This document summarizes AsiaInspection's Q4 2017 Barometer report, which analyzes manufacturing and quality control trends. It finds that global sourcing is growing in countries like China, Pakistan, and Cambodia. Peak season is straining ethical compliance as factories struggle most with working hours and wages. Manufacturing quality is improving overall but safety and chemical compliance remain challenges, especially for products like toys, eyewear, and food going to Western markets.

1. MANUFACTURING PEAK SEASON BRINGS
NEW QUALITY AND ETHICAL CHALLENGES
ASIAINSPECTION Q4 2017 BAROMETER

2. HONG KONG, OCTOBER 5, 2017
ASIAINSPECTION (AI)
A LEADING GLOBAL QUALITY CONTROL AND COMPLIANCE SERVICE PROVIDER
THAT PARTNERS WITH BRANDS, RETAILERS AND IMPORTERS AROUND THE WORLD
TO SECURE, MANAGE AND OPTIMIZE THEIR SUPPLY CHAIN
today announces its 2017 Q4 Barometer, a quarterly synopsis
on outsourced manufacturing and the quality control services industry.

3. GLOBAL SOURCING TRENDS:
MANUFACTURING POWERHOUSES GOING
STRONG INTO HOLIDAY SEASON
+11.6%CHINA
PAKISTAN +18.7%
+22.7%CAMBODIA
YEAROVERYEARGROWTH

4. +65%LATIN AMERICA
SOUTH AFRICA +7.1%
LESOTHO +13.6%
YEARTODATEGROWTH GLOBAL SOURCING TRENDS:
BRANDS DIVERSIFY GEOGRAPHICAL SOURCING

5. PEAK SEASON PUTS STRAIN
ON ETHICAL COMPLIANCE
Fully compliant
factories with
“Green” scores
Factories with
critical non-
compliances
Average score of the
biggest compliance
issue: “working
hours and wages”
30%34% in 2016
34.7%27.3% in 2016
6.4/10

6. ETHICAL PERFORMANCE BY REGION
Comparaison YTD vs 2016
7.5
CHINA
-5%
SOUTH & SOUTHEAST ASIA
+7%

7. COMPLIANCE BY INDUSTRY REMAINS DISPARATE
BEST ETHICAL
SCORES IN Q3 2017
Homeware
8.1/10
E&E
8.0/10
SECTORS SHOWING
IMPROVEMENT
Textiles and apparel
7.6/10
(7.2 in 1H 2017)
NEGATIVE EVOLUTION
OF ETHICAL SCORES
Toys and Juvenile
Products
7.4/10
(8.1 in 2016)
Cross-industry average
7.7/10

8. STRUCTURAL SAFETY DETERIORATES
Share of factories at
immediate risk more than
doubled this year so far:
2017 YTD: 6.7%
(End of 2016: 2.5%)
Medium-term risks
found in 61.3%
factories
Share of compliant
factories flat at 32%

9. MANUFACTURING QUALITY DISPLAYS
POSITIVE TREND
4-point YoY improvement in Beyond AQL rates
Quality performance in Q3 2017 varied strongly by region and industry
4 pt.improvement in
Beyond AQL rates

10. IN-FACTORY PRODUCT QUALITY TRENDS BY REGION
Quality remains poor in South
Asian sourcing hubs, with high
Beyond AQL rates:
Bangladesh: 47.8%
India: 30.1%
Sri Lanka: 28.2%
China shows improvement: 19.7%
Beyond AQL in
Q3 2017, vs. 22.2% in Q3 2016

11. QUALITY PERFORMANCE BY INDUSTRY
Textiles and Apparel:
30% products Beyond
AQL in Q3 2017
Accessories and
Eyewear are best
performers with 14.3%
and 12.2% Beyond AQL
values respectively
E&E: down 3 points
vs. 2016 Beyond AQL
values, to 16.9%

12. POSSIBLE PROGRESS FOR FOOD QUALITY IN CHINA
FOOD QUALITY GLOBALLY:
28% failed inspections in 2017
CHINA:
30% in 2017 YTD vs. 46% in 2016
Potential impact of the new
food safety law

13. CHEMICAL COMPLIANCE REMAINS
A CHALLENGE FOR IMPORTERS
TEST RESULTS FOR US MARKET PRODUCTS
12% failed for excessive amounts of
Lead, Cadmium, Heavy Metals
11% contained banned phthalates
On average, failure rates in Q3 2017
doubled vs. 1H 2017
EU MARKET (REACH COMPLIANCE)
2% failure for Lead content
5% failure for Phthalates

14. TOY MANUFACTURERS STRUGGLE
TO COMPLY WITH UPDATED US STANDARD
Key toy safety standard ASTM F963-16 recently updated
FAILURE RATES
for relevant tests in Q3 2017:
9%
Average
8%
Flame retardancy
requirements
9%
Mechanical hazards
requirements
10%
Meavy metals
content

15. EYEWEAR: ANOTHER
CHALLENGING PRODUCT CATEGORY
Test results from AI’s HOKLAS accredited lab show high failure rates
of eyewear products:
EU MARKET: 12% failed in lab US MARKET: 28% failed in lab
Most common REASONS FOR FAILURE: Most VULNERABLE product types:
Nickel release
UV and blue light transmittance
Resistance to optical radiation
Ready-to-wear spectacles
Sunglasses
Ni
Ni
Ni

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