Still afraid of the "S" word?November 18, 2009: 9:00 AM ET
Get over it: There's good reason to share data with your customers, suppliers and subcontractors.
By Jim Lawton, senior vice president, D&B
Toothpaste, dog food or children's toys: Which one of these tainted products could have been prevented from coming to market?
The fact is that all of them could have been stopped – well before any consumers were harmed. How? Manufacturers and retailers could have shared "secrets" about supplier quality, preventing bad actors from getting their wares onto store shelves.
That's a big change from the way most companies operate today. But businesses need to change their ideas about what matters – and bring 'transparency' into the supply chain that tracks the product at each stage of production.
Isn't this heretical? Maybe. But in this global market, product quality and safety need to be front-burner issues. Even one non-fatal recall kills public trust, and with it, a vendor's stock price.
The reality is that in most industries – aerospace and defense, consumer goods, automotive, industrial equipment and more – the manufacturers and retailers use the same suppliers as their competitors. This model makes it the perfect time to create global standards for information about suppliers and the subcontractors producing products, which sometimes, to be honest, aren't very good, or very clean.
For the first time, uniform, broadly provided data can be used by all manufacturers and retailers to create standards to which suppliers must adhere. This is especially important for the four-steps-removed mom-and-pop shops that are often creating key components for name-brand products, with "controls" that are undocumented, and often, ignored.
Case Study: Avoiding supply chain disasters
Let's take the recent Topps Meat Company recall as an example. As reported in The New York Times, more than 21.7 million pounds of potentially contaminated beef products were recalled allegedly due to a breakdown in one of Topps' Canadian suppliers. Contaminations were reported from all over the country and many end-consumers became extremely ill from consuming the beef. As a result, Topps, a producer and distributor of beef products, was forced to permanently close its doors and file for bankruptcy.
Unfortunately, the Topps Meat Company example is not one of a kind. Every few months, there is a massive product recall due to contamination, whether it is from E. coli, lead paint in toys or defective automobile parts. The fact that most companies are unaware of where these contaminations take place is a huge red flag yet a frightening and common reality.
Is it really fair to put all the blame for the sale of the contaminated beef on a company like Topps Meat Company? The answer is yes and no. Creating safe products should be top-of-mind for all companies across the supply chain, not just the one that slaps its label on it at the end. All points of the supply chain need to be re-examined, and information on supplier quality and performance is a critical way to mitigate the ways in which companies take short-cuts to get products to market faster and cheaper.
Let's pretend that we live in a perfect world where all supplier information is available to anyone who might do business with them. Not only would Topps Meat Company be able to track its direct suppliers but all of the tier two and three suppliers that also provide goods for the final product. If one of these suppliers had been flagged in the past for causing a contamination, and if the information was widely available, the whole disaster could have potentially been averted.
Honesty is the best policy
The actual process of aggregating the data is not that difficult; however, manufacturers and retailers need to be honest and forthcoming when providing the information. I'm sure the cynic in the back of your mind just went off like a fire alarm. However, there already is a movement by some industries to share data to protect consumers. One example is the Toy Industry Association (TIA), which represents more than 500 companies that account for approximately 85 percent of all toys sold in the United States, recently partnered with the American National Standards Institute to create the Toy Safety Certification Program.
You may call me extremely optimistic -- maybe even naïve -- that companies will be transparent with the data. But come on. No company wants to see one of its customers hurt from one if its products. Even if it means achieving that goal requires sharing supplier data with competitors.
Lawton is a senior vice president and general manager supply management solutions at D&B (DUN), a leading provider of data and information about corporations.