AsiaInspection Q4 Barometer

06-Oct-2017 Intellasia | BusinessWire | 10:00 PM Print This Post

Manufacturing Peak Season Brings New Quality and Ethical Challenges

HONG KONG–(BUSINESS WIRE)–AsiaInspection (AI), a leading global quality control and supplier
compliance service provider, today announces its 2017 Q4 Barometer:
quarterly insights on outsourced manufacturing, supply chain quality and
compliance trends. AI data is based on 250,000 inspections, audits and
lab testing performed in 85 countries in Q3 2017.

Global Sourcing Trends: Manufacturing Powerhouses Going Strong into
Holiday Season

As the holidays approach and manufacturing peak season has started in
sourcing powerhouses throughout Asia, AI data on inspection and audit
demand reflects the overall trends in the region. YTD data on inspection
volumes in China suggests strong annual growth at +11.6%,
as the sourcing powerhouse is set to exceed its revised 2017 growth
forecast of 6.7%. Southeast Asia is showing robust growth as well, with
inspection and audit volumes rising by +22.7% YoY in Cambodia,
while Taiwan and Thailand show continuous expansion throughout 2017. In
South Asia, Pakistan’s inspection volumes rose +18.7% YoY in Q3 2017,
continuing the growth trend observed by AI last quarter.

Multiple production regions outside of Asia are showing sustainable
growth. As some brands diversify their geographical sourcing patterns, in
Latin America, demand for inspections and audits has increased by +65%
. Meanwhile, African manufacturers continue strengthening their
foothold in the global textiles market, with textile and apparel
inspection volumes rising +7.1% and +13.6% YTD in South Africa and
Lesotho, respectively.

With feet on the ground in 85 countries on all continents, we
have a first-hand perspective on the constant evolution of global supply
,” said Sebastien Breteau, the founder and CEO of
AsiaInspection. “Even though China remains the powerhouse for
consumer product manufacturing, we see regional hubs emerging across the
globe, as brands and retailers diversify their sourcing geography and
adapt to changing macro-economic trends

Regional and Industry Disparity Still the Case for Ethical Compliance
and Structural Safety

The peak season’s tighter shipping deadlines are definitely putting a
strain on ethical compliance. Third-quarter data from AI factory audits
shows the percentage of fully-compliant (“Green”) factories dropping
to 30% across the board
(compared to the 2016 average of 34%), while
the share of factories with critical non-compliances increased by almost
a third, to 34.7% from the 2016 figure of 27.3%. Corrective action in
the medium term is necessary in the remaining 35.3% factories, which
received an “Amber” score.

AI data shows that of all the major ethical issues, manufacturers are
still struggling with working hours and wages compliance the
most, achieving average scores of 6.4 out of 10 in this category
(compared to 7.3/10 at the end of 2016).

After a slip in ethical performance earlier this year, factories in China
seemed to stabilize their social compliance
during this quarter,
with average scores hovering around 7.5/10. Meanwhile, suppliers in
South and Southeast Asia remain on an upward trend, scoring on average
7% higher compared to 2016.

A look at ethical scores by industry shows that the Homeware and E&E
sectors performed best
, scoring 8.1 and 8.0 out of 10 respectively,
several percentage points above the cross-industry average score of 7.7. Ethical
compliance in the toy industry, in the meantime, has been significantly
during 2017 compared to the previous year (7.4/10 in 2017 vs.
8.1 in 2016). Textile and apparel factories saw a slight decline in
ethical scores in Q3, and still fall behind the average, with 7.6/10 in
2017 (vs. 7.8 in 2016).

Meanwhile, structural safety has further deteriorated during Q3 2017,
as seen from AI field data. While the share of compliant factories
remained virtually unchanged compared to the end of 2016, at around 32%,
the ratio of factories in need of immediate remediation has more than
doubled (6.7% in 2017 YTD vs. 2.5 at the end of 2016). Medium-term risks
were found in the remaining 61.3% of factories, where remediation is
still incomplete.

Product Quality and Compliance: Two Steps Forward, One Step Back

Manufacturing quality in factory shows some improvement compared to last
year’s figures: the overall percentage of products outside of acceptable
quality limits in Q3 2017 was 4 points lower YoY compared to 2016.

Individual countries and regions overall maintain their previous quality
performance trends. For example, China’s manufacturing quality
improved slightly,
with 19.7% of products falling outside of
acceptable quality limits in Q3 2017 (vs. 22.2% in Q3 2016). Manufacturing
quality in South Asia remained traditionally poor
, as between
one-quarter and half of products failed in-factory inspections in India,
Bangladesh, and Pakistan.

Product quality by industry continues to reflect the degree of
automation and technology in each respective sector. The Textiles and
Apparel industry, which still heavily relies on manual, often
low-skilled labor, performed the worst
, with around 30% of onsite
inspections finding more defects than allowed during Q3 2017. By
comparison, during the same period, only 16.9% of products came short of
specifications in the more technologically sophisticated E&E sector.

By contrast to the improvement in factory, product compliance in lab
took a hit during Q3 2017
. Having tested thousands of consumer
products, AI labs found that up to 12% of lots intended for the US
market contained excessive amounts of lead, cadmium and other heavy
(compared to 8% in 1H 2017), while 11% contained banned
phthalates (vs. 8.7% in 1H 2017). Products intended for the EU performed
better in lab, with 2% and 5% of products failing to meet REACH
requirements for lead and phthalates, approximately halving the failure
rates compared to 1H 2017.

Product compliance in the toy industry remains a challenge, as
manufacturers targeting the US market struggle to comply with the
recently updated key US standard ASTM F963-16. Tests in AI labs of toys
and children’s products covered by this standard showed that 8% of toys
did not meet the requirements on flame retardancy, 9% failed due to
mechanical hazards, and up to 10% contained unacceptable amounts of
heavy metals.

Eyewear is another product category that struggles with compliance;
optical, chemical and performance tests in AI’s HOKLAS accredited lab
showed that as many as 12% of eyewear intended for the EU market and
28% of those for the US market failed on a number of specifications,
including nickel release
. Among the multiple product types in this
category, ready-to-wear spectacles proved the most vulnerable to
compliance failures, with sunglasses not far behind.


Mathieu Labasse, (+33) 1 7997 9888


Category: BusinessWire, PRAsia

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