Preparing For the Future -...

Copyright © 2014 BSI. All rights reserved.

Brittney De Stefano Business Development Manager

Tony Pelli Senior Global Intelligence Analyst

Footwear Sourcing Risks and The Need for a Prequalification Assessment

Preparing For the Future

FDRA Footwear Forum 2015

2 Copyright © 2014 BSI. All rights reserved.

Agenda

•  BSI Professional Services Overview

•  SCREEN Intelligence – Footwear Sourcing Risks

•  Industry Challenges and the Need for a Prequalification Assessment

•  Scenario: Sourcing a New Athletic Shoe

Copyright © 2015 BSI. All rights reserved


BSI Professional Services Supply Chain Intelligence & Risk Management Solutions



BSI Supply Chain Solutions sits within the Professional Services organization. The Supply Chain Solutions organization is the leading global provider of supply chain intelligence, auditing services, audit and risk management compliance solutions, as well as advisory services. Our charter is to help corporations, governments and associations identify, manage and mitigate global supply chain risks and maintain world class governance risk and compliance programs. Our holistic supply chain risk management suite is designed to predict and visualize risk, and develop robust risk mitigation and compliance management programs to protect your supply chain, brand and reputation.

BSI Professional Services Holistic Supply Chain Risk Management



SCREEN Intelligence Country Risk Analysis Tony Pelli Senior Global Intelligence Analyst



Increasing Labor Unrest in China

•  Labor strikes are increasing in all of the major exporting provinces in China

54

154

243

300

0

100

200

300

400

2011 2012

2013 2014

Labor Strikes in Guangdong

9 23

42

103

10 27

54 60

6 12 11

44

21 16 18

85

5 15 20

47

0

50

100

150

2011 2012

2013 2014

Labor Strikes in Select Provinces

Jiangsu Zhejiang Shanghai Shandong Fujian


Increasing Labor Unrest in China

0 10 20 30 40 50 60 70

6.0%

7.0%

8.0%

9.0%

10.0%

2011 2012

2013 2014

Strikes and GDP Growth in Zhejiang Province

GDP Growth Strikes

0

50

100

150

200

250

300

350

0.0%

5.0%

10.0%

15.0%

2011 2012

2013 2014

Strikes and GDP Growth in Guangdong Province

GDP Growth Strikes

•  In some provinces this may correlate with decreasing GDP growth

•  In other provinces different factors may be driving the strikes


Increasing Labor Unrest in China – Strike Profile

•  Strikes are concentrated in heavy manufacturing, electronics, and garments

•  Footwear strikes see some of the largest numbers of employees participating •  40,000 in 2014 strike, direct losses of $27

million •  Strikes with 1,000+ workers occur regularly

• Working conditions are typically not a cause of strikes in China •  Wage arrears, compensation, and benefits

much more commonly cited as causes

Heavy Manufacturing

(steel, machinery, etc.), 20.9%

Electronics, 17.5%

Garment and Textiles, 16.9%

Consumer Goods and

Retail, 10.3%

Food, 6.9%

Footwear, 5.9%

Automotive, 5.3%

Pharmaceutical, 2.8%

Not Specified, 4.0%

Other, 7.5%

Strikes by Industry in China Year-to-Date 2015


Increasing Labor Unrest in China - Causes China’s economic catch-22 •  Fast growth:

• Wages increase •  Emboldens workers •  Leads to relocations that drive

strikes

•  Slow growth: • Wage increases stall •  Increases employer wage

withholding


Increasing Labor Unrest in China – Causes

•  Lower-end manufacturing increasingly moving elsewhere

• Wages lower in Vietnam, Cambodia, Myanmar

•  Primarily in the garment industry, with electronics following

•  Increasing factor in strikes •  12 relocation-related strikes in Q2


Increasing Labor Unrest in China – Government Response

Police Response54.0%

Other Outcome 46.0%

Police Response to Strikes All Strikes in China, 2014-2015

Police Response62.0%

Other Outcome 46.0%

Police Response to Strikes Hong Kong-, Macau-, Taiwan-Owned

Factories, 2014-2015

Police Response 37.0%

Other Outcome, 63.0%

Police Response to Strikes Foreign, Joint-Venture Factories,

2014-2015

•  Moves towards empowering official government unions

•  CCP becoming more intolerant of unofficial organizing •  Mainly driven by migrants

