Arrow Electronics’ Chairman’s 10 steps for ensuring Chinese supply chain quality

August 15, 2007

From pet food and toothpaste recalls to lead paint in toys, electronics manufacturers wise to also take steps to avoid any potential risk

William E. Mitchell, chairman, president and chief executive officer of Arrow Electronics, Inc. (NYSE: ARW) today offered guidance to electronics manufacturers on how to manage and lessen supply chain risk in China. He shared Arrow’s own internal quality-control practices in response to the recent issues that have surfaced regarding product sourced from the region.

“Companies that want to be successful in China — and around the world — also need to make quality a top priority in order to avoid any potential pitfalls in sourcing product from this region,” said Mitchell.

Arrow has more than 20 locations in China and nearly quadrupled its Asia- Pacific revenues in the past four years from 2002 to 2006. Mitchell said one critical element for success is ensuring transparency throughout the supply chain.

“Arrow’s own internal supply chain controls and our continued commitment to quality assurance can serve as guidance for other companies doing business in this region, such as manufacturers of electronics, ranging from mobile phones to HDTVs and MP3 players,” Mitchell said.

Mitchell offered up 10 steps for other companies to strengthen quality assurance measures:

1. Source from reputable, well-established companies with tight internal controls.
2. Conduct comprehensive background checks, including checking trade references and past business history, of supply chain partners before conducting business with them.
3. Implement site inspections of supply chain partners and find out what systems have been put in place to track quality.
4. Conduct ongoing performance reviews of supply chain partners and engage in ongoing communications with them to benchmark against preset goals and define improvement plans.
5. Only source from companies that are willing to provide a guarantee for products in writing.
6. Be cautious of buying from companies that do not have franchised relationships with distribution partners to avoid a greater potential risk of counterfeit product.
7. Beware of unusually low pricing. While pricing is certainly important, it should not be the only determining factor in business relationships.
8. Look for International Organization for Standardization (ISO) or other equivalent, globally recognized certifications in a supply chain partner’s operations. For example, Arrow’s distribution centers in Asia are certified to ISO9001:2000.
9. Establish relationships with third-party organizations. For example, Arrow often works with testing centers for the Restriction of Hazardous Substances (RoHS) in China to have products tested for compliance to meet customer requirements.
10. Translate quality into measurable and clearly defined targets with supply chain partners and ensure these metrics are communicated regularly with employees.

Source: Arrow.com