Emerging Regions: Growing Pains for Businesses Expanding into New Geographies

QIMA Supply Chain Conference 2019 - Session 1: Navigating the Shifting Landscape of Global Supply Chain

Anita Lo, Program Director, ICTI Ethical Toy Program
Lynne Sprugel, Committee Vice-Chair, Academy International Ltd.
Caspar ter Horst, Managing Director, ProductIP
Stan Teisseire, Global Operations Director, QIMA

Moderator: Colby Jones, QIMA

“Start things right in a new country: do your due diligence and discuss compliance right out of the gate”
The trade wars have diversified sourcing, and many challenges are arising as businesses shift from China to emerging regions. Academy International, ICTI Ethical Toy Program, ProductIP and QIMA representatives all shared the pain points experienced or observed in the field. Unlike China, which has a highly developed manufacturing infrastructure, many of the new sourcing countries are struggling to meet quality measures in the face of new volume demands. This has caused companies to go back to basics when it comes to onboarding new supplies and ensuring expectations are being met.

Key takeaways:

  • Sourcing diversification brings a host of challenges:
    • The additional costs of setting up production in new regions may be not obvious at first, but significant, even when compared to tariffs
    • Some of the universal struggles include maintaining consistent product quality and finding adequate production capacity
    • Different struggles in different regions, from ethical issues among China’s neighbors to factory safety concerns in South Asia
  • Factors that are often overlooked:
    • It is crucial to understand and clearly communicate requirements on compliance (externally and internally) before stepping into new countries
    • Sourcing in retail also requires a robust compliance program, with boots on the ground at every production stage and at multiple tiers of your supply chain
    • Moving a company’s manufacturing means moving the whole ecosystem, including integrating new raw material suppliers into a business’ the existing data system and ensuring the continuing flow of information about the product
    • Corruption risks: when hiring local third-party companies to help with compliance, businesses must make sure these providers have checks in place to prevent bribery and corruption
  • Advice for businesses expanding or moving to a less mature sourcing region:
    • When moving to a new country, start everything right: discuss social compliance at an early stage and make your requirements clear
    • Do your due diligence and all relevant audits: investigate your supplier’s security procedures, social compliance, structural and fire safety, training programs, etc.
    • Don’t forget to build up your data structure: make sure that your supplier and their suppliers, in turn, are able to supply all necessary documentation in time
    • Get to know the people you will be working with: meet with your suppliers personally and make sure you have eyes on the ground
    • Work with a professional organization to help with social compliance, preferably an international provider with local presence and a solid understanding of compliance