Don’t Ignore the Role of Small Trading Companies in Supply Risk

Trading companies (often import/export focused) across the metals, resins, ingredients, and other raw and semi-finished material areas were the pioneers of the global sourcing market. For many companies, the role of using traders as intermediary as gone away, as organizations have shifted to sourcing globally (for export) themselves as well as buying locally for regionalized production in global markets. Still, in emerging markets like China, where traders still often serve more roles than just being able to access and sell raw materials from global markets (stockholding, credit, etc.), this intermediary role has not gone away.

And it’s one that could be adding risk to company supply chains as well. The recent Aston Martin counterfeit parts incident highlights why – the raw material in question could have easily come from a trading company, hidden multiple levels down in the supply chain (which the ultimate OEM would know little about).

A CNBC article that we previously referenced sheds further light on the role of trading company as intermediary (and supply risk perpetrator) in this equation:

“Plastics distributors in the area said that counterfeit plastics were available. Three such traders, including Wu Jiarui, whose small family-run shop supplies high-end foreign plastics, said some types of fake DuPont plastics could be about 20 to 40 percent cheaper per ton. ‘DuPont is a relatively more expensive brand, but you can replace it with some other materials,’ said Wu, one of hundreds of plastics suppliers, wholesalers and distributors crammed into a maze of shops in the area, displaying sacks and boxes of plastic pellets in their storefronts.”

Are murky traders playing a role in your extended supply chain that you might not even know about? Don’t fret. There’s something you can do about it. We’ll explore what this is tomorrow.

See also:

The Conspiracy to Adulterate Bond’s Car: Aston Martin Crashes Up Against Chinese Supply Risk

Sustainability in Procurement: Prevent the Next “Bangladesh Factory Fire” From Happening Again

Planning a Long-Term Response to the Bangladesh Factory Fire

Sustainability in Procurement: Why Do Sweatshop Scandals Occur?

How Do You Handle Underperforming Suppliers?

Of Supplier Management…and Horsemeat

Beyond Bird Flu 2.0 – Inoculate Your Supply Base Against Supply Chain Risk

The Policy Supply Chain: Conflict Minerals and Preparing for Mandated Ethical Sourcing

Conflict Minerals Analysis: Readiness, Technology, and Questionable Practices

Conflict Minerals Compliance: Checklists, Templates, Planning Documents

Conflict Minerals Q&A: SEC Enforcement, China, Scrap, and Supplier Views

Conflict Minerals – How To Prepare Your Supply Chain (Part 1)

Conflict Minerals – How To Prepare Your Supply Chain (Part 2)

Supply Performance Management – Introduction

Supply Performance Management: Critical For Procurement Measurement

Re-thinking and Re-claiming “Tail Spend”

Offsets, Local Content, and Supplier Information Management

Offsets, Local Content and Supplier Information Management (Part 2)

Direct Material Sourcing and Supplier Management Platforms (Part 1)

Direct Material Sourcing and Supplier Management Platforms (Part 2)

Can Supplier Management Be Saved? The Problems With SIM, SRM and Risk Management (Part 1)

Can Supplier Management Be Saved? The Problems With SIM, SRM and Risk Management (Part 2)

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