CH. 17: business and its suppliers

suppliers share an interest in obtaining orders that will enable them to:

-make money -use their productive capacity efficiently -build long term, stable relationships w business customers

drawbacks to auditing

-on site inspections are expensive & time consuming (cant be scaled to cover entire supply chain) -audits aren't always unannounced -workers sometimes distrust auditors, not knowing if the inspectors represent the supplier, brand, or independent 3rd party (therefore reluctant to be honest)

supplier development

activities undertaken by companies to improve the performance of firms in their supply chains a lead firm may choose instead to invest time & resources to build supplier's capailities rather than terminate/ punish supplier

supplier

an org that provides goods/ services to another org aka vendors or contractors important market stakeholder of business (bc provide critical inputs, often manufacture entire products that companies then sell to customers under their own brand) major transnational firms can have enormous # suppliers (Intel has 16k suppliers in 100 countries)

capability building & incentives

lead firms can provide a variety of rewards/ incentives to suppliers that collaborate to build capabilities capability-building initiatives work best where interactions between buyer & supplier are frequent & ongoing suppliers are more likely to engage when lead firms are prepared to offer them stable & long term contracts

level of suppliers

lead firms categorize suppliers according to tier tier 1 suppliers aka contractors: hired to manufacture products & provide them directly to the co. they may work w tier 2 tier 2 suppliers aka subcontractors: who may in turn work w even more distant suppliers

capability building

lead firms engage in capability building bc cost of switching suppliers may be too high -a supplier may have critical capabilities -lead firm may feel moral obligation to workers & local community not to cause job loss -other suppliers may not be readily available to take over the contract.

human trafficking

modern day slavery - illegal recruitment & movement of people against their will, usually to exploit them for economic gain 80% of the 2.5 mil victims of trafficking in world are women & girls forced into prostitution

supply chain audit

monitors a supplier's performance to determine if it is in compliance with the relevant code of conduct choices in carrying out an audit: internal audit external/ 3rd party audit

supply chain

multiple steps involved in movement of product or service from the most distant supplier to the customer bc of complexity of these systems, firms can refer to their supply webs or networks, rather than "supply chain" which implies simple linear relationship

supplier power

they may have both economic & informational power supplier that is sole source for a key component or natural resource/ controls critical worker skills/ other relevant manufacturing infrastructure naturally has more leverage than one which is not

supply chain transparency

what happens in a company's supply chain is fully disclosed to stakeholders- as if seen through a clear glass window? some firms realized that openly revealing supply chain info can enhance brand loyalty among consumers concerned about social, ethical, and environmental responsibility. technology increasingly makes this possible @ POP (consumers can see how/where a product was made in startling detail)