68 MILLION CHILDREN FORCED TO WORK, DEATH AT WORK EVERY 15 SECONDS

ASIAINSPECTION Q2 BAROMETERActual child laborer discovered by AI in 2014

HONG KONG, APRIL 7, 2015

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 2015 Q2 Barometer, a quarterly synopsis on outsourced manufacturing and the quality control services industry.

ASIAINSPECTION SAW DEMAND FOR ETHICAL AUDITS INCREASEBY 65% YEAR OVER YEAR.

The ILO published that

EVERY 15 SECONDS SOMEONE DIES AS A RESULT OF AN OCCUPATIONAL ACCIDENT OR DISEASE.

Factory accident witnessed by AI during an inspection

UPCOMING G7 SUMMIT TO REACH AN AGREEMENT ON SUSTAINABLE AND ETHICAL GLOBAL SUPPLY CHAINS(1).

If this becomes fully implemented, the burden would be on brands and importers to ensure that they adhere to these global standards.

In France, a law passed in late March that will potentially force all large corporations to be socially accountable through their supply chains,

including subcontractors.

A key challenge when tackling ethical accountability is the ever growing complexity of supply chains.

According the Center for Business and Human Rights at NYU, unauthorized subcontracting remains rampant in Bangladesh creating a LACK OF TRANSPARENCY FOR BUYERS & CONSUMERS ALIKE[2].

AI PROVIDES GPS COORDINATES IN ALL ETHICAL AUDITS which can be tied to the actual manufacturing location.

HOW IS WATER MANAGED IN GLOBAL SUPPLY CHAINS?

While much of the focus is still on labor conditions, recent updates show that brands and retailers are starting to take the environmental impact

of their sourcing strategies seriously.

60% of China’s groundwater is polluted. 25% is so dangerous it can’t even be used for industrial purposes.

In a briefing published by Sedex from 20,000 audits: 42% of audits lacked permits for resource use and waste disposal

and lacked a system for checking their environmental performance against relevant laws and customers’ requirements.

ARE VIETNAM AND MYANMAR THE NEXT CONTENDERS?

Although China remains the dominant sourcing region by sheer volume, AsiaInspection data confirms the trend that

brands and retailers are sourcing more from neighboring countries.

In terms of global inspections performed, from Q1 2014 to Q1 2015, China’s share in percentage dropped by 12 points.

Big brands are being increasingly drawn to Vietnam by a younger population and lower wages than countries such as China and Thailand.

According to the latest Purchasing Managers’ Index for manufacturing, VIETNAM ROSE IN BOTH OUTPUT AND NEW ORDERS(3).

While US imports from China in January were down for the first time since 2008,

VIETNAM BECAME THE BIGGEST EXPORTER TO THE US among the 10 Association of Southeast Asian Nations or ASEAN(4).

Meanwhile, MYANMAR’S GARMENT INDUSTRY HAS SEEN SIGNIFICANT GROWTH,

increasing by 300 million USD in the past year and has doubled in less than three years(5).

AsiaInspection figures confirm both trends with a staggering year over year increase of

for performed inspections

AI figures confirm both trends with a staggering year over year increases for performed inspections:

This growth has not come at the expense of quality.

VIETNAM OUTPERFORMED CHINA with a 24% failed product inspection rate, versus 28% with China.

190% in Vietnam

113% in Myanmar

&

FOOD SCANDALS HIT CHINESE AND THAI EXPORTS

ASIA CONTINUES TO INCREASE IN BOTH MANUFACTURED FOOD AND FOOD SCANDALS.

Australia was struck in February by frozen mixed berries packed in China that were linked to an outbreak of hepatitis A[6]. Again in February, tuna canned in

Thailand was linked to histamine poisoning[7].

ASIAFOODINSPECTION PERFORMED SERVICES INCREASED 64% YEAR OVER YEAR.

For the first time in 11 months, food failure rates in China dropped to 41% in Q1 from 48% in Q4.

Although too early to conclude on a global improvement in food safety practices, this can be seen as an encouraging sign and could be proof that

BUYERS ARE BECOMING INCREASINGLY CAUTIOUS.

