World Trade - February 2009 - (Page 44)

GLOBAL SOURCING Managing Supply Chain Risk BY MONITORING CHINESE SOURCING CAPACITY J ust after noon on Nov. 1, the chaira recent Aberdeen survey] are actively man of the company that owned managing those risks,” said Viktoriya China Top Industries, a shoe facSadlovska, an analyst with the research tory in Dongguan, China, made ﬁrm Aberdeen. a surprise announcement to his Which is strange, because supply assembled workers: the factory was chain disruption is hardly a rare pheclosing, effective immediately. Then nomenon. In a 2008 survey, Aberdeen he climbed the wall surrounding the found that 99 percent of responding factory and fled, leaving behind a companies had experienced at least one mountain of bad debts. recent disruption, including 56 percent The closure shocked almost everywho said their suppliers couldn’t meet one, from the 2,000 employees who their demand and 39 percent who said had arrived that morning thinking their shipments had been delayed or their jobs were secure to China Top’s damaged. “Risk monitoring of your BY CLAY RISEN American customers, who were left supply chain is vital when you’re lookwith a sudden, gaping hole in their ing at export-import markets,” said supply chain. Rick Ostopowicz, a spokesman for credit insurer Euler But in far away New York City, one person saw it Hermes. coming: Josh Green, co-founder and CEO of Panjiva, a And yet too many companies caught in the “rush to startup that provides analysis on overseas suppliers for revamp their supply chains,” concluded a 2006 report the apparel industry. “On October ﬁrst, according to our by the insurance and risk management ﬁrm FM Global, data, [China Top] had had a drop-off in output,” Green “often unknowingly take on greater exposure to natural said. “So we had a good indicator a full month ahead.” disasters, lower safety standards and less reliable legal It was still too early in Panjiva’s development to share systems.” the analysis, Green said. But in the coming months his But with the global economy tanking, risk perception ﬁrm will begin to offer the sort of detailed information is growing. “The driver has been to explore the savings currently missing from the supply chain risk environ- from globalization,” said Sadlovska. But with the worldment: Using powerful database software, Panjiva sifts wide downturn shuttering emerging market factories virthrough mountains of information—much of it from the tually overnight, she said, “Suddenly they see the other U.S. government—to develop detailed analyses of ﬁrms’ side of global business.” quality, social responsibility, and ﬁnancial health. As the economic crisis works its way around the It’s the sort of data that experts say is desperately globe, experts expect to see things worsen. A separate needed in an economy where almost every company Aberdeen survey, taken in 2007, found that 62 percent relies on some sort of global supply chain. These days, of ﬁrms expected to see their supply chain risk increase “You need to know a lot more information a lot earlier in the next three years. Nevertheless, only 49 percent in the supply chain, and you need to be able to validate said they had implemented a risk analysis and manage[your supply chain] on a moment’s notice,” said Stephen ment program. Lamar, executive vice president of the American Apparel Then there is the question of natural or manmade and Footwear Association. calamity, from tsunamis to earthquakes to riots and It’s hardly news that lengthening global supply chains political upheaval. mean increased risk. But for too long, U.S.-based comQuality is a big risk issue as well. Massive recalls of panies have been unaware of, or unwilling to address, China-made products, from analgesics to stuffed animals, the issue, taking out insurance if necessary and praying has raised concern over the ability of U.S. companies to for the best. “Less than one-third of all participants [in monitor, let alone guarantee, the quality of the products In-country China data bases provide advance warning for production disruptions and quality issues. 44 WORLD TRADE FEBRUARY 2009

Table of Contents Feed for the Digital Edition of World Trade - February 2009

World Trade - February 2009 Contents Taking Stock in America Confronting Corruption in Latin America Supply Chain Watch Tradewinds Where's the Goods? Where's the Money? Hope on the Horizon Managing Fleets in Turbulent Times The Impact of China's Economic Slowdown on U.S. Supply Chains The Fuel Volatile Supply Chain Getting the Most from On-the-Fly Transactions Managing Supply Chain Risk by Managing China Sourcing Capacity OECD Global Economic Outlook for 2009 'Natural' Agricultural Monopolies No More

World Trade - February 2009

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