Question

Please answer the following questions based on the Case-in-point:

1. What are some of the dark sides to inter-organizational trust between buyer and supplier?
2. Do you think supplier audits will negatively impact trust between buyer and supplier? How often (if at all) would you conduct supplier audits if you were chipotle based on this recent event?
3. Which do you think is more important and why? The trust between buyer and supplier or the trust between an organization and its customer?

Case-in-point:

We have so far talked a lot about the importance and benefits associated with trust in a supply chain. However, there are bad sides to having high levels of trust. Let’s take a look at an example from the best burrito chain in the world: CHIPOTLE!!! I don’t know about y’all but chipotle is my spot. Now I don’t like Carnitas (chicken’s more my thing) but if I did I would be pretty upset. Let’s check it out:

Chipotle is in the throes of a carnitas crisis. America’s favorite burrito chain has reportedly stopped serving pork at one-third of its more than 1,700 restaurants after suspending a supplier that violated its standards. Chris Arnold, a spokesman for Chipotle, told the Associated Press that the halt on carnitas marks the first time that Chipotle has stopped serving any topping for its burritos and bowls.

Arnold told the AP that Chipotle discovered the violation on Friday through a routine audit and that “it’s hard to say” how long carnitas will be absent from affected locations. While Chipotle has not disclosed the exact nature of the violation, Arnold told Reuters that the company has strict animal-welfare expectations for its suppliers and does not allow them to use antibiotics. He added that although Chipotle could fill its pork shortfall with so-called conventionally raised pork, the company is unwilling to compromise its standards in that way.

It’s quite possible that Chipotle’s decision to pull pork from its menu—while disruptive in the short term—could end up being a smart decision. Much of Chipotle’s success to date has come from its ability to distance itself from the consumer skepticism plaguing fast-food chains like McDonald’s and Taco Bell. To that end, Chipotle has embraced its “fast casual” dining label and marketed itself as a higher quality alternative to fast-food restaurants; promoting its “sustainable design” and “food with integrity” have been a key part of that. And as Business Insider CEO Henry Blodget told Yahoo! Finance, “if it had been discovered that [Chipotle] ignored an audit or some journalist did a story where they followed it and said it’s all a big sham and the pigs were being treated horrible, that would have been catastrophic.”

As devastating as this news might be to pork fans, carnitas actually make up a surprisingly small portion of Chipotle’s entree orders: 6 to 7 percent, according to the company. Chicken is the most popular order. People seemed much more upset back in March of 2014 when an annual report from Chipotle appeared to indicate that the chain would stop selling guacamole and some salsas if certain ingredients became too expensive. (Fortunately, that didn’t happen.) And anyway, while Chipotle sorts out its pork problems, it's all the more reason to try its tofu Sofritas option and earn a free burrito for when the carnitas are (hopefully) back on the menu.

Answer 1

Ans 1

Trust is a tricky sentiment in business. What one should definitely not mistake it for is blind faith!

Remember, Trust between business dealers is based on-

• Open communication
• Active participation and co-operation from both sides
• Mutual satisfaction
• Need of the relationship and,
• Perceived longevity of the relationship

The supply of resources is an essential element of business with direct implications for product quality, and thereby for sales and customer relations. The dark side of Trust in the buyer supplier relationship may be "the taken for granted attitude" which eventually compromises quality at all levels and builds distrust across the board.

Ans 2

Going back to the basics of Trust, mentioned in the answer above, audits shouldn't bother if there's honesty and transparency in dealings. Positive outcomes in repeated audits will only strengthen credibility. Open communication and mutual satisfaction are essential to trust. Businesses are built on formalities - audits should be seen as customary formalities.

Ans 3

Remember, audits are expensive and time consuming. An event of the nature described in the case shouldn't prompt one to increase the audit frequency out of panic. Showing outright disbelief is also a bad gesture. It doesn't signal a positive outlook among the supplier market. In business our endeavour is to balance things - too much of anything is bad! And in any case, Chipotle's present audit system was good enough to detect the anomaly on pork in the first go. Hence no major change is necessary.

Ans 4

Trust with all stakeholders (and not just the supplier or customer) is equally crucial. Trust is the foundation for harmonious relations. Distrust with suppliers may create a bad reputation for the company in the supplier markets and block all avenues for resource acquirement. What will the business produce then? Likewise, distrust among customers may simply subvert sales. Who will the business sell to?

It isn't just these two parties that matter. Disbelief at any level of business has the tendency to spill over and undermine the whole process. One can comfortably say that no business can be run without trust. However, trust doesn't imply blind faith. There are scruples to be followed. The pointers mentioned in Ans 1 serve as a guiding basis for trust in business relations.