What Bush’s Import Safety Plan Means to Supply Chain Managers

Information technology executives will have to manage another layer of supply chain complexity if the Bush Administration’s product inspection proposals announced November 6 are enacted. That includes allowing the federal government greater visibility into the practices of American manufacturers that farm out factory work to subcontractors abroad. The proposals also would be expected to add compliance requirements to companies’ product quality standards.

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It all adds up to management of more data, for longer periods of time, and the ability to get to that data faster in the case of a product recall, says Joe Barkai, a practice director at Manufacturing Insights.

After a rash of high-profile product recalls of toys, toothpaste and other tainted goods imported from China and other countries, President George W. Bush today unveiled a plan to bolster federal product safety inspections abroad. The plan, some of which requires Congressional approval and some which the Administration can enact by itself, will impact IT leaders who manage or work with global supply chain systems.

“For many years, we have relied on a strategy based on identifying unsafe products at the border. The problem is that the growing volume of products coming into our country makes this approach increasingly unreliable,” Bush said in a statement.

The new Import Safety Action Plan calls for identifying and targeting high-risk points in the global supply chain for products made for export to the United States; increasing the presence of American product inspectors overseas; creating real-time data exchanges among exporters and federal agencies about products approved or rejected for shipment; and empowering the Food and Drug Administration to impose a mandatory recall of products deemed dangerous. While consumer safety advocates and some in Congress have urged more funding for product inspections, Bush did not address funding in his announcement.

The changes, if implemented as described, would increase the federal government’s involvement in the overseas legs of global supply chains which companies now must engineer to get goods sourced, assembled and delivered around the globe.

The effect would be to force manufacturers to give their suppliers more time for production to factor in the need for increased testing, said Simon Jacobson, senior research analyst at AMR Research in Boston.

“If the administration succeeds in increasing testing, there’s an implication for lead times you need to give your suppliers. More testing takes more time,” Jacobson said. He added that for American manufacturers working with factories in China, “companies will say, if you want to be our supplier, here’s what to do. CIOs will want to monitor what those companies are doing and catch defects before products get shipped.”

Barkai said that Bush’s proposal is more about after-the-fact enforcement than about preventing product defects. “Companies will need more visibility into the internal inspection processes of their foreign manufacturers. It might mean US companies don’t do business with overseas companies that can’t or won’t provide that visibility,” said Barkai, whose consulting firm, like CIO is owned by International Data Group.

He added that: “Maybe this will result in companies sourcing no longer on lowest cost, but on what those suppliers can provide in terms of product testing and reliable data about product testing. Lowest cost suppliers may actually cost more, if you consider the lifetime cost of your product. Recalls are expensive.”

Michael Goldberg contributed to this report.