Question

Detecting unethical practices at supplier factories, to include monitoring and compliance, is a major challenge to say the least. Yet, wages drive costs and it’s an absolute necessity to maintain the lowest cost in production of any good. Or is it?

1. Discuss how important is it for companies, such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct?

2. Would you recommend that a company join the Fair Labor Association and use FLA’s standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort?

3. What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

Please number each response and provide one space between responses.

Answer 1

Answer:

The companies like Walmart or Nike are not only known for the quality products and services, but also for their reputation, sustainability and corporate governance in the organization. On a similar like, it becomes very important to modify an existing value chain to the level of minimum standards of the quality practices. The follow up of the quality practices with standard benchmark, does not always mean to raise the cost. It provides the different benefits also such as conformance to quality, regular deliver of the materials as per the specifications, payment of salaries and wages on time as well as following good manufacturing practices. These factors are very important for the own existence and sustainability of the organization. So, it is very important for the value chain leaders to implement the standard practices not only in their own organization, but also in the organization involved in the value chain. The example in this regard can be taken from that of Starbucks when they procure coffee beans from farmers in Brazil and the case of Apple when they outsource the iPhone manufacturing in the country of China. The focus is upon the environment care, ethical guidelines and application of labor laws.
Company should set up its own compliance and monitoring system to supervise and monitor the work taking place in the organization of suppliers and vendors. It will help the organization to apply the standards that best suits them towards the quality parameters. FLAs may only focus upon the labor practices and their own welfare. It may hamper the quality compliances, necessary for the suppliers and other vendors.

In this regard, the company can do the following:
1.   Setting up the guidelines for the procurement and the quality of the goods
2.   Making suppliers and vendors to make necessary disclosures regarding the different organizational practices, books of accounts and other details
3.   Regular inspection of the facility, interaction with the employees
4.   Imparting training to the partners regarding the best practices to be followed in the organization
5.   Time to time sending of the performance report and revision of the contract term on the basis of the performance