Supply Chain Solutions No.12 – Supplier Risk Assessment

Ensuring there is the correct level of quality managment and compliance to manage your supply chain, achieve business and brand value is critical in todays ever competitive market.  Are you or your team prequalifing suppliers to ensure quality and social compliance goals are achieved?

This guide is to provide an outline to sourcing management and suppliers as to the most appropriate method of gathering quality and social system compliance data on new and existing factories before an order is placed on the manufacturer and to establish the frequency and method of on-going monitoring for existing vendors.

This supplier risk assessment guide acknowledges that there are various approaches to implementing global sourcing compliance and risk management based on market and business values. This tool is to provide a base solution where additional detail unique to the relevant market needs to be applied.

The resultant risk level generated by this guide is for direction only. Any subsequent information or external risks must be considered. This tool must not replace a gut feeling about a sourcing route. If in doubt, please discuss with your ethical and/or quality systems team, or contact IDGC by email info@idgc.co.

This risk assessment guide has been designed to be completed intuitively to help in the allocation of a risk value, these are not comprehensive lists and are for guidance only on initial or re-audit by the sourcing team preferably accompanied by a technical representative. A Risk value is to be selected from a group of four values, for each category. Risk value (1) constitute the lowest risk to the brand, and increase systematically until the highest risk, risk value (4).

New Manufacturer

Completed by the sourcing team with an accompanying technical representative, the tool relies on a minimum amount of information being required before an order is placed:

  • Management system; Known social compliance and product quality monitoring systems
  • Size of buy (FOB); This reflects the cost price of the product to be purchased and an indication of initial quantities. If multiple products are to be purchased, this is the total size of the buy. When this guide is used for children’s apparel, divide the cost by 4 to represent the associated risks to that industry
  • Country of manufacture; Identifies risk with the likelihood and seriousness of violations of local labour law and human rights abuses
  • Workforce Percentage; Takes into account the make-up of the workforce, e.g.% of homeworkers, seasonal labourers, etc
  • Business Makeup; Guidance on the likely exposure of workers to adverse conditions, or risk to the brand. Includes core, promoted, sensitive, emotive and novel products.

The resultant Total Risk generates a minimum action required. This represents the lowest level of agreed information we will accept before an order is placed.

Existing Factories / Repeat Business

The frequency of monitoring social and quality systems compliance is based on the on-going risk represented by the factory to the brand. Information is required on the following before a repeat order is placed:

  • Proposed factory usage; Consider the next season or production period
  • Previous audit history; Non- compliance with our Global Sourcing Principles are differentiated into Low-risk and High-risk, see the previous audit document for classification
  • The resultant Total Risk generates the frequency that the minimum action is required

Assessment Categories and Risk Value

Management System

  • Risk Value 5 – New supplier with no management system
  • Risk Value 3 – Existing supplier with poor management system
  • Risk Value 2 – Existing supplier with good system
  • Risk Value 1 – Existing supplier with recognised accreditation from a reputable auditor

Size of buy (FOB)

  • Risk Value 5 – Total order value greater than US$250,000
  • Risk Value 3 – Total order value greater than US$150,000 less than US$249,999
  • Risk Value 2 – Total order value greater than US$80,000 less than US$149,999
  • Risk Value 1 – Total order value greater than US$1 less than US$79,999

Country of Manufacture

  • Risk Value 4 – New sourcing market, less than two years in the region
  • Risk Value 3 – Established sourcing market with no regional sourcing office
  • Risk Value 2 – Developed sourcing market with a regional sourcing office
  • Risk Value 1 – Within same geographic and legal governance region, speaks the native language

New = New Labour laws, limited infrastructure and multiple ethical non-compliances
Established = Semi-developed labour law governance, established infrastructure and ethical compliance.
Developed = Developed labour law governance, infrastructure and ethical compliance.

