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How Important Is Quality Control Service for Your Business?

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Quality Control Service Title

A quality control service enables cost-efficient, Asian sourcing with transparency and accountability. If you source from any location that you do not directly oversee, quality control checks and a quality assurance capability are an absolute must.

When your supply chain operates a few thousand miles away, popping into the factory for necessary inspections is rarely a realistic option. But, distance should not lead to a drop in product quality.

Overseas Should Not Mean Oversights

Sourcing from overseas countries introduces a range of new risk factors to an already complex manufacturing process and supply chain. Proper sourcing solutions and active management alleviate these factors to maximize cost-effective quality.

Quality control services act as a filter between each step of your manufacturing process. One common misconception businesses encounter when they seek quality assurance is the idea that such services eliminate all risk.

A quality control service cannot guarantee that nothing will go wrong. Rather, their job is to identify issues early to help determine the best quality solutions. Quality control specialists conduct most final inspections under internationally recognized sampling methodology (AQL). Rather than checking every single piece, inspectors sample shipments for errors.

Strategic sourcing identifies issues early
A professional quality control service can mitigate how costly a mistake becomes.

Why Do You Need Quality Control Services?

At this point, you may find one question running through your mind: If they cannot prevent all possible mistakes, then why bother hiring a quality control service?

Issues will occur and problems will manifest themselves. Quality control services provide the capability to manage these upstream. Once a Quality control specialists identifies an issue, quick implementation of correction action plans ensures that quality products still ship in good time.

When is the worst time to discover a quality problem? Whilst standing in your warehouse staring at the open container. Quality control plays an integral role in preventing such a scenario.

Identifying problems early in the manufacturing process empowers businesses to modify or, if necessary, reject the product upstream (on factory site) to eliminate the additional costs of shipping unsalable goods.

Quality Control Service Bottle Source
Early detection can prevent issues from rippling through production.

When Should You Perform Quality Control Checks?

Depending on your product and history with your supplier, you may choose any combination of the following inspections. Products which carry higher risk factors at certain stages in the process may require more attention.

Hiring a professional quality control service also ensures that audit-level tracking documents record each step of the process.

One of the most important standards is the Acceptable Quality Limit (AQL). The AQL is defined in the ISO 2859-1 as “The quality level that is the worst tolerable.” It is based on a sampling methodology that should identify any quality issues. Over the course of several inspections, AQL testing demonstrates your products’ compliance to industry standards.

1. Raw Materials at the Factory

Low quality materials rarely make high quality products. Raw material receipts secure a baseline for the foundation of your product, particularly when your product must meet government regulations and customer expectations.

If poor raw materials are used, then they will likely impact the appearance, function or chemical composition. This means that for certain product types, if the raw material is not correct, you will not get the product required at the end of the production line. This can be a particular type of yarn in a garment or the type of wood to build furniture. In terms of time and financial risk, raw material inspections can save entire productions from getting reduced to scrap.

It is also a useful check to confirm that lead times any supplier has already committed to are on time.

2. Early Stages of Production

Once goods reach the production line, early product checking inspections can begin. If manufacturers drill holes too wide or cut corners at the wrong angle, early identification is key. This should be based on a risk assessment on the supplier (history, relationship etc) and the type of product manufactured. To an extent, this also focuses on the manufacturing process as well to understand where the potential risks lie.

Like a dress rehearsal, early stage inspections distinguish immediate concerns. Corrections should be adjusted as quickly as possible to maximize the usability of remaining materials.

3. Middle Line Inspections (During Production – “DUPRO”)

Once production is significantly underway, in-line inspections assure that everything still aligns to specifications. Sort inspections may be necessary at this point in the process if inspections identify issues.

4. Pre-Shipment Inspection (PSI)

After production, but before packaging for shipment, inspections of products ensure that you receive products which meet your initial specifications. Typically conducted using AQL, PSI relies on the sampling based on the production volume against the agreed inspection standard. Before incurring the cost of shipping, it is vital to validate your product. PSI represents the last opportunity to accept or reject factory manufacturing before shipping the goods.

How Important Is Quality Control Service
Reduce costs by preventing shipments of unsalable goods.

5. Loading Containers (Loading Inspections – “LI”)

Oversight in packaging specifications can lead to factory-primed goods arriving damaged beyond recovery. Ensuring proper loading of pallets and boxes increases the likelihood of the goods surviving any shipment on the sea. Container seal numbers are commonly provided at this stage to maintain the integrity of the shipment from port to warehouse.

6. Sort Inspections (Any Stage)

If an issue arises at any point in production, sort inspections may come into play. They establish an exact count of which products are affected and which are not.

Sort inspections isolate impacted units and remove them from the process. Only products without the defect move forward.

Which Inspections Does my Business Need?

The best combination of inspections depends on both the supplier and the products’ risk factors. Fragile products, or those which must meet high standards for sale, require more attention throughout their production. Some companies may not offer the inspections best suited to your business’s needs.

Quality control services not only conduct these inspections, but are responsible for compiling data and relaying it to their clients. It is important to discuss how often such information is shared and during which points in production.

Our experienced team at ET2C International is here to service your quality control needs. Transparency and accountability drive us to continually improve our inspection communications capabilities.

Contact us to learn more about how we can minimize wasted resources and stabilize your product quality standard.

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Why Do You Need a Sourcing Agent in Asia?

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Sourcing Agent in Asia Supply Chain

A sourcing agent in Asia leverages your company for greater potential growth and success.

Access to the internet positions the world at your fingertips. Timbuktu endures as a place of legend, but its distant landmarks materialize on your screen in the blink of an eye. Similarly, at the press of a button you can connect with manufacturers on the other side of the world.

It is possible to identify ‘partners’ from the comfort of your own home or office, prompting some companies to buy from suppliers at arm’s length. But they miss out on one of the most valuable services in their supply chain. Qualified sourcing agents in Asia introduce expertise capable of saving time and money along every step of the process. From identifying cost-effective sourcing materials to conducting audit-level quality control checks, professional sourcing agents devote care to managing their clients’ sourcing needs.

Why Source from Asia?

Improved manufacturing capabilities and low labor costs cement Asian sourcing opportunities as some of the most cost-effective in the world. Although China has been the dominant force for the past two decades, other regions such as Vietnam and India are developing a breadth of manufacturing.

Sourcing-Agent-in-Asia-Intersection
Sourcing agents help find the best country and supply chain tailored for your business.

At the government level, both China and India have committed to investing in smart manufacturing. Their efforts are developing a manufacturing base for the future that is driving efficiencies through technology.

China

With the implementation of the Belt and Road Initiative and “Made in China 2025”, China doubled down on commitments to increase transnational supply chains and advancing sustainable manufacturing techniques. One of the pillars of modern outsourcing, China has developed complex supply chains across a vast range of product categories.

Vietnam

Vietnam earns recognition as one of South-East Asia’s fastest growing manufacturing nations. With a lower cost base, it has a comparative advantage in certain categories. A wealth of free-trade agreements reinforce Vietnam as manufacturing hub of the future.

India

With a newly elected pro-business government, India is entering a bright era of skilled manufacturing and production. Best known for expertise in textiles and electronics, the nation is expanding their horizons with Prime Minister Narendra Modi’s “Make in India” campaign. Following the recent election, India is now committed to further investment in technology for the manufacturing sector.

How a Sourcing Agent in Asia Can Help You:

Sourcing agents in Asia can help companies of all sizes source in the region. Scalability and breadth of resource is something that is particularly beneficial. Whether you have just started searching or are looking to enhance your vendor penetration and supplier management capability, sourcing agents present opportunities that a direct sourcing model may struggle to find.

If You Have Never Explored Opportunities in Asia Before

You may feel the risks outweigh the benefits to give it a go without any support. There are certainly suppliers (on platforms like Alibaba) that warrant skepticism and may present pitfalls when it comes to product quality. Sourcing agents, especially those with more years of experience, are some of the finest domestic resources for building your new supply chain.

