Chapter Thirteen: The Supplier Program

Overview

Supplier management is the key to a company s ethical supply chain. At its best, good supplier management means working with suppliers collaboratively to design safe products, with high quality standards that do no harm to workers assembling those products, to consumers who buy them, or to the environment in their manufacture or after-use disposal. That means developing a formal program that incorporates much more than just quality, price, and delivery dependability ” the standard criteria for judging vendors in the past. As companies become more and more dependent upon suppliers in developing nations, it means a much closer relationship in every way ” collaborative design, education, training, and supervision.

As we have seen, a new level of buyer “ supplier cooperation is necessary for several reasons. First, because suppliers in the modern supply chain are much more strategic to success of the company. With JIT concepts and collaborative design, the better a company understands the capabilities of its most important suppliers ” and increasingly these will be located in developing countries ” the more likely it is to avoid quality and productivity damaging mistakes in the supply chain. Second, as we have seen, just as companies are organizationally closer to third-party vendors, so too is their responsibility in the eyes of investors, consumers, and activists for these suppliers behavior. Therefore, assurance of high social and environmental standards among suppliers will become increasingly important in terms of protecting a company s reputation.

And given the costs in terms of investment, reputation, and human capital,-it makes little sense for companies to simply withdraw their contract as a punishment for suppliers that violate social or environmental standards. The entire process has become too complex for that. In the first place, to cut and run helps none of the parties ” the workers, the supplier, or the buying company. In the past two years , most activist organizations have begun to call on companies not to withdraw their contracts when infringements are found, but instead to participate more closely with their suppliers in improving worker health and safety or environmental practices. In fact, in what critics describe as both unfair and ironic, large companies today that choose to immediately withdraw their contracts from factories that are found guilty of violating workers rights, are often criticized for both their failure to enforce compliance, and at the same time, for their insensitivity in withdrawing much needed work from the community.

Accordingly, a supplier program must go beyond just setting policy and monitoring compliance. Companies must begin to mentor favored suppliers much in the same way as they would focus improvement efforts on their own operations. This may require education, training, and coaching in management technique, in labor relations, in process efficiencies, health and safety, and environmental quality. Importantly, it may also require investment in schools , housing, or medical care that were initially seen as the responsibility of the supplier itself or the local government ” something that, ultimately may be well justified on business as well as humanitarian grounds.