Few thoughts are supposed to pass through your mind when deep in the trance of Adho Mukha Svanasana, least of all whether your pants are leaving little to the imagination when bending over in a room full of people.  Alas this was the issue for yoga gear favorite Lululemon Athletica.  In early 2013, Lululemon recalled approximately 17% of its Luon fabric yoga pants after concerns were raised the material of the pants were a little too transparent for customers’ liking.  This was on top of other problems the company was having in their products, including color bleeding in fabrics, swimwear that became see-through when wet, and a seaweed fabric touted to release vitamins and minerals into the skin that in fact contained no seaweed at all (the horror).

Lululemon took a deep breath and reacted aggressively.  In addition to the recall, “a letter to our guests” was posted on their blog, acknowledging the pants didn’t meet their standards and offering customers a refund or exchange.  The letter also assured customers that Lululemon was working with their suppliers to figure out what exactly happened in their supply chain that led to this mess.

So what did happen?  This part is not so transparent.  While Lululemon maintains there was a failure in the supply chain, namely quality issues in the product, their Taiwanese supplier, Eclat Textile Co., says otherwise.   Eclat Textile claims all of their shipments go through a certification and approval process set out in their contract with Lululemon.  Because the shipments were accepted, they argue the manufacturing requirements were met.

Regardless of where the problem stems from, the damage is done.  Sales were down, customer confidence was at an all-time low, and shares plummeted.  The lesson here is that the retailer holds the risk associated with any disruptions in the supply chain.  Therefore it’s important that in addition to having a high supplier selection criteria, the retailers must maintain proper oversight and implement appropriate contingencies should any quality control issues arise.

Suppliers need to be monitored to ensure they haven’t strayed from the standards established in their supply chain contract.  A constant presence may not always be feasible, especially when suppliers are based overseas, but regular audits can provide a much needed transparency into the manufacturing process.  Retailers can ensure products are meeting their expectations, and suppliers will be able to receive regular feedback and make the necessary adjustments.

Looking at Lululemon now, it appears they got the message.  In their 10-K, Lululemon stated that they will continue to invest in their product quality and build up their supply chain, as it’s the foundation of their customer loyalty.  In a great show of transparency to their customers, they have outlined how they stay in constant communication with their suppliers through regular visits and collaboration with the company’s designers, sourcing group, and quality assurance teams.  The company also conducts quarterly vendor performance reviews, where suppliers can receive updates on their overall performance.  It’s no surprise all this attention and investment into their supply chain is coming back tenfold, the company has been experiencing steady growth and their outlook is positive.    This is what we call good karma.