10.01.2007 - 10:14am ET

(CSRwire) NEW YORK - October 1, 2007 - Recent recalls of pet food, toothpaste, toys and tires have demonstrated the need for consumer products companies to fortify their supply chains and are a wake-up call to these companies about how they will compete in a transparent future.

"Clearly, disruption to the supply chain is a risk consumer products companies always face," says Pat Conroy, vice chairman and U.S. consumer products group leader at Deloitte & Touche USA LLP. "However, recent product safety issues have made it crystal clear that, as companies increasingly source products and components globally, a new genre of systemic risk has emerged that redefines the risk level and can truly damage a company’s brand."

Conroy noted that many consumer products companies are making more unannounced inspections at factories, looking for things they did not look for in the past, being more proactive in ensuring compliance with their stated standards, and increasing their testing and analysis of imported goods. Additional, tangible steps that companies can undertake to fortify their supply chains and mitigate risks include monitoring supply chain integrity, employing track-and-trace capabilities, creating an intelligent supply chain to monitor products in transit, and enhancing increased overall transparency for consumers.

"Consumers rely on companies to do due diligence but, given the recent recalls, they are now exercising more caution about purchasing products made or grown outside of the U.S.," commented Conroy. "At the same time, technology has given consumers an enhanced ability to 'peek behind the curtain' for more information about companies and products and, increasingly, to research sourcing, ingredients, other consumers’ experiences with the product, and more."

A recent survey by Deloitte's Consumer Products group underscored the importance of protecting supply chains and the trend of consumers investigating products and companies. The vast majority (85 percent) of adult consumers were aware of recent issues surrounding imported products. In light of those issues, one-third of survey respondents (33 percent) said that they are now looking for more information on the packaging/product when making purchase decisions, and almost one in five (18 percent) said they are now looking for more information on the Internet or in other locations.

"Companies must now decide how they will compete in a much more transparent future," concluded Conroy. "They have an opportunity to create and maintain trust by adhering to the highest standards of quality and transparency. On the other hand, in this new age of transparency, there will be immense consequences for missteps, which will directly affect consumers’ trust."

Deloitte's Consumer Products group plans to issue new research on these transparency issues in the coming weeks. Deloitte Consulting's report Supply Chain's Last Straw: A Vicious Cycle of Risk, issued in January 2007, found that top brand U.S. companies did not truly understand the magnitude of the potential risk they faced and were not fully prepared for the new genre of systemic risk, or S-risk, that we have witnessed in the past few weeks.

For more information about Deloitte's Consumer Products group, please visit www.deloitte.com/us/cpg.

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