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How AI-Powered Risk Assessment Advances Quality & Compliance Oversight

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For retail and consumer goods companies, managing global supply chain networks is only becoming more complex. Covid-19 era disruptions—including transportation delays and factory closures—require retailers to have a real-time pulse on where garments are in the production process.

At the same time, firms are facing increasing scrutiny over their labor compliance from consumers, regulatory bodies and NGOs, further necessitating full visibility over manufacturing operations. “Consumers have ever-increasing standards,” said David Klein, co-founder and president of Inspectorio, a quality and compliance managing platform with some of the world’s biggest brands as its customers. “And they’re not willing to forgive—or at least they’re less willing to forgive—when these standards are not being met.”

Compliance is not just about meeting goals and staying in shoppers’ favor. It’s also a competitive edge for brands that are vying for the same wholesale or vendor accounts. “To stay in the game, you need to comply,” said Klein. “But in order to acquire more customers, you actually need to exceed standards.”

Aside from social and environmental compliance, companies must also keep a tight handle on quality. If products aren’t up to par, retailers could risk missed sales, rising returns and lost loyalty, all of which can impact a company’s long-term financial forecast.

A single brand often has at least hundreds of suppliers, if not thousands. Most companies don’t currently have sufficient compliance oversight to ensure there are no “broken points” in their supply chains, Klein said. And as production networks broke down during Covid-19, the blind spots in manufacturing visibility became clearer. While companies may have had a strong pulse on certain products or certain factories, it was often not the case across the board.

“The pandemic is really a stress test where, probably for the first time in their history, companies are required to have immediate information of every single SKU [stock keeping unit] in all of their factories in order to make immediate decisions on every style produced, about to be produced, or that was already ordered,” Klein said. It took firms weeks or months to build up the level of visibility needed to navigate Covid-19 challenges, he added.

To inform their decision-making, companies first need data. This includes having trustworthy details about a particular facility’s performance and whether it is meeting standards.

It’s nearly impossible to manually manage the sheer amount of data needed—not only to keep tabs on each supplier, but also to drive improvements. By leveraging technology, companies can centralize information so actionable insights are accessible to all parties round the clock.

“You’re required to work as a team across all of your stakeholders,” said Klein. “There are different levels of accountability spread around all the different stakeholders, and in order to improve across common expectations, everybody needs to have access to the same information—that single source of truth.”

Inspectorio platform

Inspectorio’s SIGHT & RISE platforms—which respectively cover quality and compliance—are powered by artificial intelligence and machine learning. AI takes some tasks off humans’ plates and speeds up processes. For instance, a machine can run calculations and consider an array of hundreds of statistics and variables much faster and more comprehensively than a person. Klein pointed out that despite industry executives’ expertise, many of their choices remain subjective. By handing off some decision-making to an AI, companies can get a truer read on the risk of a particular facility and make more objective judgment calls.

Determining risk is valuable, since it allows for more adaptive oversight practices. Companies can set risk thresholds for a particular product or factory, so if a manufacturer is deemed low risk, they might be able to self-report, while facilities that are higher risk may require a third-party or internal evaluation. The result is improved quality and compliance with the added benefit of reduced costs, reversing the existing trend of bigger budgets for monitoring with minimal impact.

Additionally, these scores are shared with the factories, allowing them to identify areas for improvement and work toward reducing their riskiness.

“Factories know the risk score at all times, including how it’s changing, but also what are the underlying causes of a particular score or a particular change,” Klein said. “With this information, it means that they can actually proactively work towards addressing those issues. They understand what is moving the needle.”

Click here to learn more about Inspectorio.

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