You Source Product in China. But Do You Really Know Who's Making It?

Multi-tiered manufacturing supply chains can end up in some unexpected places – including prisons. The use of unauthorized subcontractors, even prison labor, is a disturbingly common practice in China and elsewhere in Asia. The problem surfaced a few years back, when an Oregon woman discovered a hastily scribbled note in the Halloween decoration kit that she had purchased at a local Kmart. The writer purported to be a laborer in a Chinese prison. And while the source of the note was never traced, it highlighted a pervasive problem of which many retailers and original equipment manufacturers are unaware. Greg Hallahan, senior director with FTI Consulting, is an expert on the problem of unauthorized subcontractors in Asia markets. He joins us on this episode to detail the severity of the trend, caused by lax supplier vetting on the part of buyers. He also shines a light on the practice of rigged bidding among suppliers who are nominal competitors. (You'll never guess what the number-one product made in Chinese prisons is.)