Focusing on the difficulties of transparency within the supply chain, Melissa Brown of Association for Responsible and Sustainable Investment in Asia (ASRiA) sat down for an interview covering a lot of the angles surrounding the integrity of supply chains in China.

I highly suggest taking your lunch break to watch the 15 minute clip, and then think about some areas you feel may be at risk within your supply chain. I have listed the 7 questions she was asked along with a few bullets on what she said… and added a few thoughts of my own in italics

Questions asked during this clip are:

1) How easy is it to get details about Asian companies?
- Need to have a sense about what is know and how to compare
- Need to use different tools - policies are not set the same way, available resources can be limited

Getting information about Chinese firms is not terribly difficulty, it is about time and the amount of money one is willing to spend. One can approach firms from different angles, as a buyer, as a supplier, through a friend, through Alibaba.. you can even stake a factory out for a week. But it all comes down to how much time you want to spend, and the budget you are willing to allocate

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After reading the transcript of the press conference, I knew I had to get my hands on the report itself and read through it for myself (Action Plan can be downloaded here). I needed to see just what the findings were, and more than that, I needed to see what their recommendations were….

Now, given it is a 86 page and I am sure you all are not looking for the page by page, so first I will offer some thoughts on the points the government felt summed up their “plan”… and then I will offer a few comments

So first, the framework (as seen in the picture below)

The highlights of the findings as per the U.S. government fact sheet:

• The Action Plan proposes a strategy focused on a risk-based prevention with verification model that allocates import safety resources based on risk.
• The sheer magnitude of the import-export enterprise makes clear that our Nation cannot inspect its way to safety.
• The Action Plan presented today reflects the Administration’s commitment to continually strengthen and improve the import safety system

and their 14 recommendations:

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On Tuesday, an article came across my RSS that I just knew was going to lead to a post.. or series of posts. Bush’s Import-Safety Plan Is Detailed in the NY Times reported that the “plan” has been released

There is a lot of information that I am going to try and pack in here, so bear with me.

On November 6, the White House released its Fact Sheet while Michael Leavitt and Dana Perino were giving a press conference on “the Plan”, the process behind “the plan”, and what the plan in terms of “the plan” being rolled out.

So first some highlights from the press conference. Of course, over the last 6 months, there has been an increased effort to deal with this problem. There were toys from Mattel and RC2, tires, toothpaste, and other products that were being recalled during the summer, and Americans were scared of products from Communist China poisoning and killing Americans.

so, with that in mind, the Import Safety Commission set out on a mission to get down to the bottom of things:

I, personally, went to ports and border crossings and freight hubs and post offices and I saw drugs and vegetables and fish being processed. I went to retailers and wholesalers and fruit stands. I’ve inspected personally everything from imported tire irons to gingerbread houses.

and they asked questions….

They went deep. They asked questions like, “What are the current authorities that we have?” Asked questions like: “Do we need more authority?” “What are the changes that need to happen if we’re to be able to respond in a global economy?” “What are the limitations we have?” “Do we have enough resources?” Et cetera.

and they got answers…

And I think the thing that impresses you most when you see this is how much it takes to fill up and empty out the American pantry every day.

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Part 3 starts off with a case study of working with a car accessory project (wanted a quality product at a savings) that started with 30 suppliers, and then narrowed down to 5..

but there were some issues:

• All of them were trying to aggressively looking to expand to U.s., so educating a potential competitor
• Decision was made to find to use his firm to do assembly, packaging, and export as a firewall
• no big surprise, and the case is pretty basic

For anyone dealing with a commodity like brake pads, this is going to be the case. Especially if one can find 30 suppliers that are readily accessible to a search. Were the product more specialized, perhaps the maturity of suppliers would be lower, but one would be hard pressed these days to find a supplier that is not going to Europe for a trade show.

The big takeaway from this part is that it is best to use a firewall, and I agree wholly.

• It prevents the supplier from identifying the ultimate buyers and going around them
• Quality assurance
• Money flow

In all cases, we have a firewall. Some are more creative than others, but there are components that remain throughout, including an entitiy in the U.S. that imports all the goods in our name.

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For the past several weeks, China has been the punching bag of international supply chain management.

The underlying problems are very serious ones as a number of people and animals have become sick and even died as a result of using goods that have been manufactured in China.

There are dozens of news reports in the press (print, cyber, TV, and other) that look to judge China itself rather than explore the role of business , and this clip is a perfect example of that

Why reports like this have me scared more than using a tube of Chinese toothpaste is simple… they make no attempt to highlight the critical issues that underly the problem and in the end, the problems are not solved

Lou Dobbs, and others like him do not understand the fundamental reasons of where the breakdowns occured, nor does it appear they want to. They are only concerned with finding new ways to inflame the public into believing that products Made in China are bad.

• They spend no time educating the public of the role American importers played in distributing thee products
• They spend no time educating the public of the real difficulties of supply chain management or the responsibility of various parties within the supply chain to ensure quality

In my mind, reports like this offer no solutions to the problem, and only make the problem worse as these reports create more misinformation of what the core problems and fear of anything made in China.

Which wil only result in more blog posts like this, stories like this, and tit-for-tat trade disputes like this.

This evening, I ran into this youtube post called avoid the middleman, and while it is really about developing an Ebay store, I think that graphics aside there are some takeaways here.

In watching this 3 minute clip, the primary emphasis on removing the middleman is because you as a distributor can save time and money, and neither of these should come as any surprise.

Not only true for the Ebay model, this is also true for the China sourcing model, and it is something that I have seen a lot more of in the last 18 months as a number of firms who were using trading company relationships in the U.S, Taiwan, and H.K. have begun taking out the middleman.

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With all the recent news surrounding the safety of Chinese produced goods, many are looking for answers and I would like to thank my friends at A.T. Kearny who turned me onto a recent report entitled Fixing China’s Food Safety Issues will Require a $100 Billion Investment (PDF Report Here).

Supported by a detailed powerpoint presentation and video (see below), AT Kearney recently reported their findings at CIES World Food Business Summit in Shanghai whereby they found:

China’s food safety process is broken and fixing it will require a $100 billion investment in improved food safety standards, warehousing, transportation and training

With over 1500 interviews conducted in Beijing, Wuhan, Chongqing, Shanghai, and Shenzhen the findings of the report are interesting, relevant for everyone doing business in China, and unlike a number of recent reports they offer their ideas on some solutions and where the investment should go.
The reported statistics:

• The middle class spends 150 Billion USD on food now, and that will increase to 650 Billion by 2017 (17% CAGR)
• 95% of respondents say food safety is important to them (73% in 2005), and nearly 85% of respondents said they would pay a premium for safe foods

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