scm exam 2

provide incentives for identifying, disclosing, and addressing problems

suppliers end up relying on the buyer rather than developing their own desire and expertise to identify and fix the problems without prodding (persuasion) - dont disclose environmental problems to buyer UNLESS they recieved a specific request for the info

headlines for apple

"apple attacked over pollution in china" "apple cited as adding to pollution in China"

fairphone mines in

DRC and rwanda - better business practices - help spur healthier location economy Suzhou factory - Work 10 hour days - Usually sitting down - Napping & screwing together about 600 phones - One woman repeatedly took selfies to test the front-facing camera *company is more humane= host cake-eating competitions on birthday's; - only complaint is that they don't have enough choices in the cafeteria Goal; 60 hour workweek - Struggles to keep shady workforce brokers at bay and to accurately forecast demand so that Hi-P doesn't have to hire temporary workers - Some employees want to work more hours to earn overtime pay

dodd frank act

Dodd-Frank Act - Required public companies to disclose whether any of their products containing these minerals were funding militia groups in - Democratic Republic of Congo and surrounding areas - Dodd-Frank doesn't actually require minerals be conflict free Many companies struggled with disclosure requirement: a. Apple: 100% of its smelters and refiners are now subject to 3rd-party audits Up from 44% in 2013 b. Samsung - 3rd party auditing of its mineral handlers will soon reach 90% **JUST BECAUSE A FIRM IS AUDITED DOESN'T MAKE IT AUTOMATICALLY VIRTUOUS** - Apple = investigating allegations of gold smuggling associated with armed groups while working with other industries to encourage responsible mining

how do you use the strategies to make ur business better

TEN cycle transparency engagement networking

supplier selection/evaluation

Tata group: ISO 14000 certification - Tata largest Indian - Work w suppliers that ISO 14000 certified - If not—not qualified - Just for u to qualify - Some automakers - polishing this info - Supplier evolution has changed Wal-Mart: suppliers are evaluated on energy and climate, material efficiency, nature and resources, and community - Added this - "Beyond 50 years" More companies changed expectations EX: - Child labor in Indian suppliers - Ikea - strong commitment to help those in india stop child labor - Many of the workesr are female, mothers - Cant send kids to childcare, that's why they are working w their moms - How can we help, empower the moms to work full time but also send their kids to school IKEA: potential suppliers should commit to no using child labor in their operations - Many companies have worked in groups - Company - leverage If we work together = we can get some leverage

firms have made changes to comply with MNC requirements

a. Using key performance indicators b. Monitor supplier sustainability ALL - Work with major suppliers to map the connections and interdependencies in their supply networks (including those at the lower-tier level) a. Allows them to identify the risky lower-tier suppliers b. Work with the major suppliers to deploy customized risk mitigation programs where needed

SKU proliferation

addition of different forms of the same product to serve different markets toilet paper more suppliers more variations - trade off

new technology

allows companies to lower costs or switch more flexibly among the products they manuf. automation - cost of automation declines -people see robots can operate alongside humans safely

practice of lower tier supplires

always worse increasing companies exposure to serious: a. financial b. social c. environmental affairs

chinese suppliers are happy to work w a ... rather than...

an auditor for a group rather than multiple auditors - can divert attention away from fixing problems - complaints that they spent more time attending audits than fixing the problems

Electronic Industry Citizenship Coalition

another ngo

luen thai holdings -- levi strauss supplier

apparel manuf. operations in china/asia - find this approach works well - complain that not all customers are as "mature" as Levi Strauss - many buyers and factories give sanctions for noncompliance

part of a companies strategic planning process

appropriate sourcing level

where are the problems

automotive electronics pharmaceuticals and consumer products

US china trade war

everytime there is a new tariff- affected immediately - threatening to impose new tariffs and increase existing ones

what are the characteristics of an outstanding global sourcing

executive commitment to global sourcing rigorous/well defined process avaliability of resources integration through info tech supportive org design structured approaches to communication methodologies for measuring savings

