The $500 Average Order Dilemma

Managing product safety and social compliance into large, long-lead-time projects is something that many suppliers and distributors who purchase factory direct have become fairly adept at doing. Most of these efforts have been driven by their end buyer customers' expectations as part of Fortune 1000's focus on protecting their brands. If there are both the time and a large enough order size, it is possible to schedule a third-party factory audit and have pre-production and perhaps even final production samples sent out for testing-and still hit the delivery dates.

The real challenge in our industry is the day-to-day orders. It's not easy to find suppliers that can demonstrate through their documentation and validated processes that product safety and social compliance is a part of their in-stock inventories, which are used for the smaller quantity, shorter lead-time orders that make up so much of the industry's business.

I've heard various estimates of the average order size and lead times for projects in our industry. For the sake of the title of this post, let's base our assumptions on an average order of $500 and delivery within 10 days. From a compliance standpoint, this position is still valid even if the average order size was $5,000 and the delivery time was three weeks.

It is either impractical or impossible to reactively manage product safety or social compliance into inventory you already own in these small quantities and short lead times. Here's why: If compliance was not a primary focus when you placed the order with the factory, it probably doesn't exist. Plus, it costs way too much to provide testing reports on small-quantity orders should you have time to wait for test results before shipping the order. Depending on the product, the costs to rush the testing could be higher than the profit from the order.