Managing Risk in the
INFOGRAM
SUPPLY CHAIN
Risk in the supply chain comes in
a variety of forms. Some of the
most crippling result from
inadequate or poor product
quality testing and supplier
management programs. 1
The volatile socio-economic climate
coupled with the enhanced regulatory
demands from government at all levels has
created an environment in which strong risk
mitigation practices are not only a
competitive advantage, but a critical lifeline
for brand survival. 1
It is imperative to minimize the risk in any area where you
can by, among other things, segmenting and regionalizing the
supply chain 4, as there are many factors that are simply
beyond your control, such as natural disasters, political
upheaval and the price of energy and labor:
67% Sourcing executives who believe that unit costs may rise
at a low- to mid-single digit rate in the second half of 2014 due
primarily to the increasing costs of labor. 3
17% the expected rise in the minimum wage in Vietnam
80% the expected rise in the minimum wage in Bangladesh
3
The demand for higher value at lower price is
increasing. To survive, apparel manufacturers need to
improve their operations by producing right first-time
quality, and reducing waste. 2
The downward price pressures
exerted by Amazon and fastfashion retailers such as H&M,
Zara, Forever 21 and Uniqlo
translate into winnowing gross
margins 3
ZERO-TOLERANCE POLICY:
for unauthorized subcontracting at Walmart,
instituted on April 11, 2013. Also, fire-safety
standards strengthened in Bangladesh. 5
100%
of factories that
supply private-label
or goods directly to
Walmart to be
inspected. 5
65%
The amount of each
company’s sourcing volume
to be inspected by Walmart
under the IndustriALL
proposal. 5
the number
of materials
researched by Nike as part of
its development of a Materials
Sustainability Index (MSI), the
result of 7 years of research. 7
77,000
Trends shaping the way companies
mitigate risks and address opportunities:
1 Innovations in product development and
operational efficiency.8
2 Changes in the availability of the
resources needed for companies to make
their products.8
3 Increased investor and consumer
demand for sustainable practices and
products.8
4 Measurement and awareness of
environmental impacts that can help drive
innovation and efficiency.8
5 Changes in the regulatory environment
that require companies to mitigate their
environmental impacts.8
6 Increasing transparency in the global
marketplace, and the ability of technology
to highlight impacts that were not
previously clear.8
3
$40 billion: the annual
cost of corruption and
bribery in developing
countries 6
Supply chain efficiency, which is directed at improving a
company’s financial performance, is different from supply
chain resilience, whose goal is risk reduction. Although both
require dealing with risks, recurrent risks (such as demand
fluctuations that managers must deal with in supply chains)
require companies to focus on efficiency in improving the way
they match supply and demand, while disruptive risks require
companies to build resilience despite additional cost.4
200+: The number of workers admitted to the Prek
Anhchanh Health Centre clinic on the outskirts of Phnom
Penh, Cambodia, after passing out at work in garment
factories, in a single week in July, 2014 9
2: Number of those who died
9
Sources: 1 ecVision, “Total Risk Management Solutions To Address Supply Chain Management Concerns”; 2 “Minimization of Reworks in Quality and Productivity
Improvement in the Apparel Industry,” International Journal of Applied Sciences,” Department of Textile Engineering, Daffodil International University, Bangladesh;
Department of Apparel Manufacturing Engineering, Bangladesh University of Textiles; 3 Sourcing Survey Volume 3: The Merch Margin Environment Remains Perilous,”
The Cowen Group Inc.; 4 “Reducing the Risk of Supply Chain Disruptions,” MITSloan Management Review Magazine: Spring 2014; 5 Walmart.com/news-archive;
6 www.sedexglobal.com/transparency-the-impact-of-corruption-on-supply-chains-webinar; 7 “Designing the Future with Supply Chain Transparency,” Apparel Magazine,
February 2014; 8 Gap Inc. Social & Environmental Responsibility Report, 2011-2012; 9 “Cambodian Garment Workers Toiling to the Death,” Aug. 14, 2014,
IndustriALL Global Union, www.industriall-union.org.
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