Samsung’s plan to outsource a fifth of its smartphone production to China next year may help it compete with low-cost rivals such as Huawei and Xiaomi but it’s a strategy fraught with risks, people with familiar with the move said.
Samsung Electronics which shut its last in-house Chinese smartphone factory in October, is quietly moving production of some Galaxy A models to contractors such as Wingtech, which are little known outside China.
Samsung has been coy about the volumes involved but sources said the South Korean tech giant plans to ship some 60 million phones made in China by so-called original design manufacturers (ODMs) next year out of a total of about 300 million devices.
Wingtech and other ODMs make phones for multiple brands – including Huawei, Xiaomi and Oppo – giving them the economies of scale to keep costs down, and the nimble contractors can develop and produce new budget phones quickly.
Critics of Samsung’s strategy say it risks losing control of quality and undermining its manufacturing expertise by outsourcing, and may even help rivals by giving contractors the extra volume they need to lowers costs further for all.
Samsung can ill afford another quality crisis. It scrapped its flagship Galaxy Note 7 in 2016 after reports the expensive phones were catching fire and delayed the launch of its folding phone this year after screen defects were identified.
But with margins razor thin for budget smartphones, people familiar with Samsung’s strategy say it has little choice but to follow rivals and use Chinese ODMs to shave costs.
“This is an inevitable strategy rather than a good strategy,” a source with knowledge of Samsung’s Chinese operations said.
Samsung said in a statement to Reuters that it has been making limited lines of smartphones outside its own plants to broaden its existing portfolio and “ensure efficient management in the market”. It declined to say how many Samsung phones are made by ODMs and said future volumes had yet to be determined.
Wingtech did not respond to a request for comment.
Research firm Counterpoint says ODMs can procure all the components needed for $100-$250 smartphones for 10% to 15% less than major brands with their own factories in China.
One supply chain source said Wingtech can get some parts for up to 30% less than Samsung Electronics pays in Vietnam, where it has three factories churning out smartphones, TVs and home appliances.
Wingtech started making tablets and phones for Samsung in 2017, accounting for 3% of its smartphones. That’s expected to hit 8%, or 24 million units, this year, according to IHS Markit.
Samsung’s outsourcing plans involve its lower and mid-range Galaxy A series, with Wingtech having a hand in both design and production, sources said. The A6S, one of the models to be outsourced, costs from 1,299 yuan ($185) in China.
The Wingtech phones will mainly go to Southeast Asia and South America, one source said. Samsung is gaining share in both at the expense of Huawei, which is suffering from U.S. sanctions that bar it from putting all Google’s services on new phones.
While Samsung is anxious to remain global smartphone market leader, some analysts worry it might not be worth the risk given that profits in the budget phone business are scarce for all.
“Low-end phones are headache for Samsung,” said CW Chung, head of research at Nomura in Korea.
Chung said they were now commodity products and it was “nonsense” to make them in-house. But he and other experts said if Samsung gave ODMs more volume, that could cut contractors’ costs further and boost their experience and knowledge.
“If ODM firms become more competitive, rivals will be more competitive,” Tom Kang, an analyst at Counterpoint said, adding that once a company loses its expertise in making low-endphones by outsourcing, it is difficult to regain the know-how.
Chung said Samsung’s strategic shift signalled the declining manufacturing prowess of the company, once a low-cost Asian manufacturer and now the world’s top producer of high-end electrical consumer goods.
U.S. rival Apple outsources production to Taiwan’s Foxconn Technology, which has factories in China, but Apple still designs its phones in California.
Samsung said in an emailed response to Reuters that it will be involved in the oversight of the design and development of smartphones produced by ODMs.
One person familiar with Samsung and Chinese ODMs said contractors save money by cutting some steps out of the manufacturing process, potentially raising quality issues. He declined to go into details.
With that in mind, Samsung has been pairing South Korean component suppliers with Chinese contractors to keep closer tabs on quality control, the person said.
“We understand the logic of increasing the production volume with Chinese contractors is a strategic business decision but that doesn’t mean all of us are happy about it,” an executive at a Korean component supplier said.
Samsung told Reuters it has applied the same quality checks and standards it does with all its devices, adding that it was committed to delivering high-quality products.
Historically, Samsung has designed and produced almost all its phones in-house in vast factories in Vietnam and, more recently, India while winding down production in South Korea and China where labour costs more.