For companies looking to outsource manufacturing for the first time, entering the market with a sourcing agent in Asia that you trust is equivalent to sitting before a judge with an experienced lawyer as your counsel. They know how the system works and will ensure that your interests are protected whether quality or price.

If You Already Source from Asian Suppliers

A direct sourcing model requires ‘on the ground’ management. In whatever guise, having the ability to develop deep and meaningful relationships will put you in good stead in the future. Just as if your company was manufacturing in your local market, there would be an expectation that you would need to visit and have visibility of any production.

Of course, companies are now able to go direct to suppliers across Asia. It depends on resource and capability in the company doing the sourcing. For example, a sourcing company can help bridge the communication and time difference that companies outside of Asia will face.

There is also an opportunity to leverage breadth of resource and expertise which already exists in-house. When you engage directly with suppliers and manufacturers, you need to manage multiple relationships. With a sourcing agent at the helm, what used to be numerous check-ins, six with suppliers and two with third party quality control, reduces into a single meeting encompassing your entire supply chain.

Sourcing-Agent-in-Asia-Scheduling
A sourcing agent in Asia reduces the time and energy required to manage your supply chain.

If You Encounter Communication Issues or Inconsistent Quality

Vendor accountability can be one of the most frustrating aspects of managing your supply chain. If you don’t have visibility of your production until items are fully “produced,” there is a wide margin for error. Miscommunication and insufficient quality control can ruin entire shipments and waste hard earned cash.

Qualified sourcing agents and companies arrange quality assurance checks along every step of the process to ensure early identification of any issues and present viable solutions. From sourcing from certified suppliers to load monitoring inspections, some agents cover your entire supply chain with transparency. Others may only cover sourcing and require clients to hire their own third party services. Be sure to verify exactly which services your sourcing agent is willing to perform.

If You Plan to Expand or Launch New Products

While your current capability might be sufficient for the time being, you might want to grow in the future. Suppliers may not be capable of taking the next step forward due to their own limitations.

Sourcing agents specialized for your industry are well-equipped to help you expand your business. With a wide range of suppliers, sourcing agents can not only manage potential problems upstream at the factory, but also help you consider the best way forward.

Sourcing agents can also play an integral role in enabling companies to scale their businesses. The allocation of resource combined with local expertise can ensure that a broad supplier base is easily managed.

If your company plans to expand production in their five-year plan, now is the time to connect with a sourcing agent.

 

Supply-chain-solutions
Expanding your production? It may be time to re-evaluate your supply chain for scalability.

How to Choose the Best Sourcing Agent for Your Company

Identifying an agent or company which understands your sourcing strategy and drivers can be a challenge. To learn more about what factors to consider when choosing the best agent for your company’s individual needs, check out our last article here.

We at ET2C International value understand your needs whatever size of the company. We would love to discuss how our team can provide sourcing solutions for your individualized needs. No matter your current sourcing situation, our team can assess your current sourcing strategy and identify potential opportunities. Contact us to learn more about what we can do for you.

 

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5 Key Benchmarks for Your China Sourcing Agent

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5 Key Benchmarks for Your China Sourcing Agent

Evaluating the Effectiveness of Sourcing Agents:

Properly vetting a sourcing agent in China can make or break your supply chain. Identifying a sourcing company with the right connections and a track record for success prevents costly delays and communication pitfalls. While it does cost money to hire a guide, a local perspective minimizes the likelihood of chasing dead ends.

Navigating Supply Chains
Sourcing agents in China operate as navigators for unfamiliar markets.

1. Integrity & Accountability

When it comes to finding the right partner for your company, there is no better option than an organization that has a track record of integrity and accountability. Trust and an ability to develop a long-lasting relationship with a sourcing agent will be integral to the effectiveness of the partnership. This gains particularly importance given the region that you will be operating in.

Whether it is supplier selection or management, product development, quality assurance or price negotiation, you want to be sure that your sourcing is agent is doing the work on the ground that will deliver an upside to your gross margins.

2. Quality Control

One primary concern when sourcing from China is the idea that quality will fall below acceptable parameters. There are factories which will cut corners and deliver products that do not meet expectations. Sourcing from a country halfway around the world creates a wide potential margin of error. Without measured quality-control checks throughout every step of the process, unsatisfactory materials become sub-par products.

While bad business deals do exist, strategic sourcing companies help you to navigate through unreliable sources to find high-quality suppliers and manufacturers. With a sourcing agent in China guiding you to certified suppliers, well-tested with a quality track-record, you can side-step the costly mistake of buying materials you cannot use.

By providing third-party quality control checks at every step of the process, your China sourcing agent should be able to provide an audit-level review of production meeting or exceeding standards. Early correction reduces transportation fees and emissions by preventing unsalable products from ever being shipped.

It is important to make sure that your sourcing company understands the certifications and standards required in the manufacturing of your product to ensure that they are capable of translating your needs to their suppliers and other contacts.

3. Risk Mitigation

No matter how many safeguards you put in place, there is always a risk that things will go wrong. But how wrong depends on the measures you take to prevent small hiccups from swelling into pricey delays. Having a dedicated team of sourcing agents on the ground can be one of the most effective tools for curbing potential error.

China Sourcing Agent warehouse logistics
From correcting a misfiled document to finding a missing shipment, sourcing agents are problem-solvers.

With sourcing agents working in the same time zone as manufacturing, communication with suppliers and manufacturers flows without interruption. At the first sign of unexpected issues, sourcing agents work swiftly to correct anything that needs to be done, from filing amended documentation to mitigating disruptions in the supply chain.

Instead of waking up to an urgent request sent while you were sleeping, you can rest soundly knowing that a qualified team is working to absorb the effects of missteps as they occur.

Business relies on taking not only risks, but well-calculated risks.When evaluating a company’s ability to mitigate risk, it is important to consider what services they offer. Companies with procurement and supply chain management services are more likely to be capable of responding with strategic solutions to issues beyond sourcing alone.

4. Network Strength

The best sourcing companies dedicate years to building up solid relationships with local suppliers and manufacturers, consistently vetting their powerful network of trustworthy partners to ensure that they are certified and capable of fulfilling quality orders.

China Sourcing Agent strategy
With the right supply contacts, your company can maximize its sourcing efficiency.

Relationships take time to develop, but tapping into the carefully cultivated pool of suppliers shortens the distance between both parties. Just as an introduction from a trusted friend can elevate a conversation with someone new beyond small talk, sourcing companies take the tedious scrutiny out of meeting new suppliers.

5. Transparency

Gone are the days in which Sourcing Agents did not disclose the source of the products. Visibility is a must across the supply chain and sourcing agents should be walking you through as much detail as your business needs. For example, Sourcing companies should understand the value of knowing where materials originate, how workers are treated, and frequent updates relating to scheduling. Not only does such information make your supply chain transparent and allow constant supervision, but compiled documentation is easy to track for auditing purposes.

Before employing a sourcing agent in China, it is always a good idea to research which certifications and standards they uphold. Increasingly, from an ethical standpoint, having a granular understanding of where your products are made is essential. You should look for sourcing agents that do not just understand this but also preach this. In such a vast market, there will always be contacts that, in addition to assuring quality, operate in line with your company’s values. You should also get some current client references from similar markets to your own.

Your China Sourcing Agent Should:

  • Have a track record of integrity and accountability
  • Assure Certifiable Quality
  • Deal with Unexpected Issues
  • Work with a breadth of Suppliers
  • Exercise Transparency across Production
  • Understand your sourcing strategy and drivers
  • Identify any issues early and present solutions

Where to Find Your Sourcing Agent

While it is possible to find independent agents through online searches or trade shows, working with a sourcing company should present a competitive advantage. They will provide the ability to scale your production in a low risk environment whilst breaking down the barriers of managing suppliers directly (culture, language, time zone, market knowledge, product knowledge, etc).

As opposed to a multiple contacts across a range of suppliers, sourcing companies should provide a single point of reference that utilizes their own internal resources to provide you with cover for a competitive price. For more information about how to select the best sourcing company for your business, check out our last article here.