lack of skills ex

hiring intern in chinese studies - provide info to procurement people - how do i prepare my team with the proper knowledge

international trade gap- EU

ideal situation - much overlap - amount that they buy is somewhere similar to the amount that the sell

currency fluctuations

if dollar becomes strong or weak - something that anyone in procurement is monitoring daily (2x/3x a day) - more risk - pandemic/manuf plants/shutting down -

communication and cultural barriers

important info can be lost/altered in translation - companies may not understand business norms across cultures - bribery if you dont speak mandarian-- can work w chinese - lot of info gets lost when u use a translator

if you are a global brand and have stable sales in the US where should you focus

india - massive potential markets

what are the major differences between international purchasing and global sourcing

international purchasing: - involves commercial transaction between a buyer and a supplier located in different countries a. ppl usually move towards this because they recognize international purchasing can lead to a range of performance improvements --> towards level 3 - strategies are not well coordinated across ww buying sites/locations a. usually focus on price improvements global sourcing: - invovles integrating and coordinating common items, materials, processes, tech, designs, and suppliers across ww buying, designing, and operating locations - greater sourcing consistency among locations - better mgmt of total supply chain inventory (avaliable once the org takes integrated approach to global strategies and practices)

international purchasing definition

involves commercial transaction between buyer and supplier located in diff. countries

integration

involves coordination of design/procurement activities - occurs during development of new products focus on: - developing global agreements / contracts - work to standardize supply mgmt and practices worldwide`

how do we reduce this gap

think about another supplier Vietnam - becoming competitive Russia- potential supplier --> reduce dependency on chinese suppliers

the solution

thoroughly map out your supply chain to identify / uncover the risks to mitigate them: a. line up alternative supply sources in diverse locations b. increase stock of critical materials c. revisit your product

esquel ex

170 audits per year - some suppliers are welcoming, others are uncomfortable

several directors at the MNCs

"demon in this place is the lower tier suppliers that i know the least about" "i dont have control over the ones that pose the highest risks, so im losing sleep over them" - all concerns mean that lower-tier suppliers are unquestionably the riskiest members of the supply network

going beyond the firms four walls

"orgs have achieved certain level of sustainability maturity, but their supplier remains the top barrier for their advancement to the next level of sustainability performance"

android powered fair phone 2

$580 - Android-powered Fair phone 2 has responsibly sourced materials and labor and design - Both consumer and earth friendly - Isn't for everybody, can teach us all real costs of little black boxes in our pockets **not a single villain= too many people involved** - Global supply chain full of complicated relationships and trade secrets

ACT ON WHAT THEY KNOW

*******

nike --- ehs

**7 full time Nike environmental engineers and close collaboration across technical functions* - Footwear factories now generate 1/3 less on-hazardous materials waste - Reduced hazardous waste by almost 40% per pair of shoes manuf. since the program started - Use of solvent-based chemicals has also fallen dramatically by 96% from a 1995 baseline Nike Engineers spend - 80% of time - driving these environmental initiatives at these suppliers (rather than just simply auditing them for EHS compliance) - Enjoy the lions share of the factories production output - makes factory mgmt. more willing to follow up on recommendations for environmental improvements avoids problem of other buyers free-riding on Nikes efforts Nikes other active contract suppliers - (130 in china alone) - Can be less amenable to Nike's requests - Most of them are apparel suppliers a. Nike is a small account Less leverage - Nike has found it more difficult to capture their hearts and minds NIKES RECOMMENDATIONS - Created in late 1990s - Nike corporate responsibility department - Oversaw EHS compliance at suppliers - Did not have an equal say in making factory sourcing decisions with traditional Nike business functions CSR offiers - Tended to enter the decision-making process late in the game - Momentum: in favor of a supplier was too strong to redirect Nike 2009 - set out to embed its sustainability function into a. Design b. Manuf. c. Marketing decisions