Workforce Percentage

  • Risk Value 4 – Greater than 50% Homeworkers, Seasonal or Immigrant workers
  • Risk Value 3 – Greater than 25% less than 49% Homeworkers, Seasonal or Immigrant workers
  • Risk Value 2 – Greater than 5% less than 24% Homeworkers, Seasonal or Immigrant workers
  • Risk Value 1 – Less than 5% Homeworkers, Seasonal or Immigrant workers

Business Makeup

  • Risk Value 4 – Manufactures infants, kids and core ranges, products containing licensed branding, the major customer is you, and processing involves chemicals
  • Risk Value 3 – Manufactures basic fashion ranges and you are a minor customer
  • Risk Value 2 – Semi-automated manufacturing eg. Sweaters and you are a minor customer
  • Risk Value 1 – Fully automated manufacturing low labor and you are a minor customer

Total Risk Level = the total accumulated points of the assessment categories

Red; 19-22 Risk Value Points
Amber; 15-18 Risk Value Points
Yellow; 10-14 Risk Value Points
Green; 5-9 Risk Value Points

Minimum Action Required based on total risk level

Red Risk Level – Internal managed assessment with 1-year re-audit intervals

  • Safety Audit – Approval and/CAPAR conducted by an internal QA auditor
  • Quality Management System – Approval and/or CAPAR conducted by an internal QA auditor or an accredited 3rd party
  • Ethical Compliance (Company Standard) – Approval and/or CAPAR conducted by an accredited 3rd party
  • Ethical Compliance Licensed Branded – Approval and/or CAPAR conducted by a nominated 3rd party auditor
  • Re-audit interval after CAPAR date (maximum 6 months), followed by 1-year re-audit

Amber Risk Level – Internal or accredited 3rd party assessment with 1-year re-audit intervals

  • Safety Audit – Approval and/CAPAR conducted by an accredited 3rd party or internal QA auditor
  • Quality Management System – Approval and/or CAPAR conducted by an internal QA auditor or an accredited 3rd party
  • Ethical Compliance (Company Standard) – Approval and/or CAPAR conducted by Internal QA auditor
  • Re-audit interval after CAPAR date (maximum 6 months), followed by 1-year re-audit

Yellow Risk Level – Internal managed assessment with 2-year re-audit intervals

  • Safety Audit – Approval and/CAPAR conducted by accredited 3rd party, or self assessment after accredited training
  • Quality Management System – Approval and/or CAPAR conducted by an internal QA auditor or an accredited 3rd party, or self assessment after accredited training.
  • Ethical Compliance (Company Standard) – Approval and/or CAPAR conducted by accredited 3rd party / self-assessment
  • Re-audit interval after CAPAR date (maximum 6 months), followed by 2-year re-audit, all ethical compliance assessments ‘MUST’ remain current and meet company guidelines

Green Risk Level – Internal managed assessment with 2-year re-audit intervals

  • Safety Audit – Approval and/CAPAR conducted by an accredited 3rd party, or self assessment after accredited training
  • Quality Management System – Approval and/or CAPAR conducted by an internal QA auditor or an accredited 3rd party, or self assessment after accredited training
  • Ethical Compliance (Company Standard) – Approval and/or CAPAR conducted by an accredited 3rd party / self-assessment
  • Re-audit interval after CAPAR date (maximum 6 months), followed by 4-year re-audit, all ethical compliance assessments ‘MUST’ remain current and meet company guidelines

Before an order can be placed to the new factory ensure that all criteria have been met for each risk level. Each assessment needs to have been conducted, approved and/or a CAPAR issued that is not considered critical. Assessments from approved 3rd parties may equally be submitted to meet requirements.

ID Global Concepts has been involved in sourcing and quality management of fabric, accessories, and apparel for many years. We can add value to your operation either through consultancy or management contract to ensure your business has the best practice quality systems that are the right fit for your business and meets your value expectations.

Below are the retailer’s ID Global Concepts have delivered quality apparel and accessories to over the last ten years;

Macy’s, Urban, Sears, Marks & Spencer, Myer, Kmart US & Kmart Australia, Dunnes Stores, Debenhams Monsoon Accessorize, Asos, Witchery, Brown Sugar, RM Williams, Coles, Chloe, John Lewis, Disney, Next, Firetrap, Lonsdale, Postie, ASDA, Harris Scarf, River Island, Tesco, Woolworths, Walmart, Glassons, Babies’R’Us, New Look, Target US & Australia, Primark, David Jones, Best & Less, Sophie, Yakka, Top Shop, BHS, Burlington, BigW, Oasis, JayJays, Blue Illusion, Driza-Bone, Just Jeans, Volcom, House of Fraser, Pumpkin Patch, Suzanne Grae, Pelaco, Laura Ashley, Sportsgirl, Ted Baker, Truetex, TableEight, French Connection

If you would like to learn more or wish to discuss other supply chain opportunities, please email us at info@idgc.co.

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