Here at ET2C, we understand the importance of these elements because we practice them every day.

We can be your next China sourcing agent, working tirelessly to manage and enhance supply chains, mitigate risks, and drive efficiencies. With more than 2000 supplier contacts across China, Vietnam and India, ET2C is always looking to identify the best partner for your sourcing needs. Whether you would like to know about anything from reviewing sourcing certifications to introducing full-scale Supply Chain Management, contact us for all your strategic sourcing needs.

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How to choose the Best Sourcing Company for Your Business

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How to choose the Best Sourcing Company for your Business

How Do You Find Your Best Sourcing Company?

Now that you’ve decided to explore your supply chain options abroad, hiring the best sourcing company for your business can mitigate costly issues in the supply chain. In a time when customers are demanding ethical, eco-friendly, and long-lasting goods, it is more important than ever to engage in transparent and strategic sourcing.

Unfortunately, even the most environmentally-minded consumer limits how much they are willing to spend on a product. Sourcing in Asia represents an opportunity to fabricate products at reduced prices without sacrificing quality, but hosts a range of latent miscommunications and risks. Thankfully, hiring a sourcing company can save time and diminish liabilities.

Why Should You Hire a Sourcing Company?

Once a company decides to invest capital in any venture, it is worth their while to hire consultants capable of sidestepping costly issues. Just as hiring a lawyer to review a trademark prevents lawsuits, strategic sourcing companies are worth every mistake their clients don’t make. From properly filing documents to exercising local business etiquette, minimizing missteps maximizes profit. Discovering your best sourcing company can also free up your valuable time to focus on other aspects of your business.

How to choose the Best Sourcing Company for your Business logistics
Supply chains are immensely complex and yet, only one aspect of running your company.

Sourcing Country or Countries

This may seem pretty simple, but it’s important to consider the origin of your products based on a complex web of factors. While it may have historically been cheapest to produce your product in China drivers such as local import duties might make other Asian markets more cost competitive overall. Determining the best possible value for your product at your price point requires an understanding of not only local markets, but regional and international markets.

Each sourcing company in Asia retains access to different suppliers and factories. Some are solely market specific and only operate within China or India etc. If you have done adequate due diligence and know exactly which markets best serve your company based on your product mix, a direct to supplier approach may be appropriate. However, if you harbour uncertainties about which country will supply the best value, international sourcing companies provide the opportunity to evaluate several markets at once. This is increasingly important given the current international trading landscape.

Sourcing companies with ties to several countries can also restructure your supply chain should better opportunities in other countries arise. For instance, tariffs imposed on one nation may make another more desirable for lower importation fees, or a country’s government subsidies for products in your industry may reduce costs. International sourcing companies can help reevaluate the supply chain over time to ensure that your business is not over reliant on any one country.

How to choose the Best Sourcing Company for your Business plan
Identifying wasteful points in your supply chain can save both time and money.

What is Strategic Sourcing?

Sourcing is “a strategy in which a business seeks to find the most suitable location for manufacturing a product”. Rapid growth of manufacturing capabilities across Asia and low labour rates drive the region to be one of the most cost-effective for outsourced production.

Sourcing

Before you can determine which is the best sourcing company suited to your needs, you must decide what sort of service you need. Depending on your familiarity with the market, level of desired support, volume of spend, in-house capability and ability to appropriate time and funds, you may want to explore the different options available.

The best sourcing companies spend years developing connections in their regions and when you employ their services, they grant you access to their vast network of certified suppliers and manufacturing contacts; visibility across production should be an integral part of any supply chain given quality requirements. Touching base with a sourcing company before production begins ensures that you acquire an understanding of the realistic capabilities of your manufacturing partners, from reasonable pricing and quality to practical timeframes.

Strategic Sourcing

Procurement is “the acquisition of manufactured goods from an outside external source.”If sourcing alone sounds useful but a little daunting, procurement services take a holistic approach to the process of fabricating of your product. Supply Chain Managers work with you to develop the strategy of how your product will be sourced, assembled, and even shipped. If the thought of messing up the logistics is holding you back, procurement services work with you every step of the way to ensure that the process runs as smoothly as possible.

For companies looking to re-evaluate the efficiency of their existing supply chain or maximize the benefits of a new project, supply chain management relies on personalized sourcing solutions to minimize supply chain disruption, quality defects, and other issues that can quickly escalate.

If you’re not certain which option makes the most sense for your company or you want to understand your options when sourcing from Asia, then consulting with expert sourcing agents can help determine the best path for you to pursue.

ET2C Sourcing Solutions

While a wide range of companies and individual sourcing agents can manage your supply chain, ET2C offers a few unique additional services. We believe in a transparent “boots-on-the-ground” approach for businesses to access their supply chains.

Dedicated Team (“Buying Office”)

Sometimes international companies want a more hands-on approach and our buying office service provides upstream access to their supply chain. Through a dedicated team with the relevant experience, ET2C helps manage the ‘on the ground’ sourcing function in the corresponding Asian market. It is a cost effective way for companies to leverage the benefits of Asian sourcing whilst removing the risks.

Business strategy
“Buying offices” are one of the most hands-on approaches to outsourcing.

Sourcing Teams

ET2C merchandise and quality teams translate expertise across a range of categories that cover China, India and Vietnam. With the option of organized, single-point vendor management entry, companies can reduce time and effort trying to coordinate a series of vendors. A large pool of suppliers and manufacturers drive highly competitive pricing and increased efficiencies. Quality assurance is of utmost importance and ET2C’s partners assure ISO, ETI, and SA800 brand protection compliance.

Whether you’re seeking advice or full-scale Supply Chain Management, contact us at ET2C for all your strategic sourcing needs. We have a dedicated team primed to find sourcing solutions for your company through our network of over 2000 supplier contacts across China, Vietnam and India. Our mission is to deliver long-term sustainable value to our clients’ supply chains that creates cost and quality benefits to their purchase channels from key global sourcing markets, while ensuring the sourcing process is simple, easy, and convenient.

 

 

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Entering New Markets: The Challenges of Social & Ethical Compliance

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social and ethical sourcing compliance

 

Asian sourcing markets are in a state of flux. With the rise of protectionism, currency volatility and emerging manufacturing economies, companies are increasingly looking to pursue diversified sourcing strategies. Whilst the old adage of ‘not putting all your eggs in one basket’ rings true, entering new sourcing jurisdictions is not always easy. Not only must suppliers meet the quality, capacity, price and delivery requirements, but also all relevant compliance requirements. Certain markets present their own unique issues with regards to compliance expectations. Whether cultural, regulatory or standard business practices, having an insight will help mitigate the risk of buying from these countries.

New Sourcing Trends

In recent years, social and ethical compliance has become increasingly important for any purchasing decision, as issues like worker safety, modern-day slavery, fire safety and working hours have gained attention from not only NGO’s and consumers, but both governments and investors alike. ‘Corporate Social Responsibility’ strategies are widespread and ethical audits are not only common place anymore but mandated.

China’s manufacturing base has already been through an extensive compliance transformation, due to the audit requirements that have been in place for many years (backed by the Government recently on environmental practices). Similarly, Vietnam also has years of experience in the compliance arena; even to the point where new technologies are being invested in and the wider story is compelling. For example, one Vietnamese garment factory’s dye treatment plant is so good that they are using it to clean the local communities drinking water. That’s not to say that there is not any non-conformance in these markets, but just that the manufacturing base is well developed and generally understands the requirements to export products.

What about other markets that fall further from the China basket though?

Where is Sourcing Going?

Cost has always been a driver in determining emerging low cost manufacturing markets. Industries that have a reliance on cheap labor, such as garments and textiles in particular, are often the earliest entries into these markets. Many companies are therefore looking towards low-cost countries in Southeast Asia, such as Bangladesh, Cambodia, Indonesia and Myanmar, where there is an abundance of low cost labor, while others are focusing on newer locations in Africa, specifically Ethiopia.

 

cheap labour markets compliance
Industries such as garments and textiles often rely on cheap labour markets.

