Supply Chain

Supplier management

Supplier is a crucial part of our supply chain, and it is an inseparable part of business operation. As a responsible merchandiser, we have established strict codes and requirements for the suppliers in terms of environment, society and work. We have also established a system to monitor the suppliers to ensure a satisfying standard of their performance and maintain the stability of the supply chain. The standard of monitoring suppliers could be divided into business operation and corporate social responsibility. In these two main categories, there are detailed items for the suppliers to evaluate.

  2019 2018 2017 2016 2015
R&D cost ratio (as a percentage of revenue) 2.3% 2.5% 2.9% 2.6% 2.8%
Number of suppliers in China Over 649 Over 645 Over 615 516 703
Numbers of suppliers in overseas countries Over 20 Over 8 Over 8 14 4

In 2019, we continued to encourage the suppliers to improve their management capability and obtain more certificates in order to improve their performance on environment, governance and quality, so that we can progress together on the ways of sustainable development.

In 2019, the number of suppliers that have obtained ISO9000 Quality Management Certificates has increased by over 70% compared to last year, and the number of suppliers that have obtained ISO14000 International Environmental Management Standards has increased by over 70% comparing to last year. Moreover, we successfully introduced the ISO26000: Principles of Social Responsibility to the daily operation of some of the suppliers. It allows the suppliers to gain a better understanding of energy management, material recycling and social responsibility and assists their practice in these areas. In addition, we encourage apparel suppliers to obtain the Bluesign® certificate in order to ensure the process of production comply with the standards of environmental protection, health and safety; and stop the hazardous matters at the source of production, there are a total of 40 apparel suppliers obtained the Bluesign® certificate till now.

Basic supplier evaluation criteria:
  • Performance and rating in three areas: creditability, contract spirit and financial stability;
  • Based on the requirements of product type, price and company size, the suppliers have R&D capability, production management capability and quality control systems that are in line with the industry standards;
  • Hold Chinese certification related to production and quality control and obtain other international standards or certificate systems, if possible;
  • Meet the requirements listed in the background questionnaire; and
  • Conduct due diligence inspection on all suppliers.

As there is a wide range of products, the supply chain is long and complex. The cooperating suppliers are of different scales and natures, which makes it difficult to management. Therefore, we have established a set of detailed requirement criteria based on law and regulations and introduced a “zerotolerance” policy. This ensures proper measures on important issues are taken by the suppliers and the risk of operation is reduced.

10 basic principles

In 2019, we have developed a more comprehensive audit requirement based on social enterprise responsibilities of the supplier. Their responsibilities are clearly stated in ten important aspects:

Categories Basic principles
Child labor
  • Comply with the local minimum working age requirement
  • Obtain proof of the age of the employee
Forced labor
  • Staff should not be forced to work and their wills shall not be violated
  • Prison labor or bonded worker should not be employed
  • No guarantees should be required from the employees
  • Staff members are given the right to resign and have free access to the workplace
  • No discrimination during the process of recruitment, salary adjustment, promotion and demotion
  • No pregnancy diagnoses should be required to female staff before employment
  • Pregnancy shall not be the grounds of dismissal or rejection of job application
Complaint mechanism and communication channels
  • Establish an effective complaint mechanism and communication channels
  • Protect the whistleblower and ensure staff who made complaints would not be retaliated
Salary and benefits
  • Employees must be paid no less than the local statutory minimum wage
  • Full salary must be paid on time
  • Social insurance and the provident fund must be provided to employees abiding by the law
  • Statutory holidays must be provided to the employees
Disciplinary measures
  • Corporal punishment, coercion, exploitation and sexual coercion are strictly prohibited
  • Staff complaint channels and procedures need to be defined
  • Establish strict internal code stating the rights of staff and the rules to comply explicitly, and ensure staff are well-noticed and have an understanding regarding the related contents
Working hours
  • Salary and working records must be provided
Human resources management system
  • All staff are required to sign a contract of employment
Social responsibility management system
  • Establish working hours and payroll management system
  • Obtaining certifications from different areas is encouraged
Health and safety Factory, dormitory and cafeteria
  • Ensure all establishments and their operation location are legally permitted by the local officials and fire service department
  • No three-in-one factory, building consists of workshops, warehouse and dormitory
  • All places should maintain a suitable temperature with light and ventilation with good hygiene
  • Staff access to hygienic, accommodating and catering equipment is ensured
  • Staff access to clean drinking water is ensured in the working area

Electrical and chemical safety
  • Electric equipment are in good condition and maintained properly
  • Analyze according to the risk of the workplace and install proper safety equipment
  • List clear inventories for all chemicals, label the goods correctly, and ensure that the chemicals are stored in specified places
  • Ensure proper training, protective and emergency medical equipment are provided to workers who handle dangerous goods
  • Provide procedures and code of handling dangerous goods for workers if needed

Fire Safety
  • There should be two exits in each workshop which leads to the safe outdoor area
  • Emergency exits must be opened all the time
  • Ensure all areas in the factory are equipped with proper fire service system and inspections are held regularly to ensure the good condition of the equipment
  • Hold fire drill regularly