Heightened publicity over product recalls has made product safety, quality and environmental standards in emerging markets a hot-button issue. According to a new "Innovation in Emerging Markets" annual study by Deloitte's Global Manufacturing Industry Group, roughly two-thirds of both developed and emerging market executives surveyed said that over the past 12 months these issues have become more important when global companies choose emerging market suppliers. As a result, manufacturers are taking additional steps to address the risks.
The Deloitte study, which captures the views of more than 650 global executives, explores how manufacturers from developed and developing countries view and handle their exposure to risk stemming from sourcing in emerging markets.
Just over one-third of the developed market executives surveyed felt that their companies had been very successful in sourcing from emerging markets. These companies appeared to be more attuned to the risks involved. Their boards of directors and senior management are more involved in product safety and quality issues, and their companies work closely with their suppliers to inspect supplier facilities more often.
"Our research found that executives from both developed and developing markets anticipate a greater demand for higher standards and transparency," said Craig Giffi, Deloitte's vice chairman and U.S. Consumer & Industrial Products industry leader. "In addition to upgrading standards and testing, many viewed the need to provide customers with more sourcing information to allay fears about safety, quality and environmental standards."
Adhering to higher standards may also make it easier to attract and keep global customers, especially when those standards are contrasted with problems afflicting competitors in the local market as well as in competing emerging markets.
The study indicates that successful manufacturers have been engaged-or will likely engage-in other risk management activities, including:
· More frequent visits to suppliers' facilities.
· Willingness to address managerial skills and working conditions during visits.
· An expectation that testing levels will increase significantly.
· Contract requirements that call for more visits to facilities and for the approval of subcontractors.
To view the "Innovation in emerging markets 2008 annual study," visit www.deloitte.com/manufacturing.