concern for buyer

- Breaching antitrust laws - Brands most involved in collaboration (Adidas and Levi Strauss) don't see it as insurmountable impediment US anti-trust law - Companies can't share or act on privileged info that influences consumer prices or creates some anticompetitive situation - Cannot take joint action against a supplier *must make their own decision about what to do if the supplier does not follow through with their requests to fix a problem* EX: - Levi Strauss and Adidas - Agree that Chinese supplier should put in a wastewater treatment plant - They cannot do is jointly decide to cut off the supplier if the supplier decides not to do it if properly managed by the brand collaborators - Antitrust concerns should not impact on sharing factory-level environmental performance data Antitrust: more of an issue for collaboration on labor compliance because of potential discuss wages - Can influence pricing

anti slavery laws in cai and UK

- Requires companies to disclose what they are doing to address the problem in their supply chains, consumers and investors are starting to get more insight into larger companies' labor practices

ex:tech comapny

- Several years. Ago - Facility that encountered piracy of our technology - Theft of intellectual property - Sale of products into gray markets Local Businessmen made copycat versions of Eaton products - Threatened to label them with Eaton brands names unless we paid them not to Local Government - Repeatedly approached them for payments - Without which: would not pursue or prosecute these matters **clear that we were not going to be able to do business in a environment where ethics of local officials were so different from our own** - Abandoned the facility / business in that country a. At a not-insignificant cost

eaton CEO talks ab ethics

- addressed winners of the Supplier Excellence awards goals --> didnt include price reductions talked ab "want to be the most admired company through supply chain perfromance' "have the right ethics and business practices-- you will attract the best people/suppliers who produce the best results"

room for improvement - lack of sustainability training

- all 52 procurement officers said they need more trainings - cost quality delivery technology AND social and environmental goals cost savings always top priority - followed by quality improvement

topic of sustainability on managers agenda didnt really start till

2011

tailor programs to local realities

- buyers run into problems finding credible techincal service patterns in china to work w suppliers ex: - chinas energy service companies more limited in developed markets lack of maturity in chinas energy industry

ex: organic cotton exchange

- can bring more buyers/suppliers to table - help like minded buyers

avoid issue...make use of improving chinese government data to augment internal supply chain transparency efforts

- chinese governments effort to measure accurately the problems and progress - if reliability of data increase --> buyers will use that as second info about partners and potential partners

fair labor assoc.

- create standardized audit for labor/basic EHS compliance - member companies can look into database and see if the company was audited --> can etiher conduct another one or just add more info

code of conduct

- document stating a number of social and environmental standards that a firm suppliers are expected to fulfill (introduced in contracts) how to make it effective--> there is a gap between ethical standards code of conduct/actual conditions

when indiv. are found to act unethically, why does eaton not give them a reprimand and a second chance?

- dont allow any unethical action to stand or appear to be endorsed when it was a clear violation of the companys ethis -- integrity can break down at any level no matter how much you preach and teach ethics

collaborate with nongovernmental groups to facilitate monitoring and help tier 1 and subtier suppliers self-identify problems

- encourage suppliers to take greater responsibility 1. timberland, Nike, Walmart - institute of public and environmental affairs - tracks domestic and foreign companies air and water violations in china - use IPE databases to screen new/existing suppliers - encourage suppliers to fix the problems when they are found

US china trade war

- firmst to shift to a china plus one strategy - spreading production from china and southeast asian countries to vietnam, indonesia, and thailand *reducing dependency on china is EASIER for some products than others* - furniture, clothes, household goods = easy to obtain elsewhere because the inputs (lumber, fabrics, plastics basic materials) HARD: - Sophisticated machinery, electronics, other goods that incorporate components such as a. Machinery b. Electronics c. Other goods that incorporate components 1. High density interconnect circuit boards 2. Electronic displays 3. Precision castings

MNCs are handicapped by ignorance

- frequently dont know how their lower tier suppliers/ where they are located / what capabilities they have (OR DONT) 22 lower tier suppliers - small or medium firms that provide little info to the public makes them almost invisible

make use of chinese government data to augment internal supply chain transparency efforts

