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How to Avoid a Tainted Product Disaster


Last updated 7/13/2010

Do you know what's really going on in the factories of your overseas manufacturing partners and suppliers? If you can't answer that question with a confident yes, your brand could be at risk. So could your profits. In fact, so could your customers—not to mention their kids and pets. Just ask the companies involved in these recently reported tainted product cases: Menu Foods (the Canadian pet food company whose contaminated products affected many cats and dogs), Colgate-Palmolive Co. (whose brand was sullied due to a contaminated "counterfeit" version of its toothpaste), and any store that had to pull the popular Chinese-made, lead-painted Thomas & Friends wooden train sets off their shelves.

These kinds of problems aren't new—think back to the Tylenol crisis in the early '80s—but globalization has made them far more likely. With today's far-flung manufacturing facilities and ever-present terrorism-related security risks, global entrepreneurs face huge obstacles. Savvy leaders know that achieving a high level of transparency will help them decrease the likelihood of their products ending up in a recall report on the national news. Think of it as a "vaccine" to protect your products (and your brand’s reputation) from contamination.

Here are six reasons transparency is key when running a global business:

1. Transparency will help you protect your mark. Your intellectual property—patents, copyrights, and trademarks—are some of your company's most valuable assets. Each time you license your intellectual property to a third party or engage a factory to produce goods that carry your logo, you are taking a risk that your mark will be misused or misappropriated. The only way to monitor this key asset is by establishing a system of transparency through contractual arrangements and regular monitoring. And while no self-monitoring system will guarantee total brand protection, without making your best efforts in this regard, the likelihood increases that you will end up seeing poor-quality, counterfeit goods bearing your intellectual property in the marketplace.

2. Transparency will help you manage the public's opinion of your company. The other important manifestation of your brand, your company's overall reputation among the consumer public, can be protected only if you take care to keep ethics high on your corporate agenda by employing sound corporate governance protocols. Written ethics policies, self-monitoring programs, and publication to your business partners and contractors are sound ways to infuse transparency into your operations in order to avoid both the act and the appearance of impropriety.

3. Transparent companies can more easily protect their goods from harmful outside elements. In a post 9/11 world, security has become synonymous with transparency. Supply chain transparency has become mandatory for U.S. importers and is fast becoming a requirement in ports throughout the world. Because the government cannot possibly inspect every cargo shipment that enters U.S. ports, the onus is now increasingly on global entrepreneurs to carefully monitor their own supply chain activities. To ensure that a container holding your goods is not hijacked by international terrorists and turned into a conveyance for weapons of mass destruction or contaminated in some other way, you must be able to trace your goods as they progress in production from inception to delivery. Companies with secure and transparent supply chains can more easily monitor and test their products at every level.

4. Transparency is a requirement if you want to take advantage of certain trade programs. Increasingly, governments are requiring importers to prove up front that they have sufficient internal controls and procedures to thwart any attempts to breach cargo security. To be eligible for trade programs and free trade agreements, importers are expected to prove that their transactions have complete transparency by mapping out and self-monitoring every stage of production. In return, organizations that qualify for these programs receive ancillary benefits such as increased efficiencies, decreases in waste and redundancies, the potential for cost savings, in-time delivery, and fewer delays.

5.Transparency can help you be prepared. Global traders must prepare for unanticipated contingencies. Transparency plays a role in readying your company to handle contingencies such as currency crises, political instability, labor unrest, and natural disasters. Every member of your team must have his or her marching orders and be able to react quickly to thwart the effects of surprise problems and issues that affect the flow of business.

6.Transparent global entrepreneurs create more successful partnerships with offshore partners. Nothing replaces the intimacy of personal contact in business relations. By letting your offshore strategic partners know who you are, what you can do, and that you are available to them 24/7, you engender an atmosphere of trust and mutual reliance. This can be accomplished only by breaking down cultural and geographic barriers and opening yourself up in a personal way. Without this added element of transparency, I don't believe that these mutually beneficial business and personal relationships would continue to thrive.

Concluding Thoughts

The key to achieving transparency lies in the details. Global companies that have achieved transparency keep detailed records, fill out eligibility forms properly, and are prepared to back up any statements hard evidence. They also act ethically in all transactions and run the most secure supply chains. Transparency truly can be the defining element that separates the successful global companies from the failures in the global market.

While there is no guarantee that what happened in the pet food, toothpaste, and toy cases can’t happen to your business, if you follow the rules of transparency, you can greatly reduce your risk of running into similar problems and better detect and handle any problems that may occur.