There is a frequent question among the supply-chain manager I am meeting. Should we audit the tier two factories, or even more? Or should we say, should we audit the suppliers of my suppliers?
First we must consider the partial separation between the accountability tier and the production one. Indeed, an importer or a trading adds only to the accountability tier, but have no impact on the production process.
Some claim all tier two suppliers should be audited. But why not the tier three then? Or indeed, all the supply-chain with all its complexity? Obviously, costs of such approach prevent it. It is not realistic to audit the whole supply-chain from the cut&sew unit to the fabric mill, the dyeing unit, but the tag printer too, as well as the producer of the ink for the tag printer or the metal factory for containing the ink…
It seems relevant to focus the resources according to pertinent criteria as the risk or the impact of an order.
According to the risk management, everything clearly identifiable as the component with a logo or a specific design … is clearly the key point. Thus, we could be quite far from the core production, but these factories are nonetheless very significant in terms of image risk. A zip with a logo could be identified in the injection or die-casting factory, then to the polishing … before finally being assembled and then shipped to the cut&sew unit to be put on the garment. Another part of the risk management approach is the industrial process. If looking at the environmental topic, auditing tier one supplier doesn’t necessarily make much sense. The producer of a bag has only very limited impact on environment. Cutting and sewing are the only processes. Auditing this factory and concluding the product is not of pollution concern during its production is wrong. It is in the previous production steps the production may be polluting (dyeing, raw materials…). It is then on these steps the auditing resources should be appointed.
It is more difficult to assess the impact of an order or a brand on a supply chain although it is an important responsibility. Indeed, if a brand uses a material scarcely used by others or from an unusual origin, the impact of the brand on this specific supply-chain could be huge. It can then influence greatly on strengths and weaknesses of this supply-chain. It seems important to know it better then, even if it means going up to the raw materials.
Thus, to the question, “Until which tier should we audit a supply-chain?” we should not answer by a general rule, but by an interrogation on the supply-chain itself to focus the auditing resources where they’ll be the most efficient.