Do you know what’s really going on in your overseas partners’ and suppliers’ plants? Are you sure? Many companies are unable to answer with a confident yes. That’s bad news. In a time when companies are focused on getting more for less, it’s time to remember your Ps and Qs—“P” is for product, and “Q” is for quality. If you aren’t certain that everything possible is being done to ensure the quality of your products overseas and at home, your brand is at risk. So are your profits. In fact, so are your customers, not to mention their children and pets.
Just ask the companies involved in recent scandals: Menu Foods, the Canadian pet food company whose contaminated products affected numerous cats and dogs; Colgate-Palmolive Co., whose brand was sullied due to a contaminated “counterfeit” version of its toothpaste; and various retail stores that had to pull some popular Chinese-made toys from their shelves due to the presence of lead paint. In all of these cases product quality slipped, resulting in public-relations nightmares and real risks to public health.
The leaders of these companies would no doubt agree that if there were a 100-percent foolproof way to ensure the quality of their products, they would take it, no matter what the price. There’s no such thing as “foolproof,” of course, but you can reduce your chances of having your products contaminated and distributed, and transparency is the magic word.
These kinds of problems aren’t new—you may remember the Tylenol crisis in the early 1980s—and globalization has increased their likelihood. With today’s far-flung manufacturing facilities and the ever-present threat of terrorism, global entrepreneurs surely have a tough row to hoe. Savvy leaders address these obstacles by striving to create transparent companies and supply chains.
Following the tenets of global trade, explored in my book Doing Business Anywhere (Wiley, 2007), will help companies achieve a level of transparency that decreases the likelihood that their products will end up in a recall report on the national news. Consider it a “vaccine” that protects your products from being contaminated—and not incidentally, does the same for your reputation.
Transparent companies are connected at every level. Department A knows what Departments B and C are doing, and that’s not all. Today, companies involved in international trade must ensure that their own operations can withstand scrutiny by investors and regulators, and must also push this culture of openness all the way back down their supply chains. Failing to do so is simply too risky.
A company responsible for bringing goods across borders must be able to ascertain who is supplying what to whom throughout the manufacturing, shipping, and distribution processes.
While I can’t say what happened in the pet food, toothpaste, and toy cases, I’m convinced that using the tenets to create a transparent company can reduce your risk of running into similar problems. And if problems still occur—remember, there are no guarantees— they will be easier to detect and handle.
Here are six reasons for transparency in a global business:
Transparency will help you manage the public’s opinion of your company
A good reputation is everything. A bad one, deserved or not, is devastating. Your reputation can be protected only by keeping ethics at the top of your agenda and employing sound corporate-governance protocols. Transparency in operations is the only way to ensure that your company does not run afoul of its own ethical dictates. Employ written ethics policies and self-monitoring programs, and publish them to share with your business partners and contractors. This will infuse transparency into your operations and help you avoid impropriety as well as the appearance of it. Remember, perception is reality, or might as well be.
It will help you protect your mark
Your company’s intellectual property—your patents, copyrights, and trademarks—are some of your 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 run the risk that your mark will be misused or misappropriated. We’ve all seen how damaging that can be. To avoid having your logo associated with illegal or unethical activities, establish a system of transparency through contractual arrangements and regular monitoring. While no self-monitoring system will guarantee total brand protection, it will surely minimize your risk of seeing poor-quality counterfeit goods bearing your intellectual property in the marketplace.
Transparency is a must to take advantage of certain trade programs
Increasingly, businesses operating internationally are looking to the cost-saving benefits provided through preference programs and free-trade agreements. To be eligible for trade programs and free-trade agreements, you must prove that your goods meet strict eligibility requirements through origin verifications and production documentation. Your rewards for maintaining the required degree of transparency? The strategic advantage that comes with decreased trade barriers.
Remember the Boy Scout motto: “Be prepared!” (Transparency will help.)
All global traders must prepare for unanticipated contingencies. Transparency will help your company be ready to handle a host of problems: currency crises, political instability, labor unrest, and natural disasters, to name just a few. Each member of your team, at all levels, must act quickly to thwart the effects of surprise problems and issues that affect the flow of business. By keeping your options open and your alternatives transparent, you are assured that every member of your team has his or her marching orders and can respond immediately whatever crisis presents itself.
Transparent global entrepreneurs have more successful relationships with offshore partners
There is no substitute for the intimacy of personal contact. Meet regularly with your strategic offshore partners. By letting them know who you are, what you can do, and that you are available to them 24/7, you create mutually beneficial relationships based on trust and mutual reliance. This requires breaking down cultural and geographic barriers and opening yourself up in a deeply personal way.
You’ll more easily protect your goods from outside dangers
In the post 9/11 world, security and transparency have become synonyms. Supply-chain transparency is becoming mandatory for U.S. importers and is fast becoming a requirement for importing almost everywhere. The government cannot possibly inspect every cargo shipment that enters U.S. ports, and that means the onus is increasingly on global entrepreneurs to 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 from inception to delivery. Increased transparency will also benefit your organization through increased efficiencies, decreases in waste and redundancies, and fewer delays.
Transparency means keeping detailed records, properly completing eligibility forms, and being prepared to back up any statements you make with evidence of the veracity of your claims. It also means acting ethically in all transactions and running the most secure supply chains.
Quite simply, transparency helps you guarantee the quality of your products and protect your brand. If you’re not running a transparent company, then you aren’t doing everything possible to avoid the public-relations disasters that can result from scandals, security breaches, or ethical breakdowns. Transparency is the defining element that separates successful global companies from the failures. The global marketplace is a tough taskmaster, so make sure you’re up to the challenge.
About the author
Thomas Travisis managing partner at Sandler, Travis & Rosenberg, an international trade and customs law firm. He serves as chairman of Sandler & Travis Trade Advisory Services, which provides management services on customs compliance and security matters for global companies. For more than 30 years, he has advised multinational corporations and governments on global trade issues and represented their interests before the World Trade Organization, the World Customs Organization, the U.S. Congress, U.S. federal agencies, and the revenue and customs services of many nations. Travis is widely recognized as a leading authority in the complex and highly technical world of international trade. He possesses extensive knowledge on subjects such as classification, valuation, and origin of imported merchandise, preference systems, and free trade agreements between the United States and its trading partners. He’s a distinguished speaker on topics ranging from international business ethics and social responsibility in sourcing to technical aspects of free trade agreements and import/export law.
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