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Mitigating Supply Chain Risk for Non-Food Retailers

Paul Woodward
Senior Director, Retail Supply Chain Business

The following is the first of three posts providing insight to brand compliance issues facing non-food retailers, contributed by industry expert Paul Woodward.  Coming soon, we will discuss priorities for building supplier transparency, as well as current industry standards for best-in-class business processes and cloud solutions.

Virtually all retailers face brand compliance and product verification issues. Industry attention has historically focused on food retailing, partly because of the public health issues involved, and partly because the product and labeling laws that pertain to food are stricter and more complex than they are in the non-food market space.

Over the past three or four years, however, consumers have begun to expect—indeed, to demand—more knowledge about all the products they buy, such as whether the products are ethically sourced and fair traded. While that has specific application for non-food formulated products like cosmetics and pharmaceuticals, it increasingly applies to apparel and textiles as well. Almost immediately after the 2013 Rana Plaza garment factory collapse in Bangladesh, for example, consumers began asking retailers—including grocery retailers with fashion departments, such as Tesco and Walmart—what practices they had in place to ensure that the products they sold were being ethically manufactured.

More recently, we’ve seen a need to guard against criminal or deceptive practices regarding product in the supply chain. There have been instances of suppliers changing the sourcing of the materials they use in manufacturing in order to reduce cost and failing to notify the retailer and, ultimately, the consumer. In August of this year, for example, Target discovered that 750,000 sheets and pillowcases supplied by an Indian textile manufacturer had been mislabeled as Egyptian cotton. Target pulled the products from its shelves, is offering refunds to customers, and is phasing out all products from that particular manufacturer.1

In addition to compromising product quality, unannounced manufacturing material substitution can give rise to issues of actual consumer safety. This is self-apparent in products like cosmetics or medication, but it can happen in many other areas. In one of the most widely reported cases, during the holiday shopping season of 2007, Mattel Toys had to remove millions of Chinese-made toys from shelves when it was discovered that the paints used to decorate the toys contained excessive levels of lead. Children of course are likely to place small toys in their mouths, in the process ingesting the paint. Lead poisoning in children can cause neurological damage, delayed mental and physical development, learning deficiencies, and other problems. In addition to lost sales, refunds, and widespread unfavorable publicity, Mattel and its Fisher-Price subsidiary ultimately paid a $2.3 million civil penalty as part of an agreement with the Consumer Product Safety Commission.2

While neither Target nor Mattel was directly at fault in these incidents, the consumer sentiment is essentially, “your product, your problem.” You as a retailer are responsible for your brand promise, and you are responsible for making certain that promise is kept sacred. Doing that, given the complexity of today’s global supply chains, requires retailers to invest in solutions that deliver transparency and capture information about products and their components throughout the supply chain.

To protect their business and deliver on their brand promise, non-food retailers should consider investing in a brand compliance lifecycle solution. As you consider your options, basic considerations should include: integration across the enterprise (from merchandising to finance) ease of access and information capture, level of collaboration between retailer and suppliers, speed of data availability, ability to ensure compliance with regulations/legislation, ongoing maintenance costs and continuous improvement.

In the case of non-food the role of brand compliance tends to be less reactionary and more proactive. Your brand promise and key differentiators will dictate the level of risk you have with various suppliers. Luxury retailers, for example, tend to have a low tolerance for risk when it comes to source materials. If your brand is focused on sustainability and good stewardship you’re likely sensitive about manufacturing practices. In either scenario having the ability to score and rank your level of risk with various suppliers and audit them (more on this in a later post) is an essential requirement.

Regardless of your risk tolerance your brand compliance system should allow suppliers to enter data and the system should automatically validate the data against the ever-growing body of legislative and regulatory requirements. This will ensure improved product quality and speed to market. Entering data at the source removes administrative overhead from the retailer. Real-time updates and visibility to changes improves data reliability and ultimately, in the case of an issue, enables retailers to respond rapidly to claims relating to products or the supply chain.

For more information on the role of brand compliance in retail watch this blog or check out:

Learn more about Oracle’s best-of-breed Brand Compliance Cloud Service.

  1. “Target Supplier Welspun Falls Most in Decade After Cotton Dispute,” Bloomberg News, August 22, 2016. http://www.bloomberg.com/news/articles/2016-08-22/target-supplier-welspun-falls-most-in-a-decade-on-cheap-sheets
  2. Kerr, Jennifer, “Mattel fined $2.3 million for lead paint on toys,” Associated Press, June 5, 2009. http://usatoday30.usatoday.com/money/industries/retail/2009-06-05-mattel-fine_N.htm

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