Comment: suppliers: a growing risk aversion?

May 01, 2004

While impressive steps are being made down the road of compliance, future debate about responsible supply chain management must begin to centre on good relationships, not risk.

No one supply chain is the same. A large UK general retailer might have as many as 20,000 suppliers in a hundred countries. Other companies might consolidate their buying, using agents or wholesalers. So can there ever be a common thread to responsible supply chain management?

On the risk side, yes. Insight spells out the typical steps in the risk-led responsible management tool-kit: devise a code of conduct, carry out a risk assessment, train staff, undertake ethical audits, draw up improvement plans, report and disclose. For meat on the bones of the compliance approach, look no further than ETI and SA8000, which Gap and Chiquita are championing respectively.

A risk approach in itself is fine as long as the risk analysis is undertaken intelligently and backed up with a commitment to address problems wherever they arise in the supply chain – difficult in a fast-moving field and at a time when most procurement departments are being asked to cut costs and rationalise. Few companies make such a commitment. The problems are complex (e.g. child labour on family farms), expensive and time-consuming to address, and require a broader approach with government and other actors involved. Typically retailers push the problem onto their suppliers to deal with the problem among sub-sources, but do they? If not, then neither the risk to workers nor reputation are diminished.

While efforts to overcome the persistent challenges of managing risk in today’s complex supply chain is welcome, the danger is that another element to the debate is being overlooked: the opportunities presented by mutual relationships. Starbucks’ efforts to build long-term relationships with its suppliers should – if successful – help build trust, assist with the transfer of knowledge and technology, and ensure consistency of values through the value chain.

While it’s welcome to read that compliance standards are being met in company’s supply chains, who’s out there telling consumers about the jobs they’re creating or the skills they are sharing with suppliers? All supply chains are different, but good relationships should be the end goal of each and every one.

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