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Review of global supply chain in 2018: Trade war, Diversification, Sustainable development challenge

2019-01-10 00:00:00

      The trade standoff between China and the U.S., coupled with tighter consumer and government monitoring of sustainability issues, will be challenging for global supply chains in 2018. Many brands and retailers, in order to avoid tariff risks and protectionist policies, have begun to focus on diversification of procurement options and strive to maintain a slow and steady development in the area of ethical responsibility in the supply chain. In this report, we will analyze and interpret thousands of product inspection, supplier audits, and laboratory test data for 2018.

Purchasing area: China rebounds strongly, it is still difficult to stop the trend of diversification

      Although at the end of the year, there was a slight deceleration caused by the confrontation between China and the United States, but compared with 2017, China's demand for product inspection and supplier audit in 2018 still rebounded by 8.5%. In a 2018 Madeown survey of more than 100 companies worldwide, more than 30% of respondents said that they are gradually extending the procurement chain from China to other regions, and about three-quarters of respondents said they have Beginning to purchase products in a new country, or will purchase in other countries within the year, it is imperative to diversify the procurement region.


      Indeed, Madeown has observed a significant increase in quality monitoring activities in other parts of Asia. For example, Indonesia and Cambodia in Southeast Asia increased product inspection and audit demand by more than 50% in 2018. At the same time, demand for product inspections and audits in South Asia showed double-digit growth, far exceeding the region's economic growth expectations. And Bangladesh, a popular destination for textile and apparel sourcing, attracted a large number of buyers, an increase of 37.3%.

Sustainable supply chain development: hidden dangers of compliance hazards in emerging procurement regions

      Data from a factory visit by Madeown auditors from 2018 show significant improvements in ethical compliance for brands and manufacturers, with an average ethical responsibility score of 4.4% for the full year of 2018 compared to 2017.

      This optimistic trend has greatly benefited from the continuous progress of China's increasingly mature manufacturer network in ethical responsibility compliance. However, in other emerging regions where the share of procurement is gradually increasing, factory compliance is still a challenge: Vietnam, Indonesia and Turkey's factory scores in 2018 fell by 5.1%, 3.2% and 3.1%, respectively. Looking at the situation of factories in all countries, in 2018, 24% of factories still have serious violations of moral responsibility.

      Since 2016, Madeown audit data has recorded a steady and slow increase in the ethical responsibility score of the textile and apparel industry. Behind this trend is the increasingly stringent scrutiny that the industry is receiving from consumers, which confirms that the need for supply chain transparency can effectively promote the development of supply chain ethical responsibility.

      In 2018, the most urgent issues of ethical responsibility in the supply chain are waste management and working hours and pay. In particular, companies that make purchases in China should be alert to changes in national social security regulations and strengthen audit control over suppliers' payroll records and employment.

      In terms of factory building safety, in order to ensure the safety of employees, more than 60% of audited factories need rectification. There are significant differences in the safety of factories across regions. In Southeast Asia, more than half of the factories need to be rectified immediately or in the medium term. The situation in China is even more serious. Over 70% of the audited factories are marked as "yellow" and need to be rectified.

2018 Product Quality Road Tough - The Textiles and Apparel Industry Is Performing Relatively Well

      The impact of the supply chain diversification trend in 2018 is also reflected in the product quality data collected by Madeown during factory inspections. In China, in order to maintain a competitive advantage in a severe international environment, manufacturers are under pressure to reduce costs and product quality is affected: more than 25% of the tested products do not meet quality standards, compared with the same period last year. Increased by 16%. In popular purchasing areas such as Cambodia and Turkey, the non-conformity rate has also increased by about 30%.

      However, if only focusing on the textile industry, Madeown product inspection data shows that the product quality of the industry has improved, and the inspection failure rate in 2018 has decreased by 18.5%. This trend may be in line with the industry's supply chain ethics in the past two years. Progress in responsibility is related. In fact, Madeown data continues to show a positive correlation between ethical responsibility scores and quality performance, and factories with better working conditions and talent retention mechanisms often produce higher quality products.

      At the same time, data collected by Madeown's laboratories show that lead and terephthalate oversupply issues are still severe among suppliers exporting to the European Union and the United States. In 2018, more than 7% of the tested products did not meet EU REACH lead content regulations, and 8% of the tested products exceeded the standard.

      Suppliers exporting to the United States performed better in terms of compliance, with an inspection failure rate of less than 5%, a significant improvement from 2017, especially compliance with the US CPSIA and California 65 proposals. However, the problem of terephthalate exceeding standards is still serious, with a failure rate of about 9%, which has not improved significantly in the past two years.

Key KPIs from Madeown Annual Report


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