What is really true, how will you ever know? Do you believe everything you are told in a 3rd world country, especially from a distance. Do you utilize an untrained or experienced eye that regularly adds value to your supply chain (people and product)? Managing your supply chain, one challenge along the way.
I was a director of operations (investigator) in Asia for a North American apparel company who sold to fortune 500 and specialty retailers.
The client was having issues with product quality, deliveries and the price was skyrocketing in 3rd world countries.
- The challenge with corporations and the people that run or own them is they believe that there suppliers are gold and do not need any management or transparency.
- Another challenge is the client may have already established relationships and credit terms with this supplier and not have any secondary suppliers or factories to replace this supplier/factory with the same credit terms.
- Then there is the issue with being too busy, the lack of knowledge of their supply chain, financial obligations and commitments.
This is one story why an experienced western person with their hands, feet, intelligence and wisdom is required on the ground in a 3rd world country. My job was to make the supply chain transparent one supplier at a time; this is a story about one supplier who was an agent that is based in a major trading city in Asia who had production placed at factories around Asia.
To understand what was happening, I had to build a relationship with that supplier based on sharing intelligence, management and the Kaizen business models. I meet with that supplier and many other suppliers on a weekly basis; as well I would visit the actual factories frequently (2 – 4 times during production) to establish transparency and trust.
My job was to act as a detective, look for inconsistencies that could not be found by a local person doing a single job. For me I liked the challenge and when I would catch the supplier or factory, they would laugh thinking it was funny. But I would need to tell them about the seriousness of their offence(s).
For many suppliers it was a matter one or more of the below offences:
- Illegal outsourcing (sounds simple but its not, as the product you are inspecting is at the factory who was approved to make the production, so now you need to be able to read between the lines to know it was outsourced). I caught many factories with variances that didn’t make sense, when confronted properly they will admit it is outsourced.
- Hiding changes in raw materials and trims to save on costs (This only happened a few times but its happening).
- Utilizing a factory that did not have the expertise or experience to make this type of products (This is a continuous problem as the supplier/factory does not know their strengths, weaknesses, and faults). In addition the buyers do not allocate the production to an inadequate supplier/factory due to limited supplier options, credit terms, lack of knowledge of the supplier/factory, and/or they are too busy to due their job right.
- Not having the proper compliance to meet the standards of the western buyers (Unfortunately western compliance is strict for a reason but not many can pass an honest compliance inspection, as humans and businesses we all have faults).
Unfortunately with this one supplier it was a big investigation as it involved another agent who was very dishonest, misleading and conniving. There was allot at stake as we had placed millions for delivery with that supplier. The issue was that allot of this production was placed with factories in another province (State) using another agent who had the relationships with the factories and spoke the local dialect (language).
One of the main challenges was not to disturb the broken (unauthorized) supply chain, so I had to work with the factories to ensure they delivered quality products in a timely manner under acceptable compliance standards. This was implemented by introducing lean manufacturing, WIP, timeline management, staff, and quality training.
Once this was achieved I could move onto attempting to work with the secondary agent on responsibilities and deliverables. But this was impossible, as they did not want to be accountable; it baffled the main agent and me. In the meantime I needed to work with the main agent on the removal of this illegal second agent and building a transparent direct relationship with all the approved factories.
It was a struggle to stop using this secondary agent as they were claiming ownership of all the factories. I ended up discussing this in detail with the owner of the company (buyer), and we decided it would be best to go to the head office of this secondary agent (100+ employees) and meet with the managing director, manager and staff managing the products and programs. We went with our main agent (5 employees).
The conversation was allot of pointing fingers, proof of the secondary agents lies, and a conclusion that we will cease business with this secondary agent and all their factories but we needed to ensure they could conclude on all orders on hand in a professional manner.
We advised our main supplier of our strict rules of conduct and compliance. Read them the riot act then continued to do business with them. It baffled me but it was not my ultimate decision. After this incident, I later caught the agent outsourcing production to another agent, and reminded him of the repercussions, past and the fact that this was illegal. My client (the buyer) did not acknowledge this offense as I dealt with it in the very initial stages.
In the end my objective with this main agent was achieved, I managed them by weekly in person meetings, creating of WIP, timeline, management documents, training of their factories, and staffing. I helped improve the quality, deliveries and costing, which resulted in happy customers and increased orders for the following seasons.
I believed this supplier should have been replaced but due to the facts mentioned in the second paragraph this supplier is still working with this client.