 

Clearly, Asia as a continent has its own idiosyncratic operational and regulatory business practices that provide an overlay of complexity when working in this part of the world. Corruption, language, cultural differences, developing fiscal and monetary policy are all often referred to. However, when entering new emerging manufacturing markets, which are not as experienced with exporting products, there are often additional challenges as the nascent manufacturing sector emerges. Being aware of such challenges in these alternative sourcing destinations should be an integral part of working with suppliers from these markets.

Bangladesh

Bangladesh’s large population, low minimum wage and high capacity strategically places the country as a great option as an alternative sourcing location. Although it has seen significant growth particularly in the traditional ‘cut and sew’ categories over the past five years, this has only seen an increase of 0.9% in exports of global market share .

Ever since the devastating and tragic collapse of Rana Plaza, workplace safety has been a key focus with the emergence of the internal initiative, the Accord on Building and Fire Safety. The accord has been responsible for the upgrading of just under 2,000 factories including fire door installations, compliant electric wiring and sprinkler systems. The Government is now looking to take over from the Accord even though some media outlets are reporting that they are not in a position to. The concerns around building safety persist with a spate of deadly fires breaking out in recent months. The decision is currently with the High Court as to whether the Accord can extend and continue its work.

 

sourcing compliance in Bangladesh
The Accord on Building and Fire Safety has been responsible for the upgrading of fire door installations, compliant electric wiring and sprinkler systems in Bangladesh.

 

Myanmar

After years of Junta rule, Myanmar does not have developed laws and regulations that support the manufacturing sector. While their fellow Asian counterparts have had exposure to social and ethical compliance requirements, many factories in Myanmar simply lack this knowledge. There have been multiple reports of underage workers and inconstant policies with minimum hiring age. Although child labor is illegal, companies have faced issues with proof of age and tampering with age verification.

The Sourcing Journal reported that many factories have found their employees regularly working more than the permitted weekly limit, usually without correct compensation, as employees do not know how to calculate their wages. Factories tend to lack compensation packages or have ones that conflict with Myanmar law for overtime and paid leave. The factories also lack experience with fire safety and emergency procedures leading to unsafe working environments and proceeds. The country’s limited rule of law and underdeveloped regulatory regime therefore make Myanmar a riskier sourcing destination as it is more susceptible to land disputes, corruption and general social and ethical compliance. There has also been the recent case of the treatment of the Rohingya People and the broader impact on international perception of doing business with this country.

Cambodia

Cambodia, like some other South East Asian countries, has duty exemptions on shipments to the EU. It is part of the ‘Everything but Arms program’ which allows what the bloc calls “vulnerable developing countries” to pay fewer or no duties on all their exports to EU bloc. However, the EU is considering revoking the special trade deal as they say the Cambodian Government had engaged in “serious and systematic violations of core human rights and labor rights”, which is one of the programs stipulations. According to Ecotextile, The American Apparel and Footwear Association (AAFA), Fair Labor Association (FLA) and six other apparel industry organizations have written letters to Prime Minister of Cambodia urging action. These letters highlighted problems linked to criminal charges and convictions of labor leaders, the Trade Union Law of 2016, and the diminished role of the Arbitration Council. Each cited as a factor for hindering progress towards improving workers rights. Beyond these, the country’s manufacturing sector also faces poverty wages, gender inequality and violence, and the potential impact automation may have on the further degradation of workers’ rights.

Ethiopia

Ethiopia offers a lot of opportunity for sourcing companies with low costs and the ability to become a source of raw materials. However, social and ethical compliance has been a significant issue. Like many Asian sourcing locations Ethiopia has many health and safety, workers compensation, and corruption concerns. However, unlike the Asian destinations mentioned, Ethiopia lacks a minimum wage. Companies already invested in Ethiopia have faced issues with land disputes as the Government has assigned land that communities consider to be jointly owned grazing land. This raises concerns of potential land grabs in Ethiopia and other potential social compliance issues. As one would expect, the general understanding of compliance is less widespread and therefore increases the risks to those investing in Ethiopia.

Summary

There is no doubt there is, to a certain extent, a commonality of issues around compliance when operating in Asia. It should also be remembered that there are examples of social and ethical non-conformance in developed markets as well. It is all of our responsibility to ensure that we are engaging with businesses, wherever they are located, that understand social and ethical compliance.

Ultimately, price will always be a driver. And with that, new markets can in certain industries provide cost savings but it is important to remember that there will generally be a higher level of risk in low cost markets. Often companies will look to leverage an established factory (such as Chinese, Taiwanese or Korean) that is relocating or opening a new facility in a new market. In these cases, there is often a presumption of similar compliance practices being transferred to the new site.

At ET2C we are committed to social and ethical compliance. We are constantly monitoring our Asian supplier base and are in the process of setting up our own Code of Conduct at all our vendor sites to reinforce the practices we expect of our partner factories. We continue to stay up to date with new sourcing destinations through our network of partners where we do not have our own offices. For more information, please contact us.

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It’s Not Just a Phase: Why the difference between Greenwashing and Sustainability is Important

Industry Insights / / , , ,

greenwashing and sustainability

 

Hip… tubular… fly… slammin’… At one point, these words were a mark of being one with the times; status symbols displaying social aptitude. However, over the years and through thousands of uses, these worn words are more likely to prompt an eye-roll than a positive response. Today, Could the same be said for the word “sustainable?” How about “green?” Perhaps even “environmentally-friendly?”

If you have ever felt overwhelmed or exhausted walking through any grocery store as labels and signs proudly boast the words “all natural ingredients” accompanied by pictures of bucolic landscapes with welcoming farmers smiling with their products in the foreground, you may be experiencing what is known as Green Fatigue.

Green fatigue, as defined by the website EcoWho, “becoming tired with some of the constant messages of corporate green credentials and tales of impending global doom” (EcoWho, 2018). In today’s world, it’s easy to feel a bit of green fatigue. Nobody likes being told the world may be ending or that the food they’ve been eating all their lives comes from some nightmare-inducing industrial plant. This may cause some to look away from the promises of sustainable practices. The word gets used so often, how is the average consumer supposed to know what it means or if the company is really helping the environment?

difference between greenwashing and sustainability
Pictures like this are common in outlets that support sustainability. But what does it mean?

What Happened to the Word “Sustainable?”

A lot of things happened to the word “sustainable”. While environmental friendliness picked up steam as a widespread social movement in the 1960s counterculture era, words like sustainability didn’t start popping up so much in business rhetoric until the 1970s. In the 70s, various companies capitalized on the fresh environmental policies in the US at the time, such as the National Environmental Policy Act of 1970, the Clean Water Act, and the Endangered Species Act, in order to gain favor in the eyes of the public and government.

 

Sustainability in Politics

However, it wasn’t long till the word sustainable began to become politicized. Politicization of science is nothing new in the United States, so once green policies became popular among democratic politicians, the opposite side of the political spectrum became skeptical about the legitimacy of the evidence used to back up these policies. A report by political scientist, David Karol, states that:

“Endorsements and campaign contributions from environmental groups now overwhelmingly go to Democratic candidates, while economic sectors frequently at odds with environmentalists, including fossil fuel producers and much of agribusiness, increasingly support Republicans. Divisions between Republican and Democratic voters on the environment, while not as great as among political elites, have grown as well” (Karol, 2018).

The result of this growing divide has seen more eye-rolling at the word “Sustainable” by those who fall on the conservative side of American politics. Right-wing news sources are often quick to decry companies promising more sustainable practices or environmentalist policies passed by the government as part of an agenda to weaken other businesses or increase taxes. Hence, these sentiments have radiated out from this community, influencing the minds of many to doubt the credibility of the word “sustainable.”

 

Sustainability Becoming Greenwashing in Marketing

Most people in business are familiar with the term whitewashing, which is used in reference to an entity covering up certain vices by utilizing biased investigation techniques or data. However, not as many are familiar with the term greenwashing, but they definitely have experienced it in one way or another.

