How to Gain Control over Your Asian Supply Chain

Published: 16 Nov 2015 Average Rating: unrated Print

Author: Greg Hallahan (Senior Director of FTI Consulting, Forensic & Litigation Consulting. Oct 15 2015

The story is so well-known that some think it's an urban or Internet myth. It isn't. It's all too true.

Several years ago, an Oregon woman bought an inexpensive Halloween decoration kit at a local Kmart. When she opened the box, a handwritten note fell out. It was written by an inmate in a Chinese prison begging someone, anyone, to let the world know that he and others like him were forced to make the Halloween graveyard kit under horrific conditions in Unit 8, Department 2, of the Masanuia Labor Camp in Shenyang, China.

The incident left Kmart's owner, Sears Holdings Corporation, scrambling to answer media inquiries. Sears officials said the company found no evidence that its Asian supplier subcontracted to a Chinese prison, but that Sears no longer was sourcing from that supplier. The company stressed that its contracts demanded strict adherence to safety and human rights standards, and it issued a statement that its investigation uncovered no violations.

But the damage to Kmart's reputation was done.

The Kmart story is dramatic, but it's not unusual. When companies establish a supply chain in emerging Asian markets, they generally focus their attention on first-tier suppliers. But a bevy of risks lurks below that tier


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