But Roh Tae-moon, the youngest executive to become a president at Samsung Electronics, is championing the new ODM strategy in his role as number two at the mobile division, two people familiar with the matter said.
“It is crucial to cut costs to maintain competitiveness with Huawei and other Chinese handset makers,” said a Samsung insider who declined to be named.
Other Korean firms have also embraced outsourcing. LG Electronics, whose smartphones have been losing money for several years, has said it plans to expand its ODM output from budget models to mid-priced phones.
“Smartphones have come down to a battle over costs. It’s a game of survival now,” said Kim Yong-serk, a former Samsung mobile executive who is a professor at South Korea’s Sungkyunkwan University.
Source: by Heekyong Yang and Hyunjoo Jin, Ju-min Park in Seoul and Brenda Goh in Beijing, editing by Jonathan Weber and David Clarke, Reuters Connect
As supply chains become increasingly complex and interconnected, the risk of modern-day slavery being present within these global networks continues to escalate.
As our global networks deliver the products and services we depend on every day, it is crucial consumers know the paths they took to our homes and businesses. Too often, this journey involves slave labour.
It is a tragedy that millions of people fuelling today’s supply chains face labour rights violations, unsafe working conditions, discrimination and corrupt sourcing processes. As William Crandall PhD writes in SCM Now magazine, “If you are like many supply chain professionals, you wonder about the corporate social responsibility and ethical standards in the far tiers of your supply chain, particularly those in developing countries. You hope people are receiving adequate wages, have a safe environment in which to work and are given decent supervision. Yet, there is an uncomfortable reality that must be acknowledged: slavery is alive and well in far too many supply chains.”
While there isn’t an official definition of a modern-day slave, the International Labour Organization (ILO) describes it as work that is “performed involuntarily and under the menace of any penalty.” It also refers to situations in which people are coerced to work through the use of violence, intimidation, manipulated debt, retention of identity papers or threats of denunciation to immigration authorities. The ILO states that forced labour in the private economy amounts to $150 billion in corrupt profits each year.
A recent Walk Free Initiative report found that 40.3 million people live in conditions of modern-day slavery. Of these victims, 18 per cent of adults are labouring in construction, 15 per cent in manufacturing and 11 per cent in agriculture or fishing. Slavery is particularly rampant in industries with severe downward pricing pressures, as cost-cutting often involves less pay, disregarded safety procedures and imprisonment through withheld identification or documentation.
As Crandall writes – and as ASCM is committed to seeing to fruition – there are means for putting an end to it. Supply chains have the power to create a better world, and industry professionals must work together to tap into that potential. The way forward will depend on these industry leaders meticulously ensuring the integrity of their networks, methodically mapping their companies’ entire supply chains, and maintaining codes of conduct that are both fully effective and in force.
The ASCM Foundation is mobilising supply chain communities, skilled leaders and visionary partners. Together, we are committed to solving this critical problem that affects so many lives. Learn more about all of the initiatives the foundation is pursuing and how you can help at ascm.org/making-an-impact. Please join us in harnessing the power of supply chains to create a better world by eradicating modern-day slavery.
Abe Eshkenazi, CSCP, CPA, CAE, is CEO of the Association for Supply Chain Management (ASCM). Learn more about how ASCM is working to create a better world through supply chain at ascm.org.
by Abe Eshkenazi, Chief Executive Officer, Association for Supply Chain Management (ASCM)
The Procurement function has become a critical player in the process of Digital Transformation, acting as a trusted advisor to the business.
As companies continue to overhaul outdated processes and implement new technology, the need to manage change has never been more apparent. Procurement needs accessibility to data to operate at the board level and fulfil the demands placed upon it.
But as procurement continue to help all levels of an organisation, what about the function’s own Digital Transformation?
Surprisingly, procurement has largely been left behind in a world of digitalisation. While other departments have advanced and thrived with specialist tools, a reluctance to replace legacy systems has seen Procurement struggling to keep pace.
However, ‘best of breed’ solutions are providing a vital shortcut for Procurement.
They are paving the way to deliver on the failed promises of legacy systems and addressing the challenges stemming from the use of emails and spreadsheets. This allows procurement to efficiently operate at the highest level while mitigating supply chain risk, managing data compliance and saving on costs.
Market Dojo are the pioneers of on-demand eProcurement software, supporting 150+ clients worldwide in evolving their procurement processes. Their on-demand offering allows companies the flexibility of using their tools as and when required for eSourcing and supplier engagement.
Market Dojo’s CEO Alun Rafique highlights some thoughts to consider when tackling Digital Transformation.
