Quality and compliance continue to challenge supply chains

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Made-in-China manufacturing quality was stable year-on-year

Ethical and sustainability supply chain issues continue to present challenges, according to the latest view of manufacturing, supply chain quality and compliance trends from compliance service provider AsiaInspection (AI).

An analyis of data based on 250,000 inspections, audits and lab testing performed in 77 countries in 2016 found that the state of structural safety remains “troubling” as 63% of factories audited by AI last year were found in need of remediation. Meanwhile, the number of compliant factories fell from 41% in 2015 to 37%. Critical issues were found in 3% of factories, a slight improvement compared to the previous year.

Ethical compliance also continues to present challenges, the group says, with just one-third of factories it audited in 2016 found to be compliant. While the number of critically non-compliant suppliers fell to 27% in 2016 from 41% in 2015, a large portion of suppliers are still ranked as ‘Amber,’ indicating the need for improvement in the medium and long term.

Among the top concerns in ethical compliance are a range of labour violations, including forced overtime, sexual harassment, child labour, forced labour, and exploitation of refugees.

Environmental compliance was also uneven throughout global supply chains in 2016, with over 36% of these audits failing – a 5% increase from 2015. AI suggests many brands aim for the minimum legal standards applicable in their sourcing country.

Nevertheless, more companies are committing to sustainability objectives in both short and long term, setting objectives for 2020 and beyond.

In terms of product quality, trends point to “worrying results overall,” although the situation varied from country and industry. Among the industries covered by AI data, the textiles sector was the most prone to quality problems, as 41.6% of inspected products came short of specifications.

By country, Made-in-China manufacturing quality did comparatively better, and remained stable year-on-year with 32.4% of all onsite inspections finding more defects than allowed; while Vietnam showed a modest improvement, driving the percentage of failed inspections down to 29.0%, from last year’s 35.1%.

By contrast, South Asia saw quality degrade significantly across the board, with India, Bangladesh, Pakistan, and others seeing double-digit increases in inspection failure rates.

The results come as South Asia continues to grow as a manufacturing powerhouse, especially for the textile industry, with India and Pakistan seeing audits and inspection volumes surge 30.5% and 18.2% respectively in 2016.

The fall in overall in-factory manufacturing quality levels also contrast with promising results on product safety and performance testing in lab. AI lab test failure rates overall have decreased by 11.4% in 2016, with 3.3% of all tests failing.

This means it would appear that while brands and manufacturers have got better at properly designing and conceiving their products to comply with international standards, it is when mass production starts that most quality issues arise.

However, a look past this overall encouraging figure for lab test results shows a more disparate reality. For instance, as demand for REACH-related testing in the EU has skyrocketed this year, test results have not been that good, with failure rates tripling year-on-year. The highest failure rates are found around phthalates testing, with 5.4% tests not meeting safety requirements, indicating potentially harmful products.

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