Cracking Down on Compliance

When it comes to vendor compliance, complacency is not an option. Managing and monitoring trading-partner performance, specifically as it relates to product quality, consumer safety and social responsibility, is a critical concern for retailers and manufacturers. Increasingly, retailers are facing product recalls and public-relations debacles due to the inappropriate actions of suppliers. Sue Welch, CEO of TradeStone Software (Gloucester, Mass.) talked with Chain Store Age senior editor Connie Gentry about technology that can enhance a retailer’s visibility into its suppliers’ operations.

Chain Store Age: The economical advantages of global sourcing have been severely compromised by supplier non-compliance. What can retailers do to minimize risks?

Sue Welch: For starters, they can rethink their approach to design and production. In the past, compliance and quality testing were done outside the realm of product design—typically when a product was finished but not when the components were being defined. We’ve added a new tool to our Product Lifecycle Management (PLM) suite that addresses this and pushes visibility and testing back to the component level. Our TradeStone Factory Footprint has embedded quality and compliance testing as part of the original design and purchasing process.

CSA: Could this help to prevent product recalls?

Welch: Certainly. When a finished product is tested, it is too late in the process to make corrections. The TradeStone Factory Footprint enables retailers to isolate a problem to the component level before it goes through production, which keeps bad products from ever going to market. This is useful for all types of compliance issues, not just the potential safety hazards that have been making headlines.

CSA: Can you give an example of a situation that would be costly for the retailer but would not warrant a product recall?

Welch: Think about fashion apparel.

For instance, a retailer orders a sweater in assorted colors, but each color coordinates with complementary items to create an appealing floor set and to sell multiple pieces as an ensemble. If one of the colors is off, it can impact the sales not only of that one piece, but also on the coordinating items, and therefore the entire display is less effective.

CSA: How does a retailer deploy the TradeStone Factory Footprint?

Welch: It has a very simple Web-based architecture and can operate as either a stand-alone or a fill-in tool. It is especially useful for first-time sourcing by new employees or with a new trading partner because the system automatically assesses product information, where the supplier is located and regulatory compliances relative to the import country to establish appropriate trade requirements.

CSA: Have you begun deploying it for retailers and how long does a typical implementation take?

Welch: We began deploying it in the third quarter of this year. Kohl’s was one of the first domestic retailers to use it and JD Williams/N Brown, one of the largest catalog and Internet retailers in the U.K., also deployed it. As for timing, it can take anywhere from four to 12 weeks to deploy. We set it up on the Web for the retailer and bringing on their suppliers is very easy because it is a simple, step-based program that only requires the supplier to have a password.

CSA: Are there applications for products other than apparel?

Welch: Absolutely. We are working with one of the largest electronics retailers in the United States, as well as a $50 billion hypermarket out of France that has a 90% grocery/10% nonfood product mix. Food retailers have to be able to trace product back to its origin and the TradeStone Factory Footprint builds a product history that identifies the exact factory and lot number.

CSA: In addition to problems with products, there are compliance issues relative to social conditions—such as the alleged employment of children in factories in India that produced clothing for Gap. How could your technology be used to prevent this?

Welch: What happened in India was a complete aberration. Gap is taking heat for a tragic situation that was caused by the supplier’s disregard for the processes Gap put in place to be sure that child-labor abuses don’t occur. This was more a human problem than a technology one as all safeguards were bypassed by an unscrupulous person that Gap had apparently ceased doing business with.

That said, the TradeStone Factory Footprint can monitor the audit results of factories, suppliers and agents on a regular basis to ensure that compliance—legal, social and ethical—is embedded into every retailer’s merchandise and sourcing process.