“Technology implementation projects should be primarily viewed through the lens of change management. Revolutionary ideas are good and needed, but changes should be made in an evolutionary manner through incremental steps”.
In other words, supporting the use of ERP systems with ‘best of breed’ ensures real value is achieved at every stage. ‘best of breed’ solutions are no longer a bolt-on or adjunct to ERP solutions, but a core part of the final ecosystem.
Market Dojo believes in a better way to manage data, mitigate risk and deliver real value through accessible software. Implementing a tool such as Market Dojo can generate a far quicker ROI at a fraction of the cost.
Market Dojo believe Procurement should have access to the same everyday tools as you would find in sales and finance. The vision of a ‘Procurement CRM’ is unique and set to take the procurement function by storm.
by Alun Rafique, CEO and Co-Founder, and Nick Drewe, COO and Co-Founder, Market Dojo
Procurement, whether direct, relating to the core business of a company, or indirect, responsible for acquiring everything else an enterprise needs for its operation, is a complex, multi-step process. It is triggered by requisitioning, or identifying the need for a product or service, continues with finding the best offering matching this need through tenders or auctioning and concludes by performing the actual purchase.
When done manually, invoice management – the last major step in this long process – is fraught with missing goods receipts, error-ridden spreadsheets and out-of-policy spends. And although today we already have metrics to prove the efficiencies of an automated procure to pay (P2P) process, according to Zycus’s Benchmark Report, when it comes to invoicing, “email remains very much a strategy for pursuing connectivity with suppliers at 71 per cent, while 32 per cent rely primarily on paper-based and 19 per cent on fax-based solutions.”
P2P, the downstream stretch of the procurement value chain, lends itself more readily to automation than the preceding source-to-contract (S2C) upstream process. So much so that – as the Benchmark Report stated – in the top 10 per cent of the companies with the most efficient systems, 71 per cent of orders are already processed with zero intervention from on-staff professional buyers. But investing in P2P automation and not applying robotic process automation, AI and machine learning technologies to high-value sourcing (S2C) workflows is a bit like investing in a mine but forgetting to buy the tools you need to extract ore from the rock.
Although it seems procurement can leave its overhead status behind and inform strategic corporate decisions only if it undergoes end-to-end automation, the integration of upstream and downstream procurement processes has stalled since 2017.
As Richard Waugh, vice president of Zycus – frontrunner in the procurement automation space – explains, integrating data along the source-to-pay value chain is key to procurement reaching its full potential. “Upstream needs to flow naturally into downstream and ensuring that the same supplier record is used by both systems not only empowers data analytics but also improves the user experience considerably,” he says.
Zycus has created the Merlin App Studio building ‘botlets’, tailored to your business needs.
Many experts, consultancies McKinsey and Deloitte among them, see data analytics as the major disruptive force in procurement in the next couple of years. They believe that it can eventually become the silver bullet when trying to find a remedy for the two main pain points that CPOs invariably identify: a lack of software integration and poor data quality.
Data analytics touches a variety of activities across different sourcing and procurement functions. As Zycus’s Pulse of Procurement 2019 report points out, it can help monitor supplier performance for early warning signs of struggle or possible failure or capture and analyse key supplier financial and risk profile data via supplier onboarding. Having a central access to all data captured along the end-to-end S2P process and being able to analyse and make predictions based on these data will lead to better decisions and pre-emptive problem solving.
In the case of contract management, one area which can greatly benefit from data analytics, some of the processes, such as negotiating and creating contracts, come under sourcing, while checking whether service-level agreements (SLAs) are adhered to or identifying the need for contractual changes due underperforming suppliers are closely linked to the P2P process. Zycus’s contract management solution, however, will not only monitor supplier performance but also enable you to streamline your processes and make considerable savings on the buy-side by increasing the contract utilisation and compliance of your own organisation.
Spend intelligence that provides businesses with full transparency into how every pound is spent also straddles the whole source-to-pay (S2P) flow. Once new saving opportunities are identified in P2P, they need to be fed back into creating new sourcing events, as does volatility in raw material prices and exchange rates. In a similar vein, variance between supplier-contracted and actual payments needs to be identified across the S2P process in order to be redressed.
By replacing your manual processes with Zycus’s Autoclass Engine you can accelerate the data classification process and further streamline spend analysis, as well as overcome language barriers. Meanwhile, iAnalyse will provide you with a more efficient, automated tool to identify savings opportunities, and iCost will track cost drivers underlying commodity price movements and relate external market intelligence to internal spending data.
