- Stanford Global Supply Chain Management Forum
- Center for Global Business and the Economy
- Center for Social Innovation
- Other stories from the 2008 Socially and Environmentally Responsible Supply Chains Conference
FOR FURTHER INFORMATION: Helen K. Chang, 650-723-3358, Fax: 650-725-6750
Personal Touch Helps Keep Supply Chains Pure
April 2008
STANFORD GRADUATE SCHOOL OF BUSINESS —Business was booming for literacy firm Raising A Reader, a nonprofit that helps underprivileged children learn to read.
But not long after winning the Social Capitalist Award from Fast Company magazine in 2006, a routine test of the tote bags the company supplies to low-income families reported extraordinarily high levels of lead in the bag’s lining—news that rocked the Menlo Park business.
Carol Gray, Raise A Reader’s founder, was especially shocked since her manufacturer assured her they belonged to socially responsible networks. However, all 260,000 bags distributed by the firm had 6,000 parts per million of lead, far above the 40 parts per million limitation for children’s products set by the American Academy of Pediatrics.
“Our entire inventory was bad,” said Gray. “We are an early brain development program, so you can see the problem.”
Gray detailed her company’s crisis during a panel discussion on improving product safety, as part of a conference on April 22 on Socially and Environmentally Responsible Supply Chains: A Source for Innovation, sponsored by the Stanford Global Supply Chain Forum at the Stanford Graduate School of Business.
Raising A Reader’s experience illustrates the difficulties some companies face in their quest to sell safe products, and how suppliers are integral to that process.
After a local testing lab revealed the high lead levels in the tote bags, Gray said she voluntarily contacted the U.S. Consumer Product Safety Commission and recalled the bags they had sold. About 82 percent of their inventory was returned and disposed of. Then Gray set out to find another manufacturer, since the company’s main source of revenue is the sale of the book-filled bags.
Gray found Mark Dwight, MBA ’89, who had founded Rickshaw Bagworks, a San Francisco-based luggage maker, and was a member of the San Francisco Chamber of Commerce.
He wasn’t surprised by her plight. Audits of factories in the developing world often aren’t effective, said Dwight, since suppliers get advance notice about inspections. They make needed changes temporarily only to return to business as usual once regulators are gone.
Instead, Dwight swears by building relationships. Rickshaw contracts with just one factory in China, which Dwight and a business partner visit every month. At the company’s factory in San Francisco, Dwight said, “I manage my own production. I prefer to be there and see exactly what’s happening. That’s how we operate.”
Dwight’s company took over arranging production of Raising A Reader’s bags, producing containers that pass inspection.
Said Gray: “We are back in business.”
Another company at the panel discussion, Dagoba Organic Chocolate, hit turbulence after a routine test of its premium chocolate in 2005 also found unacceptable levels of lead.
The company did a voluntary recall, said Frederick Schilling, Dagoba’s founder, and then set out to find the cause of the contamination. His main ingredient, cocoa beans, comes from a myriad of independent farmers in Guatemala, Nicaragua, and elsewhere. “Supply chains are anything but straight,” Schilling said. “You are dealing with a lot of middlemen.”
Eventually the lead in Dagoba’s chocolate was traced to a machine used during the manufacturing process to shell the cocoa beans before they’re processed. The shell acts a highly efficient sponge, Schilling said, absorbing lead and other minerals from the volcanic soil. Bits of shell apparently got into machines during production, leading to elevated lead levels in the finished chocolate, Schilling said.
Since the mishap, his company has urged processors abroad to inspect their machinery a lot more closely. Also, Schilling said he visits his suppliers and producers in person regularly. He believes the personal touch builds relationships and serves as an incentive for suppliers to oversee production rigorously on his company’s behalf.
Getting to know suppliers also matters to Gray, of Raising A Reader.
However, while Gray calling Dwight a “white knight” who helped lead her company to a supply of badly needed, lead-free tote bags, she’ll keep some healthy skepticism.
“While he’s a trusted partner,” said Gray about her current bag producer, “I am going to test my product forever more.”
—Michele Chandler