In the drive to reduce costs, global supply chains have become increasingly prevalent as manufactures shift production to lower cost countries of Eastern Europe, the Baltic States, and Asia-Pacific. But, managing quality on a global basis poses risks, as many companies have found to their cost.
Too often, global sourcing success is balanced on a knife edge, with the businesses just one shipment away from a catastrophe of reputational damage and corporate or personal liabilities. Recent examples include Mattel which, in August 2007, recalled over 2 million toys because of unauthorised use of lead paint in manufacture and over 18 million due to a choking hazard. In 2006, high profile consumer electronics brands Dell, Apple, lenovo, Toshiba Gateway and Fujitsu recalled around 10 million laptop computers containing Sony batteries after they were found to catch fire.
A survey conducted by the Economist Intelligence Unit in 2005 highlighted that the top reasons given for choosing global manufacturing were the pursuits of new markets and lower manufacturing costs.
Improving product quality and customer service ranked 4th and 5th respectively out of six key strategic priorities. Quality fared equally badly in the decision about where to locate production facilities; supplier quality standards only ranked 5th out of six key criteria, labour costs being the most important. Given that poor quality has the power to destroy value astonishingly quickly; these are, frankly, scary findings.
How to assess your company's ability to manage these risks - and also profit from the opportunities global supply chains undoubtedly offer - is the theme of our feature, Global Quality Challenge by Oakland Consulting (see page 23).