A holistic view of procurement, and advanced data analytics, can also help ease the increasing burden of financial regulations, and the extended responsibility of businesses for the ecological and social sustainability of their suppliers. Rather than reacting to supplier non-compliance after it’s already happened, automation allows for greater proactivity in compliance and sustainability, and makes it easier to align vendor scorecard requirements with a company’s corporate social responsibility (CSR) strategy.
Waugh has also pointed out how having actionable, granular data at their fingertips can give procurement professionals more leverage with decision makers and budget owners. A unified view of suppliers and products sourced by the company, for example, may bring procurement to the forefront when pointing out the need for consolidating a fragmented supplier base. Also, cost-modelling software not only enables cost reduction and profitability but can also enhance procurement professionals’ negotiation skills, both with suppliers and management.
In an age where operational complexities and breakneck technological advancement mean that businesses need to make enduring partnerships to succeed, achieving excellence in supplier experience through automation is more important than ever. It helps companies to better engage suppliers and establish balanced, long-term purchasing relationships, where new models of pricing and innovation are worked out together by the partners, and maintaining an efficient vendor ecosystem has priority over a transactional approach to procurement.
To learn more about autonomous procurement through installing a selection of robotic building blocks, or “botlets”, tailored to your business needs, and how to automate your supply chain to provide the corporate value chain with meaningful and actionable data sets, click here.
For Zycus’s P2P Benchmark Report, please click here.
A former investment banker has raised more than $10 million to expand a startup that helps developing-nation farmers who are usinggreen and ethical methods to earn more by linking them directly with food buyers around the world.
After a decade investing in commodity markets at Deutsche Bank and Korea Investment Corporation, Hoshik Shin set up online marketplace Tridge in 2015 to build a network of sustainable producers and link them to buyers at home and abroad.
Food sold on Tridge includes peppermint leaves from Egypt, peanuts farmed in Nigeria and mangoes grown in India and Thailand.
“At the moment, suppliers in emerging countries are so restricted to just meeting local buyers,” said the South Korean entrepreneur, whose venture secured $10.5 million this month from investors to bolster the business.
“Through our platform, they can meet foreign buyers more easily … prices will improve and that gives bigger benefits to both farmers and their employees,” the 42-year-old told the Thomson Reuters Foundation.
Tridge users include the world’s largest retailer Walmart Inc and French supermarket chain Carrefour, said Shin.
Food sellers on the platform, who are based in about 150 countries, can cut out middlemen and traders along the supply chain, who often take a cut and push up prices.
Globally, consumers and retailers are demanding more information about the goods they source, buy and eat, to make sure their production and transportation does not damage the environment, or use illegal and unethical business practices.
In response, manufacturers of household brands, restaurants and other businesses are seeking to attract more customers by offering products guaranteed free of deforestation or slave labour, for example.
Earlier this year, conservation group WWF launched a website that harnesses blockchain technology allowing users to scan a QR code on a product or menu revealing its full history and supply chain.
Seoul-based Tridge makes use of artificial intelligence, data and algorithms, and has about 80 employees in 40 countries verifying that suppliers are trustworthy and ethical.
Food sellers on the platform, who are based in about 150 countries, can cut out middlemen and traders along the supply chain, who often take a cut and push up prices.
“The buyers get cheaper sourcing, and the supplier can get a better selling price,” said Shin.
Once linked, producers and their customers – which include large and small retailers, importers, manufacturers and caterers – can conduct business away from the website, with suppliers paying Tridge for the connection.
The online platform, whose main rival is China’s Alibaba Group, has more than 1,000 food products, 60,000 suppliers and 40,000 buyers.
Last year, purchase requests totalled about $2 billion, Shin said, with a target of $10 billion for 2020.
“We figured that food and agriculture is the most fragmented industry,” he said, noting the system can match sellers to buyers’ specifications “within one second”.
David Dawe, a senior economist at the U.N. Food and Agriculture Organization in Bangkok, said ethical and sustainable food supply chains often incur extra costs, making it hard for them to be competitive.
“Use of new digital technologies can counteract those additional costs, helping such businesses to survive and grow their market share,” he added.
Source: by Michael Taylor, editing by Megan Rowling. Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org
Over the past decades there’s been a dramatic reduction in manufacturing across Europe, as the western European cost structure in particular struggles to compete with international low-income labour. Companies must outsource their manufacturing to low-income countries or shut down entirely.
