the face of the hyper publicized incidents
involving the recall of millions of toys
by Mattel for safety issues, William E.
Mitchell, chairman, president and chief
executive officer of Arrow Electronics,
offered 10 guidelines last week on how to
reduce product quality and related risks
in an offshore supply chain.
SC Digest Says:
do this right will involve greater costs,
reducing the relative price advantage
of offshore strategies to a degree,
and certainly requiring companies to
build a substantial infrastructure to
develop and maintain these monitoring
What do you say?
us your comments here
guidelines were nominally targeted at electronics
suppliers, but offer a good starting point
for many companies looking at how to reduce
risk and potential quality problems. As
we’ve noted recently, however, to
do this right will involve greater costs,
reducing the relative price advantage of
offshore strategies to a degree, and certainly
requiring companies to build a substantial
infrastructure to develop and maintain these
monitoring programs. (See Mattel
Incident Shows Companies Can’t Go
On the Cheap when Sourcing from China, Must
Take Proactive Control of Entire Supply
Mitchell offered these 10 guidelines in
a company press release, which we publish
here in bold, followed by our comments:
from reputable, well-established companies
with tight internal controls: Makes
sense, but it is easier said than done.
The company Mattel used for the toys' production
was actually very well-established, but
ran into trouble with lead paint on the
toys through one of its own suppliers. This
recommendation will require a significant
investment in time to perform due diligence
on operational, financial, environmental,
and other controls at offshore suppliers.
comprehensive background checks, including
checking trade references and past business
history, of supply chain partners before
conducting business with them: Standard
procurement practice here, but much more
challenging and time consuming offshore.
site inspections of supply chain partners
and find out what systems have been put
in place to track quality: Similar to
number. 1. It’s the right thing to
do, but will add a lot of time and cost.
ongoing performance reviews of supply chain
partners and engage in ongoing communications
with them to benchmark against preset goals
and define improvement plans: This is
a “best practice” for dealing
with any suppliers, whether domestic or
global. Many companies don’t do a
good job of this currently with domestic
source from companies that are willing to
provide a guarantee for products in writing:
May not always be worth a lot, but certainly
some form of guarantee should be baked into
the contract or separate document.
cautious of buying from companies that do
not have franchised relationships with distribution
partners to avoid a greater potential risk
of counterfeit product: Simply says
the more a supplier is established and has
long term relationships, the less likely
it is they are involved in counterfeiting.
We would add, though, that it doesn’t
mean they won’t knock off your design.
Beware of unusually low pricing:
This certainly may indicate potential quality
issues, counterfeiting, or some other supply
chain hazard. We would also suggest that
companies do their own cost modeling, using
offshore wages and other factors, in order
to have a good idea of what pricing seems
unrealistic even from China.
for International Organization for Standardization
(ISO) or other equivalent, globally recognized
certifications in a supply chain partner's
operations: The easiest recommendation
on the list, and certainly some sign of
an offshore supplier’s investment
Establish relationships with third-party
organizations: For example, Mitchell
says Arrow often works with testing centers
for the Restriction of Hazardous Substances
(RoHS) in China
to have products tested for compliance to
meet customer requirements. For many companies
though, they won’t even know where
to begin here.
quality into measurable and clearly defined
targets with supply chain partners and ensure
these metrics are communicated regularly
with employees: The bottom line for
us: as always, it will take leadership from
the top to make it clear lowest price/highest
margins/least overhead must be balanced
against quality and risk.
What is your
take on these 10 recommendations, and SCDigest’s
comments? Will companies really make the
investment needed to follow these principles?
Let us know your thoughts at the Feedback