So what exactly is this…Greenwashing? Business News Daily defines greenwashing as, “when a company or organization spends more time and money claiming to be “green” through advertising and marketing than actually implementing business practices that minimize environmental impact.” The article continues to mention that this is rarely caused by evil intentions but usually occurs by overexcited marketers who desperately want to sell to the rising number of environmentally conscious consumers (Edwards, 2018). And the numbers provide a good reason for enthusiasm:

environmental impact and sustainability
Shoppers in the US are becoming more environmental conscious. And so are marketers (Walker, 2013).

However, there are also good reasons for nervousness when it comes to buying products that claim to be sustainable, even if one does support the concept. For instance, in 1991, DuPont, a chemical company, used an ad portraying animals rejoicing as the company showed off its new sustainable double-hulled oil tankers. Consumers who viewed the ad had their visions of a green DuPont dashed in front of them when it was discovered that the company was the largest polluter in the US that year.

So does this mean we should give up on companies that promise to be eco-friendly? Not at all. Like in most things, the bad minority of news tends to reach us before the good majority. For the most part, businesses that promise sustainability are making a difference.

 

A cliché, but a Good Cliché

Still, the word sustainable draws a lot of confusion. Are there any requirements for a company to call itself sustainable? What are the motivations to actually become sustainable? Is it all just a bunch of corporate jargon or are there results to back up these claims? These are all valid questions that any consumer doing their due diligence should be asking themselves. Nonetheless, most of these smart shoppers would be happy to report that, for the most part, there are hopeful answers.

Guidelines Exist for Responsible Marketing

For starters, there are many strategies companies can follow when becoming sustainable. One of these procedures was released by the U.S. Federal Trade Commission, which offers voluntary guidelines for green marketing claims including processes like “qualifications and disclosures should be clear, prominent and understandable,” “not [to] overstate, directly or by implication, an environmental attribute or benefit, “ and “to avoid consumer confusion about the comparisons” (Investopedia, 2018).

While these tips are voluntary, following these guidelines is great for risk management when marketing sustainability. Marketing responsibly, a company can avoid lawsuits, community outrage, or a multitude of other problems that could arise from greenwashing.

Interestingly, there is growing evidence that for a company to market ‘sustainability’, it needs to be an integral, innate part of the company’s strategy. It needs to resonate with the organization to the extent that all the stakeholders engage within the initiatives. The modern consumer has to believe that it is a genuinely held and executed mantra within the organization for it to have an impact on the brand/product resonance.

Sustainability Helps Companies Grow

The data-collection company GlobeScan points out that, “continuing the trend of the last few years, most high-ranked companies are consumer-facing brands” This means that more now than ever before, companies really do care what their consumers think about them.

The increased transparency of markets and increased access to information has boosted the practice of sustainable standards. Realizing this is companies such as Unilever, Ikea, and Patagonia, that follow through on their sustainable values which retain and capture audiences through their reputation as global leaders of sustainability (GlobeScan, 2018). This should send a clear message to marketers that the best way of selling the idea of sustainability is through actual implementation. This correlates with GlobeScan’s survey data which displays a majority of marketing experts agreeing that “Integrated sustainability values are the best way for a company to become known as a sustainable leader” (GlobeScan, 2018).

values for sustainability
Data from GlobeScan’s survey shows a majority of experts agree that integrated values are the best way for a company to become a leader in sustainability

Even so, the benefits of sustainability can help companies in more departments than just marketing. An article from McKinsley and Company presents executives of various and diverse industries sharing the benefits sustainable practices have offered to them, such as risk management, systematic management of value chains, and returns on capital through decreasing operational costs through better resource management (Bonini, 2011). So whether companies are trying to market to certain demographics or not, walking the walk for sustainability still offers many benefits for both big and small enterprises. Philip Kotler recently suggested, at Sustainable Brands 2018 – Madrid, that companies that ‘do good’ do better financially, even if there is an initial cost’. It can actually make the company more profitable.

 

Walking the Walk in Sustainability

So, has sustainability become a buzzword? Unfortunately, there is no denying that it has. Politicians and marketers have sucked a lot of the meaning out of the standalone expression. However, this could be for the better. It is displaying to companies that they need to go the extra mile to win over the increasing number of environmentally-conscious consumers.

Consumers are getting more detail-oriented when it comes to buying “green products,” which may come off as a chore for companies to cater towards. Evidence shows otherwise though. For instance, Walmart, number one on the Fortune 500, has saved $12 billion in global supply chain savings in 2011 through a packaging “scorecard” that lowered packaging costs throughout the company’s global supply chain by 5 percent from 2006 levels (Bonini, 2011). Walmart displays what walking the walk in sustainability can do for your company, especially in the way of supply chains.

AT ET2C, we’re serious about sustainability and it’s benefit to our existence as well as the ultimate commercial benefits for purpose driven companies. We are therefore looking into different aspects of sustainability within the supply chain and what it may mean to some of our clients. If you want to talk to us about your own sustainability objectives and how to implement them, contact us.

It’s Not Just a Phase: Why the difference between Greenwashing and Sustainability is Important Read More »

A Local Presence is a MUST for Companies Sourcing from Asia

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local presence is a must for companies sourcing from asia

 

Asia has been an export powerhouse over the past decade. Although the manufacturing base is increasingly fluid across country borders (labour costs, tariffs etc), this will continue for some time yet. In 2017, East Asia exported 5.2 trillion dollars of products to locations like the European Union, the United States, and other East Asian nations like Japan and South Korea.

It remains that sourcing and manufacturing products in Asia can be advantageous and a benefit to your company. However, there are considerable risks of buying from overseas markets; the internet and platforms such as Alibaba have created a massive market (a positive) that can often ‘brush over’ the risks inherent with distance, new cultures, languages and foreign laws and regulations (a negative).

 

Develop relationships

Anybody who has conducted business in Asia will stress the importance of meeting the manufacturer face to face. Companies operating in overseas markets do not always have this luxury. This is where some form of presence is an integral part of benefiting from your Asian supply chain. The ability to develop relationships, monitor production and relay information to the decision makers should not be underplayed.

Depending on product category, volumes, markets and product value, a company has a variety of options to establish a presence. Setting up one’s own office and operation in Asia is at one end of the spectrum. This requires a considerable amount of capital investment and understanding of the local laws and regulations. It is also relatively inflexible and in a fluid market entrenched with global uncertainty there is an argument that now is not the time to be establishing entities in Asia.

 

Work with local partners

Alternatively, one can look to work with local partners, such as sourcing companies and trading houses. Of course, there is a cost to this, but there is also a service being provided where often the communication piece is managed in your local market. With the right partner, it is possible to alleviate the risk, leverage product and operational expertise and provide the visibility that you require to manage your suppliers.

sourcing from Asia
A Buying Office is an Integral Part of Any Business Looking to Source from Asia

Some of the key points to consider when looking at strategic options to have some form of presence in Asia are as follows:

On the Ground

There is no point visiting a factory today, for you to drop down their list of priorities once you have left and are on the plane back home. To develop a relationship that is meaningful, there needs to be some form of constant presence that can be actively engaged with the supplier. We have seen factories in the past change the names on the side of the building for the arrival of their customer!

You need to be able to deal with your key suppliers in their language and in their time zone to ensure clarity and efficiencies (applies particularly for US companies given they are between 11-15 hours behind Asia). It will also help with the development of medium term relationships that are that much more meaningful than arm’s length interactions.

 

Visibility Across Production

If your company was manufacturing products ‘up the road’, you would constantly be visiting the factory to understand how production was going, whether the raw materials were received on time, spot checking in-line quality, and likely doing a final inspection before shipping the goods. It should be no different when buying from Asian suppliers. Having this level of visibility across your production is primarily possible through some form or presence be it an office or a partner in the region.

The ability to identify issues early means that you can put in place solutions. That can be something as simple as the raw material being late and therefore the critical path being extended. Understanding this at the outset means that different parties from logistics, to the ultimate client can be engaged with and expectations managed.

sourcing from asia
Visibility on suppliers at home is usually taken for granted, but visibility from suppliers abroad is just as important.