Robotics, however, makes it possible to relieve people of unnecessary labour, increase productivity and drive revenue. Combining highly qualified factory workers with low-cost automation enables them to compete with low-income manual labour. New generation robotics can handle short production cycles, and those that require lots of minor adjustments. But even today, robotics technology remains a luxury for all but the largest multinationals and confined to a narrow range of industries. The most obvious and prevalent example is the automotive industry, although even here robotics has seen little development for decades. In-deed, robotics technology has seen little improvement overall, focusing on solutions that are remote from humans, costly, specialised and inflexible. These systems require not only six-figure investments, but also many weeks to be set up and programmed. Demanding extensive knowledge in the field, they allow for little flexibility in adjusting and re programming tasks, making the return-on-investment very high.
Franka Emika’s vision is to make robotics accessible to everyone. Our robotic assistants are affordable, as usable as a smartphone, and are designed for direct human-robot interaction while equipped with the highest capabilities. Our users from highly skilled robotics professionals to factory workers in firms of all sizes – are benefiting from this easy-to-use, flexible, cost-efficient and scalable approach.
Our revolutionary robotic system Panda has been specially designed to be deployed within the 3C (computer, communication and consumer electronics) industry. However, it is capable of automating various tasks within any given sector, relieving factory workers of tiresome, repetitive and potentially even dangerous tasks, therefore relocating human resources towards more engaging and impactful assignments.
As mentioned before, robotics has been stagnating for decades. But the industry is now at a stage comparable to the introduction of PCs, smartphones and the internet. Our robot systems can be used by everyone, with no need for specific know-how or integration methods. The future is already here. The plug-and-play or “out of the box” – approach is at the core of Franka Emika’s methodology and design.
Panda offers the easiest and fastest set-up – in under 15 minutes it easily integrates into any environment. It can be operated through any PC or mobile device and can be used by laymen or experts alike. Panda is the first system that can be operated via smartphone-like apps, with an engaging, intuitive dialogue menu. It can learn new tasks in minutes by direct interaction, such as hand-guiding. Apps and tasks can be easily purchased and/or shared through our novel digital robotics platform Franka World. Users can reuse or deploy taught tasks on multiple robots to reduce costs and increase profit significantly. It is a unique, powerful tool, and the first of its kind.
Panda offers human-like agility thanks to a full seven axes of movement, and has an inherent, even adaptive compliance with novel sensor technology, algorithms and machine learning.
Panda is not only revolutionary, it’s also affordable. At less than €11,000 it is considerably less expensive than other players on the market, and can be equipped with apps and services through Franka World.
Our team was among the researchers who invented physical human-robot interaction more than a decade ago. Most robots avail able on the market are pre-programmed positioning machines. We, however, see robots as power tools that serve humans and make their lives easier. More than 15 years of research made this concept possible, but as with any technological revolution, it takes time for it to be fully embraced by the market and the general population.
Panda represents a new generation of sensitive and versatile power tools with a unique sense of touch that supports humans in various tasks. It has shifted the perspective on robots from being dangerous job-killers to interactive devices comparable to smartphones.
Industrial robotics still requires a lot of safety regulation, predominantly the legacy of the metal giants of classical industrial robotics. But you can use our robots with minimised safety guards and in a collaborative way – the specifics depend on the application, the end-effectors, the level of trained personnel and other factors. However, we are on the verge of dramatic changes. It is just a matter of time when cyber-physical systems – devices that connect the digital with the real world – including robotics, drones and autonomous vehicles will be deployed in huge numbers.
Besides technological hurdles – mainly the visual perception – the biggest challenges will and should be the acceptance of the general population, as well as legal and liability issues. Europe is the technology leader in this field, but we are far behind when it comes to educating the population and setting up clear rules. This could be factor which will lose us the next battle in technology and become purely a bystander, as happened in the smart device era.
SMEs seek the simplest available solutions that allow for maximum flexibility and scalability. Most people are familiar with using technology, especially software, as a service (SaaS), and therefore RaaS definitely has great potential.
However, one must differentiate between the entire robot system as a service, which requires a certain logistical effort, and using robot functionalities as a service. For the first time, the latter is possible with Panda’s industrial-suited robot system. Franka World, the revolutionary platform we launched at this year’s Hannover Messe, enables community interaction between researchers, partners, customers, developers, suppliers and even robots themselves, to push the frontiers of Industry 4.0. Besides communication, everyone is able to easily gain integrated access to products, services and management of entire robot fleets, independent of their physical location.
