SCM 301 - ethical sourcing

business ethics

application of ethical principles to business situations

from buyer-firms perspective

supplier tracks inventories, determines delivery schedules and order quantities

supplier ethical data exchange

focuses on responsible and ethical business practices, helps reduce risk associated with outsourcing

strategic sourcing

managing the firms external resources to support firms long term goals

Ethical Trading Initiative (ETI)

an alliance of organizations seeking to take responsibility for improving working conditions and agreeing to implement the ETI Base Code

framework for ethical and stainable sourcing strategy development

1. establish corporate ethical and sustainable sourcing policies 2. train purchasing staff and implement policies 3. prioritize items based upon ethical and sustainability opportunities and ease of implementation 4. develop performance measurement system 5. monitor progress and make improvements. increase use of green and fair trade products 6. expand focus to include other departments

functional products

MRO items and other commonly low profit margins with relatively stable demand and high levels of competition (ex: office cleaning products)

sustainability

ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, environmental, and social challenges

supplier certification programs

are used to identify strategic supplier alliance candidates

from suppliers perspective

avoids ill-advised customer orders, supplier decided inventory set up and shipments, opportunity for supplier to educate customers about other products

co-managed inventories

buyer and supplier reach an agreement regarding how information is shared, order quantities, when order is generated and delivery timing

ethical policies should include:

determine where all goods originated and how they were made, knowledge of suppliers workplace principles, inclusion of ethics as performance rating, independent verification of vendor compliance, report of supplier compliance to stakeholders, provision of detailed ethical sourcing expectations to suppliers

drivers of strategic sourcing

development of ethical and sustainable sourcing initiatives, managing and improving supplier relationships and capabilities, identification and selection of environmentally and socially conscious supplier, monitoring and rewarding supplier performance

green purchasing

ensures products or materials meet environmental objectives eg: waste reduction, hazardous material elimination, recycling, remanufacturing, and material reuse

supply base rationalization (supply base reduction/optimization)

firms seek to reduce purchases from poor-performing suppliers while concentrating purchases among their top-performing suppliers

formal certification programs

firms that use in-house formal certification programs require ISO 9000/14000 or similar certifications as part of the certification process

sustainable sourcing

focus on respecting human rights and reducing poverty by creating profitable trade, working within the finite limits of planets resources, and moving towards a low carbon economy

sustainable sourcing should seek to..

grow revenues (new product), reduce cost (increase resource efficiencies), manage risk (link brand to social consciousness of consumer), and build intangible assets (social and environmental)

early supplier involvement

highly effective supply chain techniques where key suppliers become more involved in the internal operations of their customer (manage inventories at customer points of use, participate in customers new product and process design processes)

Fair trade product

manufactured or grown by a disadvantaged producer in a developing country that receives a fair price for their good

strategic alliances

more formalized type of collaborative relationship involving commitments to long-term cooperation and trust, shared benefit and cost, joint problem solving, continuous improvement, information sharing

examples of ethical sourcing practices:

promoting diversity by intentionally buying from small firms, ethnic minority businesses, women-owned enterprises discontinuing purchases from firms that use child labor and unacceptable labor practices buying from firms in underdeveloped nations

buyer-supplier partnerships are easier with a rationalized supply base and result in...

reduced purchase prices, fewer supplier management problems, closer and more frequent interaction between buyer and supplier, greater levels of quality and delivery reliability

innovative products

short product life cycles, volatile demand, high profit margins, relatively less competition (ex: tesla model S, new robotics system)

ethical sourcing

sourcing that takes into account the public consequences of organizational buying or bring about positive social change through organizational buying behavior

vendor managed inventory

suppliers manage buyer inventories to reduce inventory carrying costs and avoid stockout for buyer

rights and duties

a theory stating that some actions are right in themselves without regard for the consequences

utilitarianism

ethical act creates the greatest good for the greatest number of people

ethical and environmental certifications

used by various organizations to identify rogue suppliers and suppliers who fail to certify according to ethical requirements

legal process of sustainability

3/4 of US had a sustainability report in 2014, EU requirements for sustainability reporting went into effect in 2017

value engineering

activities help the firm to reduce cost, improve quality, and reduce new product development time

outsourcing

firms purchase materials or services instead of producing them in-house helps - concentrate on core business actives, reach sustainability goals

social investors

investors backing ventures that generate social, environmental, and financial returns on investment

corporate social responsibility

practice of business ethics

modern goals of sourcing

reduce - dependency on suppliers, delivery cycle time, and carbon footprint improve - quality, customer service, and ethical reputations