End-to-end SC integrity gets business
Published: Feb 24, 2012
In today's global business environment, the practice of sourcing goods and services across geopolitical boundaries is prevalent. It has become heavily strategised and often irreplaceably engrained into the fabric of organisations across the world - which is hardly surprising given the tantalising economic benefits it can bring.
Competition is now intense, and with many firms still hoping to use global sourcing as a point of differentiation, supply chains have lengthened dramatically. Companies, for example, no longer search for efficiencies in direct suppliers. Now, they look for efficiencies in suppliers' suppliers, and often even further down the supply chain. Subsequently, supply chain management has become increasingly difficult and, worryingly, cracks have started to appear in the supply chain's social integrity.
Now is the time for companies to stop and reflect. Yes, end-to-end supply chain integrity comes at a cost. But what are the benefits? Well, in today's increasingly ‘socially aware' world they are increasing by the day and it is those that act quickly which will reap the highest rewards.
Social integrity makes good business sense
Put simply, end-to-end supply chain integrity makes good business sense. Consumers, for example, are now well-informed of its benefits and demand for ethically produced products has subsequently skyrocketed. 87% of consumers are now more likely to buy from a company that supports fair labour and trade practices, according to recent research conducted by the branding and marketing agency, BBMG.
There are also social, branding, productivity and risk management benefits of supply chain integrity. For example, it ensures workers' health and safety, which helps boosts production efficiency. It also facilitates further penetration into international markets, helps subcontractors differentiate themselves in the market and protects companies' brands against the often irreparable consequences of a scandal.
In the 1990s, numerous multi-national companies learnt this the hard way when child labour cases were unearthed and broadcast by some of the world's most influential media. All of the firms in question suffered severe damage to their corporate image and bottom lines, despite many of the violations occurring in subcontractors' facilities rather than their own. Unfortunately, the issue remains rife. According to the International Labour Organisation (ILO), there are 215 million children working throughout the world today, many full-time. Of these, 115 million are exposed to hazardous forms of child labour and the majority are in Asia, according to The Child Labour Index.
Achieving end-to-end supply chain integrity
The most effective way for a company to reap the benefits outlined above is to ensure their entire supply chain adheres to a relevant, recognised international standard. This is achieved by engaging an independent and recognised third-party certification body. The reason for this is that before a company can be certified, an independent on-site audit must be conducted to evaluate the factory's compliance to the chosen standard. Necessary corrective actions as well as continuous improvements must then be identified and put into practice. This exercise can be repeated across multiple locations or suppliers.
Timing is everything
Action against malpractice can happen anytime and demand for ethically produced products in rising by the day. Time is therefore of the essence, especially considering that low cost country sourcing is growing in popularity every year. This presents a phenomenal opportunity for those who act quickly, efficiently and effectively - one that must not be missed.
Contributed by Ishan Palit, CEO of Product Service Division at TÜV SÜD
Managing people? For HR and leadership strategy, Human Resources has it covered.