Consequently, RaaS is an inherent part of our business model, and it will follow a similar success story as, for example, when expensive on-premises solutions were supplanted by enterprise resource planning (ERP) systems. We strive for a world where everyone can use a robot, and we can reach that by connecting the world.
When we think of innovation we think of the big picture – the art of what might be possible, often fuelled by large sums of money and leading-edge thinking. But often that means we don’t look at where else innovation may be nurtured and discovered.
For instance, though SMEs tend to get little attention compared to the goliaths of business, they are significant players both in terms of creativity and their contribution to a country’s economy. According to the Federation of Small Businesses (FSB), in 2018 99.9 per cent of businesses in the UK were either small or medium-sized, and they injected a combined turnover of £2 trillion each year into the UK economy. In light of this data, we underestimate the value of SMEs, and how they can progress business development, at our peril.
It’s also important to note that the small business of today can become the large corporate of tomorrow. As they grow, they develop their innovative solutions still more, with more resource and larger networks to tap into. If SMEs are so fundamental to the UK economy, they need support from their larger customers, in good times and bad, to remain in business. This support has the potential to uncover any difficulties before they become a crisis, and to create the environment for ground-breaking solutions for which SMEs are known. However, before any of this collaborative effort can even begin to happen, the issue of an SME’s financial stability must come first and is firmly in a customer’s control. In short, SMEs must be paid on time at an absolute minimum.
Consider this: as an employee, would you be happy to wait 90 days or more before receiving your salary for that month? According to UK government data, analysed by the Chartered Institute of Procurement & Supply (CIPS), large corporations are not always mindful of the needs of their smaller suppliers when it comes to cash flow. On average, and as the data reveals, large businesses pay almost a third (31 per cent) of their invoices late. Delayed payments, lost payments or payments in part cause huge stress to small businesses and can activate thousands of insolvencies each year.
Are SMEs fearful of losing a big customer and reluctant to stand their ground and make a complaint? There is evidence to show that the avoidance of conflict is a big concern. Up to April 2019, the Small Business Commissioner had only received 125 complaints in the 15 months since the post was created, so that is a part of the story. It is a brave SME supplier that questions their large customer’s long payment terms or asks why payment has been delayed yet again.
Instead, the corporate customer should take the lead. This issue of late payments has been ignored for too long, and has largely been accepted as the risk of doing business until now. Understanding the negative impacts of late payments, the government is trying to encourage more responsible, and sustainable business, and fairer treatment of SMEs, through the power of a database which logs the details of those companies that are guilty of poor payment.
A little internet research by an SME into a potential customer is a small price to pay when the alternative could be a catastrophic impact on the future of their business and a brake on impactful solutions that could profit us all.
However, transparency around poor payers is not enough. Though some larger corporates were open about their payment processes, CIPS research found that up until April 2019, a thousand larger companies were ignoring the law and not submitting their late payment data, let alone actually paying their suppliers on time. So the issue is likely to be larger than the existing data shows.
Without proper supervision of the database itself, the government’s attempt to tackle late payments is minimal at best. More punitive measures are an option, but fines for other misdemeanours, such as environmental pollution, are viewed by the larger behemoths as merely the costs of doing business. The imposition of fines for late payment is unlikely to make much difference here either. Instead, the government’s announcement that it will stop working with serial late payers altogether could be a more significant move that creates that much-needed line in the sand about what is acceptable and what is not. This will only work if that commitment is strong, consistent, and rewards good behaviour so other businesses will follow.
Naming and shaming can only go so far. Though openly available to all, the database has not been interrogated as much as it could be to identify the riskier trades, and remains largely untapped by SMEs who stand to gain the most from the data. SMEs working a fine balance between survival and bankruptcy must take some responsibility for how they conduct their business and which customer orders they agree to fulfil. The government database shows who the consistently late payers are, and those that don’t pay at all. A little internet research by an SME into a potential customer is a small price to pay when the alternative could be a catastrophic impact on the future of their business and a brake on impactful solutions that could profit us all. So, the combined efforts of good behaviour from corporates and due diligence from SMEs will create a healthier, more productive working environment.
Small businesses are not small fry, but they are important and unique in their contribution to thriving economies and how products, services and cultures develop. In this David and Goliath situation, responsible business should not just be about meeting the terms of the agreement, or “best practice”, but should become business as usual, where SMEs are paid and nurtured to remain innovative and stay in business.