Risk mitigation

Clearly ensuring that you are getting your products on time and to the requisite quality ultimately enables companies to drive profitable sales. There is nothing worse than receiving goods in your local market that are not compliant and therefore not salable (particularly when you have paid the factory and they are no longer responding to your calls!). Addressing this risk upstream means that there is greater leverage in any discussions required with suppliers given the goods are still on site.

Another part of risk mitigation relates more to establishing an entity in the region and the potential risks that this can come with. Particularly, in China and India, the bureaucracy and regulations and complexity inevitably result in incremental costs building up and time lines being pushed out. These often become a significant distraction to the business when the primary function will be to source and manage the Asian supplier base. Scale of business and expertise will clearly be a factor when establishing your own entity in Asia, but in a lot of instances the costs and other implications can be prohibitive to a business. Just make sure that this is the right solution for you before you move forward.

 

Cost Effective

We are stating the obvious that any option needs to be cost effective. We have seen numerous companies go down a chosen route without a clear understanding of what the final costs will look like and have ended up tripping up down the line as a result. This is applicable whether you a setting up your own office or working with a trading house.

Look at dollar spend on a granular basis rather than get stuck discussing the difference between ‘capex’ and ‘opex’ budgets as a justification for the $100,000 being spent setting up a new office. Understand the full cost implications of establishing an entity before setting it up. For example, there are considerable costs associated with closing a WFOE in China that not many companies are fully aware of at the time of establishing a local buying office. Lastly, leverage solutions that allow a mix of fixed costs versus variable costs (potentially buying some products through sourcing houses).

 

Speed to Market

As the well-known adage says: “Time is money.” When setting up a buying office, a quick set-up is essential to maximizing profitability while minimizing risks in the production process. Given the bureaucracy, establishing an entity in Asia can take longer than anticipated. Build in time to make sure everything is taken into account and you know when the entity is fully operational.

 

Our Solutions

At ET2C, we recognize every client has different needs and we therefore look to tailor our solutions to your individual requirements. Whether it is creating a dedicated team in Shenzhen or working on a sourcing basis, we are here to help you source from Asia in the most cost effective and transparent way. Having operated in Asia for almost 20 years, we understand the complexities of doing business in this part of the world. We know the pitfalls, we know the ‘real’ costs of operating an office in China, Vietnam and India.
Still have more questions or want to learn more about our offerings? Take a look at our website , or contact us at any of our many offices across the world . Our supply-chain professionals are standing by, ready to take your call!

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Running into First: Ethiopia!

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running into first: ethiopia

 

Does the name Abebe Bikila mean anything to you? Unless you’re a running fanatic or Olympics expert, probably not. Abebe was the first African to win the Olympic marathon, which he completed in Rome in 1960. That’s pretty impressive, especially considering that the US and Russia were vigorously training their athletes as a propaganda move, but it gets better. Not only did Abebe win the marathon by running at a 5:10 minute per mile pace (roughly 18.4kph), but he also did it barefoot.

ethiopia marathon
Abebe Bikila Winning the 1960 Olympic Marathon displays the Ethiopian spirit to quickly adapt and overcome.

It’s no surprise that his home country of Ethiopia is the oldest independent state in Africa while also boasting the title of the second fastest growing economy in Africa and the world. This fast growth and political stability have flagged the developing nation as a potential site for international businesses to cultivate their business in this possibly-bountiful economic environment.

The global outsource manufacturing sector is increasingly fluid, particularly with soft goods (the lowest value add manufacturing process) and businesses are always keen to identify the latest low cost manufacturing base. Asia’s demographic, even with India included, is aging.

Labor is still an important component of manufacturing even in an era of automation and technological advances. The only other continent that can compete with Asia on labor is Africa.

One of the countries being looked into includes Ethiopia. While all sub-Saharan nations in Africa seem to be experiencing economic growth at an average rate of 3.2%, with its 10% growth as of 2018, Ethiopia stands out as one of the fastest. Can this fast growth be sustained, however? Or is Ethiopia just booming before its bust? A look into the profile of this ancient and resilient nation displays hope for prospective businesses but is not without its red flags.

 

Ethiopia

One of the characteristics that has caused the most publicity for Ethiopia is the country’s economy. Ethiopia’s exports have all the characteristics of an emerging economy, complete with a dominant agriculture sector with a rapidly growing manufacturing sector. At the time this article was written, Ethiopia exports a total of 3.13 Billion US dollars of products every year, with its main exports being vegetable products like coffee, which constitutes 24% of the total $1.81 billion made from vegetable exports. Manufactured products are still small in comparison, with only 232 million US dollars being coming from this emerging industry. The economy over the past decade has grown at 10% a year making it one of the fastest growing economies in Africa.

Although Ethiopia still ranks as one of the continents poorest countries, it has resource and labor to make it an attractive destination of export manufacturing. With a population of some 100 million people, 70% of whom are under 30, it has a demographic that props up the manufacturing sector, particularly given the unemployment rate is around the 17% mark.

ethiopia manufacturing agriculture
Ethiopia, while developing its manufacturing industries, still relies primarily on agriculture as its main source of exports.

In addition, it has a developing infrastructure, in part thanks to Chinese FDI. Some of the successes in this space include the development of Ethiopia Airlines, upgrading its network of trunk roads, and expanding access to water and sanitation services, all signaling progress for a more connected Ethiopia – the Addis Ababa-Djibouti rail line cut the journey time for taking goods from land locked Ethiopia to the sea from days along roads to 12 hours. However, one of Ethiopia’s largest problems lays in its power access, where, according to a World Bank journal article, a further 8,700 megawatts of power are needed in the next decade, which requires the doubling of the current power capacity (Morella & Foster, 2011).

Nonetheless, Ethiopia is also improving the conditions and sprawl of its road networks, with a US $43m road designing and construction agreement dedicated to infrastructure. Yet, this large investment along with the need to upgrade its power capacity combined with the large trade deficit could see large amounts of debt in Ethiopia’s near future.

 

Industrial Parks

Similar to the special economic zones that transformed Shenzhen into a manufacturing powerhouse decades ago, Ethiopia now has close to 30 industrial parks demarcated as ‘Special Economic Zones’. There are also incentives for foreign companies to open up manufacturing plants within these zones such as duty free exports, 10 year company tax breaks and no tax for foreign workers and duty free exports.

The majority of these companies are Chinese built and managed but are in the main focused on utilizing the local labor pool contrary to many reports of widespread Chinese labor being imported. Their scale is significant; the Huajin International Light Industrial City is a 1.5 million square-meter park that will eventually have a capacity of 100,000 workers and provide the amenities (such as housing, healthcare etc) – a larger population than the average UK town.

It is not only the Chinese that are investing in ‘Made in Ethiopia’. In Hawassa, some 270km south of Addis Ababa, built at a cost of $250 million by the Chinese Civil Engineering Construction Corporation, there are 140 hectares (part of the first phase) with 52 factory sites which house 20 different apparel firms from 11 different countries. Notably, American clothing giant PVH, whose brands include the likes of Tommy Hilfiger and Calvin Klein, and H&M take up some of the available space.

 

A Marathon, not a Sprint

That’s not to say that there are not challenges that Ethiopia needs to address. It will take time and it will not happen overnight. Unlike 90% of International Labor Organization member states, Ethiopia has no minimum wage. Even though $57 per month is the international poverty line, there are workers being paid less than $50 per month even with overtime. This is something that needs to be addressed and foreign firms will be giving particular focus to this as part of their ethical code of conducts, and there has also been a ground swell of discontent among workers on pay with an increasing number of strikes being held.

The productivity is currently estimated to be a third of that in China. This will develop over time and is a sign of the immature nature of the manufacturing sector (whereas China has to continue squeezing out any productivity gains to remain competitive) and the development and continued investment that will be required going forward.