AI BAROMETER KEY KPIS

Bangladesh China India Vietnam

* Acceptable Quality Level - Source : AsiaInspection data

January 2

014

January 2

015

February 2

014

February 2

015

March 2014

March 2015

April 2014

May 2014

June 2014

July 2014

August 2014

September 2014

October 2014

November 2014

December 2014

60

50

40

30

20

10

0

2014-2015 Beyond AQL* Percentages

Bangladesh China India Vietnam

Source : AsiaInspection data

10

9

8

7

6

5

4

3

2

1

0

2014-2015 Average Audit Scores

January 2

014

January 2

015

February 2

014

February 2

015

March 2014

March 2015

April 2014

May 2014

June 2014

July 2014

August 2014

September 2014

October 2014

November 2014

December 2014

Bangladesh China India Vietnam

Source : AsiaInspection data

250

200

150

100

50

0

-50

-100

2014-2015 Inspection Growth Percentages

January 2

014

January 2

015

February 2

014

February 2

015

March 2014

March 2015

April 2014

May 2014

June 2014

July 2014

August 2014

September 2014

October 2014

November 2014

December 2014

ABOUT ASIAINSPECTION YOUR EYES IN THE FACTORY!™

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.

With unique web-based quality control management,

AI OFFERS PRODUCT INSPECTION, SUPPLIER AUDIT PROGRAMS AND LABORATORY TESTING SERVICES

for more than 4,000 clients worldwide.

The 2015 Q2 Barometer is a QUARTERLY SYNOPSIS ON OUTSOURCED MANUFACTURING

AND THE QUALITY CONTROL SERVICES PERFORMED BY AI EACH YEAR (product inspections, supplier audit programs and laboratory testing).

DEDICATED ACCOUNT MANAGER

A supply chain partner offering advice on your specific needs

COMPREHENSIVE ONLINE MANAGEMENT

Use your real-time dashboard to benchmark and identify your high performing suppliers

PRODUCT EXPERTISE

Hundreds of off-the-shelf customizable product specific checklists

MOBILE

Book, check reports and make decisions on the go

INDUSTRY LEADING TURNAROUND

Onsite within 48 hours. Reports the same day 80% of the time

FLEXIBLE

Cancel or modify orders up to 4pmthe day before the inspection for free

TRUSTED AND TRULY INDEPENDENT

100% QC. AI is not involved in sourcingand protects your factory information

ALL-INCLUSIVE PRICING

Easy to budget. No hidden costs

ABOUT ASIAINSPECTION YOUR EYES IN THE FACTORY!™

1/ German Federal Government. G7 to reach agreement on sustainable supply chains. March 11, 2015. http://www.bundesregierung.de/Content/EN/Artikel/2015/03_en/2015-03-10-g7-konkrete-lieferketten_en.html

2/ The Sourcing Journal. Ethical Sourcing Forum: Subcontracting More Prevalent Than Brands Believe. March 27, 2015. https://www.sourcingjournalonline.com/ethical-sourcing-forum-subcontracting-prevalent-brands-believe-td/

3/ HSBC. HSBC Vietnam Manufacturing PMI™. April 1, 2015. http://www.hsbc.com/news-and-insight/emerging-markets-pmi

4/ United States Census Bureau. U.S. Trade in Goods by Country. https://www.census.gov/foreign-trade/balance/ [accessed March 27, 2015]

5/ Myanmar Garment Manufacturers Association. Myanmar’s Garment Sector - Opportunities & Challenges in 2015. January 2015. http://www.just-style.com/market-research/myanmars-garment-sector-opportunities-challenges-in-2015_id229040.aspx

6/ Australian Government Department of Health. Hepatitis A and frozen berry products recall. March 25, 2014 http://www.health.gov.au/internet/main/publishing.nsf/content/ohp-hep-a-frozen-berry.htm

7/ Food Standards Australia & New Zealand. Histamine (Scombroid) Fish Poisoning. February 26, 2015. http://www.foodstandards.gov.au/consumer/safety/Pages/Histamine-(Scombroid)-fish-poisoning.aspx

FOOTNOTES