•  Crackdown on civil society may extend to NGOs that aid in unofficial labor organizing

•  Harsh police responses, including arrests or organizers, are less common when the factory is foreign-owned, but more common when owned by a Hong-Kong/Taiwan-based contractor


South China Sea – Recent Developments

•  China stated in mid-June that it would halt island-building projects

• Most had already been completed

•  China will continue to build military facilities on the seven existing islands

•  China rejected arbitration with the Philippines by an international tribunal that will begin hearings this week



Vietnam – Social Responsibility Challenges

•  Footwear exports increased nearly 25%

threat rating for human rights

•  Health and safety a primary concern •  75% of factories had weak roofs or walls •  90% use outdated equipment that could lead

to worker injury

•  Other risk areas (child and forced labor) are less of a concern for footwear



Vietnam – Labor Unrest

social unrest rating

•  Labor unrest driven by lack of an official outlet for grievances

threat to freedom of association and collective bargaining

•  Official trade unions tightly controlled

•  Leads to more volatile ‘wildcat’ strikes

• Wage increases have increasingly become a cause for strikes •  Inflation in 2009-2011 drove strikes


125 147

387

541

762

216

424

981

539

355

0

200

400

600

800

1000

1200

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 Labor Strikes in Vietnam


Supplier Prequalification and Risk-Based Sourcing Brittney De Stefano Business Development Manager



The Challenge & Need for a Prequalification Assessment

Common Industry Challenges:

•  Enormous complexity around pre-qualification

•  Little Visibility into a Direct & Multi-Tier Supply Chain

•  Lengthy Process to Validate and Onboard New Suppliers

•  Global Diversification – No reliable country risk intelligence available

•  Lack of Collaboration within the Organization


Supplier Prequalification Assessment PAS 7000 – Utilize a Global Standard of Excellence PAS 7000 provides flexibility for tailoring the information to particular organizational needs: •  Steering group composed of over 40

organizations based in US, Europe and Asia

•  Review panel composed of over 200

organizations based in US, Europe and Asia

•  9 core modules are always included

•  6 additional modules can be selected as per the business nature and buyers’ procurement policy.

Organization Profile

Supplier Capabilities &

Capacities

Financial Information &

Insurance

Business Governance

Employee Policies

Health & Safety

Data Protection

Environmental Management

Quality Management

Business Ethics

Supply Chain Traceability

Supply Chain Security

Equal Opportunities

Disciplinary Practices &

Abuse

Business Continuity

Management

9 PAS 7000 Core Modules:

6 PAS 7000 Additional Modules:


Implement the Assessment Methodology that best suits your resources and needs:

•  PAS 7000 Self-Assessment

•  PAS 7000 Onsite Audit

•  Or Combination of Assessment Methodology

Once you identify the methodology, use an automated, risk-based solution to increase the efficiency of the process.

Supplier Prequalification Assessment Implementing the PAS 7000 Standard


Scenario: Sourcing for a New Athletic Shoe Traditional vs. Risk-Based Sourcing



Scenario: Identifying a Supplier for a New Athletic Shoe Traditional vs. Risk-Based Approach to Supplier Sourcing

Traditional Sourcing Program – RFI Identifies Qualified Suppliers for Product Spec and Pricing requirements

Traditional Sourcing factors:

o  Total Cost

o  Product Quality

o  Technical Capability

o On-Time Delivery

o  Service

Supplier B: China

Supplier A: Indonesia

90% Compliance 70% Compliance

Higher Total Cost Lower Total Cost

Child Labor – Elevated Child Labor – High

Risk-based Program – Sourcing will also look at geographic risk and prequalification results

Additional Sourcing factors:

o  Country Risk

o  Supplier Compliance


Review of the Key Elements in a Risk-Based Sourcing Program

Step1: Identify Qualified

Suppliers

Step 2: Analyze Geographic Risk

Result: Holistic Risk Scoring for

Suppliers

Step 3: Prequalification

Assessment


Questions?


Date post:	18-Jul-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Preparing For the Future -...

Documents