 

Summary

There is a vast demographic dividend on the African continent, and with the Asian average age increasing, the labor pool of the East is beginning to diminish. That is even including countries like India, Bangladesh and Indonesia. Low value add manufacturing is already present within Ethiopian industrial parks, namely footwear and apparel/textiles, and with continued development and investment ‘Made in Ethiopia’ is likely a label that will become increasingly common in Western retail stores. There are challenges, but these are not dissimilar from the Asian manufacturing base some 20 years ago and arguably Western retailers/brands are now better equipped to deal with the management and implementation of ethical standards at overseas manufacturing plants with the visibility now required across their supply chains. It will take time, but Ethiopia is well positioned to be crowned the ‘Winner’ when it comes to mass manufacturing compared with its African neighbors.

Internally, at ET2C, we are making it our business to understand how the Ethiopian manufacturing sector is developing and its current relevance to our clients. We are constantly looking for new opportunities across Asia and beyond to help our clients source from the most suitable suppliers.
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A Brave New World of Materials

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a brave new world of materials

 

Spiders. Simply the name of these eight-legged arthropods may be enough to cause some to stop reading here. Their terrifying fangs, pitch-black eyes, and intricate webs have earned them a spot as a quintessential horror troupe. However, what if instead of putting up fake spider webs to scare trick-or-treaters during Halloween, we wear them instead? That’s right. Bio-engineers at multiple apparel companies, including the popular The North Face, are now using synthetic spider silk in their manufacturing process. But why would anyone in their right mind, let alone engineers at one of the top clothing companies in the world, encourage people to wear what essentially is a bunch of spider webs?

As it turns out, the synthetic spider silk is “light, supple, stretchy, and stronger than steel,” according to an article appearing in Popular Science (Grushkin, 2015). These strengths have justified its use in all sorts of fields, including bulletproof vests, wound dressings, and car materials. The utilization of spider webs is just one example of new and innovative materials that have started to make their way into everyday products such as clothes, building materials food, and more.

Will the next generation of clothes be made of spider webs?

Innovative materials, raw ingredients used in production that deviate from the norm, are now more popular than ever. The Industrial Technologies division of the European Commission’s Research and Innovation branch estimates that 70% of all new product innovation is based on materials with new or improved properties (Sheppard, 2012).

But why are companies so eager to adopt these unfamiliar materials? As a matter of fact, there are many explanations as to why companies utilize these innovative materials. For starters, the use of most innovative materials often decreases energy-related costs, which is a prime concern for many manufacturers. Subsequently, there are also many tax incentives for pursuing these more sustainable production methods, on both and state levels in the US and through local governments in other regions (Lagas, 2015).

The macroeconomic benefits of using these materials offer an explanation as to why governments are encouraging these new practices. According to the American Chemical Association, advanced and innovative materials can “support more efficient and sustainable manufacturing practices… reduce dependence on imported oil… lower the burden of CO2 management and improve energy supply security, sustainability, and competitiveness” (American Chemical Society, 2015). These are just some of the many reasons for companies to jump into the new world of innovative materials.

 

How Companies are Using Innovative Materials

Innovative materials offer a vast variety of benefits, but what exactly are companies doing to integrate these exciting new materials into their supply chains? What new products are being developed with the newfangled materials? The answer is broad and covers a vast ranges of industries and sectors. Here are some more exciting examples of these new materials in action.

Ministry of Supply
Most people are familiar with the range of products for running. However, you may be surprised to hear of someone running a half-marathon in an hour and seventeen minutes wearing a full suit. Josh Whitehead did exactly that while wearing one of the Ministry of Supply’s three-piece Aviator II suits.
While still an impressive feat, the material of the suit may have provided some assistance to Whitehead. The suit is made from warp-knitted breathable poly, which allows the suit to be “breathable, waterproof, moisture wicking, and odor controlling.” In the words of the CEO of the Ministry of Supply, “This suit isn’t designed for running in, but the fact that it can be done is great” (Ducharme, 2016).

Adidas X Parley
There is a lot of plastic in the sea. Unfortunately, the amount keeps rising by an estimated eight million metric tons every year. By 2050, it is estimated that there will be more plastic in the ocean than fish, giving a sense of urgency to this problem (EarthDay Network, 2018). However, this has also caused some companies, like Adidas, to realize an opportunity for incorporating new resources into their supply chain while also doing their part to protect our oceans.

Adidas and Parley have partnered up to manufacture shoes out of sea plastic. Parley, an ocean conservation movement, collects plastic from beaches to send to Adidas to be manufactured into stylish and well-fitting shoes. Not only is Adidas able to save money by having their raw materials donated by Parley, but they’re also able to use the material of the shoes to target the rising segment population of environmentally-concerned customers. Adidas have also recently committed to using only recycled polyester in all of its shoes and clothing with the next six years to increase the sustainability of its supply chain.

Maybe this polluted beach is the resource of your new shoes!

Other Examples of Innovative Materials
While these two examples of companies using innovative materials are inspiring, it is also important to keep in mind the vast number of advanced materials making their way into supply chains are doing so a bit more silently. Even though these materials are not as publicized, they still have a huge impact on the companies that utilize them and the customers who buy the products.

Ultra-Strength Concrete
From 2012 to 2015, China used more cement than the US has in the entire 20th century (Swanson, 2015). This rapid growth has led to concerns about the oftentimes inversely-correlated relationship between quality and quantity, leading to many construction entities looking for alternative materials. Enter the new Ultra-strength concrete. This new kind of concrete changes the contents of cement using mathematical modeling procedures, allowing for a 40% reduction in the density of the water film and a more durable and sustainable form of concrete.

Neptune Balls
Neptune Balls, or Sea Balls, are made of the foliage of a sea-grass species called Posidonia Oceanica. The waste of these plants tends to roll up into small, sphere-shaped objects, oftentimes washing up on shores across the world. The material, however, has been recognized by some manufacturers as an innovative and renewable resource for textiles. It can also be used in its raw form as an insulating material with natural fire prevention properties. The Neptune Balls are a bit of a miracle product of nature as well, since they do not rot, contain no salts or proteins, and are not harmful in any way to humans.

Fungus-Based Materials
While most people are at least familiar with fungus on an appearance level, the study of Mycology (the study of fungi) is still being pioneered in many regards. Because Mycology is relatively immature, new discoveries about the uses of these strange organisms are being made every day. One of these new uses is to produce hard foams naturally through the same processes the thread-shaped mycelium of fungi use to colonize wood, soil and other materials found nature. Essentially, the fungi create a system of very small threads that bind to various organic waste materials. These threads could be used as a reinforcing material in both construction and textile production, providing a cost-effective and natural way to develop products (Sheppard, 2012).

new materials
Mycelium of a Common Fungi Species on Wood

Integrating Innovative Materials into Supply Chains

Even while innovative materials are extremely beneficial for both the planet and the manufacturer, they don’t simply appear out of thin air. There are processes that companies undertake in order to enter into the brave new world of innovative materials.

Some of these processes include employing “green” or sustainable initiatives to keep the company on the cutting edge of technology while also showing respect for Mother Nature. Some common processes companies adopt include upgrading facilities to rid of energy-wasting processes of production, streamlining their supply chains and employee networks, and hiring “green” professionals, such as environmental economists and engineers, to help them eliminate some of the externalities that had to their total cost (Ryan, 2018).

new materials aid innovation
Massive Supply chains come with massive costs, causing many companies to look into how innovation can help them save valuable resources.

These initiatives led to a global movement of sustainable sourcing. One of the massive corporations participating in this movement is Unilever. Unilever states that its sustainable sourcing techniques have allowed them to “secure our supplies and reduce risk and volatility in our raw material supply chains,” while also “open[ing] up opportunities for innovation” (Unilever, 2018).

Companies are not always making the leap alone. Some NGOs, like the WWF, are helping companies trace products along the supply and distribution networks, measuring the impacts along the way. The information the WWF provides allows for companies to realize areas in their products that may be creating unnecessary expenses, allowing for them to explore potentially groundbreaking solutions.

