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Factory Output, Product Compliance Issues Up During Q3

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Powerhouse manufacturing regions continue full-steam ahead, while ethical compliance and structural safety mars the record for some countries and industries in the third quarter of 2017. Further, the textile industry, in particular, continues to struggle with product compliance, resulting in more issues than any other sector.

These are among the findings from AsiaInspection’s 2017 Q4 Barometer, which tallies performance of a range of industries based on 250,000 inspections, audits and lab tests in 85 countries.

Growth

Inspection data implies China is up 11.6%, putting it on track to best its 6.7% forecast for the year. Cambodia’s inspection and audit volumes are up 22.7% year on year, Taiwan and Thailand continue to expand and Pakistan volumes were up 18.7% in the quarter. Beyond Asia, Latin America shows a 65 percent increase year to date, while Africa continues to strengthen. Textile and apparel inspection volumes for South Africa and Lesotho rose 7.1% and 13.6%, 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 chains,” 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.”

Ethical compliance & structural safety

The pressures of delivering for the critical holiday window has taken its toll on compliance. AsiaInspection has found the number of fully-compliant, or green, companies dropped to 30 percent from 34 percent last year. The number of factories with critical non-compliances shot up by 34.7% compared to a 27.3% increase in 2016. The remaining 35.3% received an “Amber” score, indicating the need for corrective action.

Specifically, China’s performance was among the best at 7.5 out of 10 and South and Southeast Asia scored 7 percent higher over the previous year. Overall, the ethical scores for textile and apparel factories dipped slightly during the quarter to 7.6 from 7.8 during the prior year, just missing the 7.7 cross-industry average.

According to AI factory audits, working hours and wage compliance are the two top ethics issues factories are grappling with, pulling scores down to 6.4 out of 10 from 7.3 in 2016.

Though the percent of factories deemed structurally safe remains at 32 percent from the end of last year to this year, the ratio of factories in need of immediate remediation jumped from 2.5% to 6.7%. In the 61.3% of factories where remediation is still incomplete, medium-term risks were discovered.

Product quality & compliance

AsiaInspection found that manufacturing quality in factory “shows some improvement” in the third quarter, with the total number of products below acceptable levels 4 points lower than the same period last year.

Regionally, quality performance remained pretty consistent, with China making incremental improvements with 19.7% of goods outside acceptable levels from 22.2% in 2016. South Asia performed as expected with a quarter to half of products failing factory inspections in India, Bangladesh and Pakistan.

In the industry comparison, textiles was the worst, owing to the manual, low-skilled nature of the work, the report stated. About 30 percent of onsite inspections uncovered more defects than allowed.

Compliance in lab fared much worse overall during Q3, with 12 percent of lots headed to the U.S. found to contain excessive amounts of lead, cadmium and other heavy metals compared to 8 percent in the first half of this year. Additionally, 11 percent had banned phthalates, an increase over the 8.7%. On the other hand, products intended for the EU produced half the failure rates in the quarter compared to the first half at 2 percent and 5 percent for metals and phthalates, respectively.

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