A note of caution for any customer who pays their supplier upfront for bespoke work, though, and then finds they go out of business. Due diligence is still essential in every contract. As responsible payment takes a hold, we could even move into the realm of early payment one day, keeping SME businesses alive and kicking, and their creativity flowing in the future. But, for now, we must solve the issue of late payments first and walk before we can run.
by Malcolm Harrison, Group CEO, CIPS
The Knowledge Triangle, an EU initiative, aims to foster interaction between education, research and innovation, thereby creating the conditions for increased relevance and utilisation of universities’ activities. In other words, how the programmes of higher educational institutions can be linked more closely to the needs of the market.
One of the projects resulting from this initiative in supply chain management is Framelog. The Framelog project links the knowledge triangle of higher education, business and research for the systematic analysis and development of supply chain and logistics learning programmes. A county’s economic performance is influenced by its overall logistics performance, which in turn is affected by the quality of its workforce at all levels. With the increasing recognition of the importance of the supply chain and an acknowledged shortage of skilled personnel, it is clear that a co-ordinated and collaborative approach to education has to be adopted in order to build the relevant skills and competencies required by employers.
Knowledge Triangle – image provided by European Logistics Association
Several tools resulted from this project. For example, a compendium of good practice that can be used as an inspiration for companies as well as universities to enhance collaboration. Next to this compendium a self-assessment has been developed where the organisation gets a view on the level of their involvement in the knowledge triangle. Together with the guidelines for implementation, these tools can facilitate a better collaboration between the industry, education and research. Using the network of the European Logistics Association (ELA), these outputs were evaluated and valued by stakeholders from 13 countries. These tools can be found in the project results of the project at www.framelog.eu.
ELA, with the tools from the Framelog project, has already developed standards of competences and accredits university programmes using these standards. Bringing the programmes of the universities closer to the needs of the industry from a supply chain perspective and in conjunction with the tools from the Framelog project ,we are one step closer to achieve the general aim of the association: empowering supply chain management.
by Nicole Geerkens, Executive Director, European Logistics Association
Supply chains are the backbone of brand and retailer operations, and more visibility into product quality is essential to their success.
Many industry supply chains, apparel included, have sporadic inspection and product quality records that lead to inconsistent product quality. This creates many challenges for brands and retailers, whose loyal customers trust them to deliver the highest quality apparel and garments possible. Customers also increasingly care more about the values of the brands and retailers they buy from rather than just purchasing on price, so the implications for brands and retailers are clear. They need to excel at responsible sourcing and sustainability, starting with continual improvements to product quality, to keep the customers they have and attract new ones in the future. Supply chain networks need to provide greater visibility into every aspect of operations, from initial sourcing to the last mile, including fulfillment.
Factories that comprise apparel supply chains are remote and rely on manual-based audit, inspection, and quality management systems that don’t scale across multiple locations. As a result, brands and retailers don’t have the visibility they need to track and trace supplier problems that run multiple layers deep into their supply chains. Inspections are often done only at the end of a production run, which further reduces the amount and value of product quality and data that brands and retailers get.
Customers are more discerning than ever about what they wear, expecting brands and retailers to excel at sustainability, responsible sourcing, and, above all, quality.
The quality of inspections also needs to increase, with inspectors better matched to specific product lines based on their expertise, with a better audit trail of their activity to ensure inspections happen when scheduled. Manually based, inconsistent inspection and quality techniques deliver mediocre products that often have customer return rates of 10 percent or more. Not meeting customer expectations for quality is bad enough, but when there isn’t enough audit, compliance, and quality data to verify that sustainability and responsible sourcing is being achieved, customers’ trust in a brand can be impacted. These challenges and more are what make scaling quality in a sustainable world so difficult.
The vast network of factories, suppliers, vendors, and inspection agencies that together comprise apparel supply chains need a secure cloud platform that allows audits, compliance, inspection, and quality data to be scaled globally. There needs to be a cloud-based operating system that enables every member of a supply chain to see, in real time, how their materials’ product quality and production activities impact everyone else. That’s the only way brands and retailers will be able to continually improve product quality while at the same time reaching their sustainability and responsible sourcing goals.
Any cloud-based operating system providing real-time visibility can deliver proactive business outcomes based on predictive analytics and machine learning. Taken together, these technologies integrated on a cloud platform are essential for earning and growing customer trust. The cloud platform or operating system needs to aggregate audit, inspection, and product quality data and continually “learn” from it, constantly looking for new patterns in the data.