In the words of the founder of Magnifeco, an online source that covers eco-fashion, “Buying isn’t the problem. Making isn’t the problem. Innovation is our way out [of wasting materials].” Eco-friendly and innovative materials not only adds value to a product but oftentimes it also saves the company from wasting valuable resources in the production process. As more and more of these new materials are incorporated into supply chains across industries around the world, industry and trade can become an asset to environmental protection efforts rather than a detriment.

 

Summary

Companies are opening up to using innovative materials in different ways. They bring a new range of characteristics and applications that will only go on to enhance the product experience. Whether it is textiles with enhanced properties, or materials that aid sustainability or the re-thinking of building materials like concrete, which the Romans had invented some 2,000 years ago, these are all good developments. Humans continue to evolve and with that evolution comes advances in the materials we use. Sometimes though, it is no bad thing to look at some of what Mother Nature has created and to take note, even if it may be hard for those arachnophobes.

At ET2C, we are dedicated to making a difference and understanding the development and commerciality of new materials is key to this. We have already utilized blended fibres (bamboo and Milk) in some of our babywear ranges and recycled plastic on sneakers (part of a sustainability drive). There is a lot of new materials being developed from resins, polymers, activated carbon, the use of recycled materials through to textiles. Our focus is understanding these attributes and, importantly, the application in mass production ensuring that there is the required level of commerciality. Sustainability also forms part of this piece of work, and utilizing materials in a way that can aide this initiative can only have a positive impact.
If you have any questions on any of the above, or ideas, please do not hesitate to contact us.

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6 Common Misconceptions of Buying from Asian Suppliers

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asia

Asia, led by China over the past two decades, has long been one of the greatest centers for trade. From the ancient days of the Silk Road to the modern mega-cities of Guangdong, Shanghai , Delhi, Ho Chi Minh City, Bangalore, Hong Kong, Dhaka to name a few throughout many points in its history, stood out as a home of commerce. However, this does not mean that one should just wade into Asia’s manufacturing sector. The region covers two thirds of the world’s population mixed together with a variety of cultures, languages and political mindsets. The region is a dynamic hub but there is complexity at every turn and understanding what these are at a granular level and how they may impact your supply chain is key to unlocking the vast opportunity that this part of the world presents.

Fortunately, many of these issues can be addressed with some local experience on the ground. The internet revolution has added an enormous upside to how business can be conducted and reduced global expanses to the press of a button at a computer in someone’s home. But with that, people and businesses have assumed that just as it is easy to find a supplier, it is easy to manage the supplier remotely. As a starting point, it is worthwhile to first dispel some of the myths that exist on doing business in this part of the world.

 

Myth 1: I Can Manage Everything from Overseas

If you were buying from a manufacturer down the road from your home, and were committing considerable working capital in purchasing products or investing in tooling, there is little doubt that you would make sure you had visibility of what was going on at the plant, likely frequenting the site at numerous points during the production. The same should be the case with Asian manufacturers, but too often we see companies managing at arm’s length; different time zones, different language, different culture – what could possibly go wrong?

There is little doubt that any dollar committed to the purchase of the manufacture of products should be carefully managed and looked after. Having some kind of local oversight is vital to making this happen. It allows issues to be identified and addressed when they should be. All because the internet suggests that the factory is a good one, does not mean that your production will necessarily be what you need it to be.

 

Myth 2: Suppliers are Easy to Find

There is no doubt that sites like Alibaba make connecting with suppliers easier (and that is a good thing!). But that does not mean that these factories are necessarily the best suited to manufacture your products, such as manufacturing capability, market experience, access to certain raw materials, ability to export, size of the business, financial health, location, IP to name just a few.

The key point is developing a sustainable partnership in the truest sense of the word. Selecting the right supplier means, particularly in Asia, having face to face meetings, seeing the site and understand why this company and location is best suited to your needs. We would suggest that going one step further as part of the due diligence process and taking an ‘under-the-hood’ approach can identify any potential issues beyond simply the manufacturing aspect.

 

Myth 3: Quality and Consistency Will Remain Constant

 

Engaging with a supplier is the most effective way of handling any quality issues.

Never underestimate the importance of quality assurance and control as an integral part of a production process. Identifying the risks of a production within a critical path should be discussed internally and with the factory from a product perspective and then a quality program implemented to address any of these.

We find that engaging in this arena with the supplier (again at a local level) is the most productive way of managing quality. It should be a continuous improvement process and to the extent that the quality piece is adopted by the factory and all the staff, you essentially have multiple QC inspectors throughout the complete manufacturing process. Again, it should be a partnership.

 

Myth 4: I can Always Count on My Goods to arrive in a Timely Manner

 

Addressing errors in an early stage can help creating timely deliveries.

Any production will always have issues and being able to address these in a timely manner is what is key to hitting delivery deadlines. A key component of this comes down to the supplier relationship – albeit the different Asian cultures will also present unique challenges – and the communication channels. We always say a problem is not a problem if it is identified early and can be addressed even if it is the acknowledgement that there is a likely delay to a production because of something unforeseen at least knowing 4 weeks in advance, it is possible to look for solutions on the freight forwarding side or perhaps even update clients, who may be able to look at different delivery windows, just as an example.

It should be recognized though that Asia, and China in particular, have become very good at delivering against the impossible where required. That said, if you do get a cascade of ‘’Mei WenTi”s in response to a complex product matter or a particularly tight deadline, we would urge you to dig a little deeper!
China is leading the world on trade, but its macro-environment is extremely complex which makes it difficult to navigate alone.

 

Myth 5: I Can Set Up an Asian Office

A local presence is certainly a step in the right direction where there is scale and an internal capability at company level to manage this. There are a variety of locations around Asia that are well suited depending on your supplier hubs and specific regions that both suit your local market and your product manufacture.

Just be aware that this does come at a considerable cost and there will be an investment required that may be difficult to actually recover. Often professional services firms will give a simple overview of the ease of establishing an entity in Asia (we have seen this many times) but the reality is markedly different. We know this because we operate across multiple Asian markets.

There is a complexity every which way you turn from simple points around different language to the legal status of legal representatives (personally) through to transfer pricing and the management of Fapiaos (Chinese invoices). The point is that from a Sourcing perspective, should a company be investing capital in setting up an entity based on scale and also the current fluidity present in the Asian manufacturing base. There are lots of other options that may be more cost effective and reduce the level of risk that a company takes on. Do not get distracted from the main event; the management of your Supply Chain.

Is setting up a buying office the most effective tool for you?

Myth 6: I can Buy from Asia at Arm’s Length

There has never been a time where partnership has been more important. It truly is the single most important aspect of sourcing from Asia, in our opinion, in this current climate. The ability to have a company that truly partners and buys in to your plans, understands your needs and actually invests in their own facility to be able to deliver is essential.

As partners, the factories or suppliers need to be treated fairly. There is simply no point in continually knocking down prices year on year, as we have seen and experienced before. That’s not to say that one should not be commercial, but it is around paying them fairly, committing over a period of time and giving visibility of what they should expect. In this relationship, the supplier will have clear sight of what they need to do, perhaps what capability they need to develop and have the funds to do so. Where a supplier is struggling to make ends meet, then this will increase the risk of quality issues arising through sub-contracting or cheaper raw  materials, or a lack of interest in dealing with the orders or not following through on the Sustainability Code of Conduct that you agreed and implemented earlier in the year.

Ultimately, paying a little bit more now, will go a long way over the medium term.

 

Summary

There is nothing complex about any of the above points. It is just necessary to take a view about how best to manage at a local level your suppliers. There are a range of options available and picking the right one will be the difference between a good year or a bad one. There is always going to be risk when you are purchasing from foreign suppliers. Think about how best to manage this.

asia sourcing
Purchasing from foreign suppliers can be complicated. To get the most out of the Asian manufacturing base, ask us for any procurement or sourcing insights.

The key points are visibility of production and developing those partnerships either directly or via third party service providers.
We, at ET2C, are well placed to have discussions with you about your current supply chain across Asia (offices in China, Vietnam, Hong Kong and India currently) and whether we are best suited to help you. Give us a call or drop us an email.

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