radar.
COMPANIES FACE BIG EXPECTATIONS
Many UK businesses are currently focusing on supply chain visibility, as a direct result of clauses in the Modern Slavery Act. Large companies are now required to report publicly on their efforts to address modern slavery within its supply chains.
“As supply chains increasingly span continents and become more complex, it is paramount that organisations understand the true reality of what is happening right across their supply chains, not just in high risk areas such as Vietnam but all across South East Asia and beyond,” says Courtney Foster, EMEA supply chain solutions manager at BSI Group.
As a result of the Modern Slavery Act, large UK companies could face legal repercussions in the near future. On top of this, ethical disasters can destroy a brand’s reputation and consumer following. Millennials, the latest generation of shoppers, are increasingly concerned about their ethical and environmental impact, and this extends to the products they buy.
“Consumers do not accept ignorance as an excuse in today’s age,” states Foster. “Brands need to find ways of obtaining supply chain intelligence in areas such as ethical, environmental and human rights by using industry designed pre-qualification frameworks and information tools.”
Segura makes it possible for companies to achieve end to end supply chain visibility. Our online platform enables all secondary sourcing activities to be managed and monitored at the click of a button. Manufacturers can self-register on our platform, effortlessly creating a personalised supply chain visibility solution for your use.
Originally Published 17/09/2015