Machine learning is the ideal technology to ensure supply chains are always learning, as supervised and unsupervised learning together can spot existing patterns while discovering entirely new relationships in the data. The ultimate goal is to provide every member of a supplier network with the opportunity to be proactive in how they manage and lead every aspect of supply chain sustainability, transparency, and visibility.
Inspectorio was born from the frustrations of serial entrepreneurs and industry leaders who had to deal with the slow, manual process of quality inspections, limited to no supply chain visibility and the impact of product returns. It was launched to automate inspections and create the cloud platform or operating system that supply chains need to improve product quality and sustainability and enable more responsible sourcing.
Inspectorio’s SIGHT and RISE, shown below, are proving to be very effective in creating a strong network effect across every supplier, vendor, factory, and inspection agency that together form diverse global supply chains. The Inspectorio platform delivers the insights needed to take proactive action and attain supply chain financial and sustainability goals at the same time. SIGHT and RISE are purpose built to enable every member of a supply chain to make positive contributions to the entire network.
Knowledge Triangle – image provided by European Logistics Association
The Inspectorio platform is used by many of the world’s most recognized retailers, brands, inspection agencies, vendors, and factories. Forbes recently published an article on how the platform’s use of machine learning is revolutionizing manufacturing inspections, product quality, and supply chain visibility.
Supply chains must continue to improve if they’re going to produce the quality of products customers want to buy. Customers are more discerning than ever about what they wear, expecting brands and retailers to excel at sustainability, responsible sourcing, and, above all, quality. They’re more aware of supply chain operations, even down to the critical last mile of delivery performance. Remote and relying on manual workflows, the majority of factories aren’t up to the challenge today.
Inspectorio is making a change by improving the performance and visibility of every factory. It has created a cloud platform that serves as a supply chain’s operating system, aggregating and analyzing inspection, compliance, and quality data and then providing prescriptive insights that lead to proactive decisions. By using its machine learning approaches to scheduling inspectors and defining when in a production process inspections need to occur, Inspectorio delivers value where it matters most: on the shop floor with every item or garment produced.
by Fernando Moncayo Castillo, Co-founder & Managing Director, Inspectorio
Italian authorities arrested the boss of a company in the southern city of Naples that employed dozens of undocumented workers allegedly making leathergoods for some of Europe’s best-known luxury groups.
Vincenzo Capezzuto, head of Moreno Srl was placed under house arrest on charges of illegal employment and abduction, his lawyer, Rosario Pagliuca said.
Industry and investigative sources said the workshop in Melito, a suburb north of Naples with a large immigrant population, made shoes and bags for groups including Armani, Kering’s Saint Laurent and Fendi, whose products can sell for thousands of euros.
None of the companies confirmed any connection with Moreno and Saint Laurent denied any relationship.
Worldwide the luxury goods industry is estimated to be worth some 276 billion euros ($305.86 billion) in 2019, according to consultants Bain & Co and Fondazione Altagamma, theItalian luxury goods manufacturers’ industry foundation.
However the case highlighted the murky world of sweatshop labour and fly-by-night subcontractors that lies behind many areas of the industry, which draws heavily on the cachet of the “Made in Italy” brand.
As police searched Morena’s premises, some 50 workers, including a pregnant woman and two teenagers were hiding in a storeroom among rolls of leather and piles of shoes and bags before being found and brought out.
Pagliuca defended his client, saying small suppliers were integral to the industry and were often underpaid by the big fashion houses.
“The manufacturing district around Melito is seen as China, where production is decentralised from European industry due to low costs and poor workers’ rights,” he told Reuters.
He also denied workers had been abducted, saying they had agreed to hide to stop the company being shut down. He said they would all be put on regular contracts.
Most large fashion groups have teams of inspectors to ensure contractors respect labour and health and safety rules.
“But the production chain at times is too long. It happens that the original suppliers subcontract to other companies, without the brands knowing,” a person working in the luxury industry told Reuters on condition of anonymity.
Saint Laurent, controlled by French luxury group Kering, said it had no relationship with Moreno. “We are currently investigating the matter,” it said.
In a statement, Armani said Moreno was not one of its direct suppliers or an authorised subcontractors. Fendi declined comment.
Source: by Giulia Segreti in Rome and Amalia De Simone inNaples, editing by James Mackenzie and Alison Williams for Thomson Reuters