- get suppliers to self identify problems brand owners= pay attention to chinese gov. recent efforts to measure more accurately environmental problems and progress quality of the gov. continues to improve BUT buyers will d well to use that as a second source of info ab partners and potential partners

collaboration

- international and local authorities a. the UN b. international labor org or NGOs institute of public and environmental affairs fair labor association - no clue about labor conditions - provide minimum standards for any country

timberland ex

- letter for repeated violations - letter asked him if he knew about the infractions--> when he chose the suppliers/ if he would break off the relationship - didnt recieve a response so they alerted the press - then flurry of correspondence

CSR in the supply chain

- no longer indiv. companies domain --> encompasses the whole entire supply chain - global competition places a particular presence on MNCs to examine not only their own practices, but those of their entire supply chain mNCs are increasingly working with suppliers to comply with social/envrionmental standards

ex: large chinese cotton fabric supplier

- paid $1mil for dumping water directly into a river --> company didnt recognize the importance of sharing that info - alot of companies give the wrong numbers

ex: volkswagen

- partnership with ILO - work w them reach out to them for local expertise --> together as a group=visit suppliers

improving environmental perfromance in your chinese supply chain

2011- greenpeace international called out nike and adidas for doing business with big chinese textile group that was responsible for dumping toxins into the lcoal river 2009- friends of nature - detected 2 major material chinese suppliers of timberland violate levels of pollution standards

long term goals

2025/2050 goals - use mid term investment

how long will it last....

- radical idea: design modular phone - can peel off hte back to remove the battery / everything inside pinch two tabs/ slide off the screen a. expose camera "ambition is to sell fewer phone" - Isn't clear how a for-profit social enterprise, Fairphone with make enough money to grow to a point of real influence If it does: - Might be able to source fair-trade gold for the 100,000 phones it has sold Fairphone execs go out of their way to avoid criticizing / directly comparing themselves to Apple or Samsung - Big companies care about labor and sustainability too - Have lots of incentives to avoid risks

MNCs should

- send more suppliers a more consistent message that economic/social/enviromental requirments are ALL important - make message clear to procurement officials and create incentives for them to pursue - take hands on approach to collect data about supplier capacity monitoring indicators of sustainability perfromance and engage w them in continuous improvement projects - engage directly with suppliers procurement units --> best way to disseminate requirements throughout the supply netwrok

ex: chinese factory of major American Industrial company

- started w designs of US/japanese factories and improved them - much more efficient process

CEO commitment

- strong support from CEO and full time personnel - companies tend to disclose more info a. set goals b. publish progress c. pay to gain trust from customers

ex: strict code of conduct

- very strict - they know they have a small group of suppliers

encourage training of more chinese envrionmental professionals

-info wasnt important in china until recently -- not taught at universities -Chinese people often appoint the WRONG people for environmental related jobs select staff based on a. communication and english language abilities NOT b. expertise in evironmental engineering and manuf. processes - because they wanted them to be able to interact with the MNC corporate responsibility departments

additive manuf.

1. Additive manufacturing a. Production method= 3D printing b. Can dramatically reduce number of steps required to make complex metal shapes c. Less dependence on distant suppliers of the machinery and tools needed d. Rapid advances - make it possible to economically produce ever-expanding array of items in much higher quantities **many industries= tech upend the traditional strategy of seeking economies of scale by concentrating production in a few large facilities** - Allow companies to replace large plants that serve global markets with a network of smaller, geographically distributed factories - more resistant to disruption

characteristics of sustainability leaders

1. CEO commitment to sustainability 2. separate function of sustainability 3. A separate reporting process 4. long term goals

my green pizza

1. Local pizza restaurant with four outlets (private/SME) 2. This company charges a HIGHER PRICE for the product 3. Key processes: product design, operations and supply mgmt. a. Product design: "ingredient philosophy" which stipulates that the ingredients in their products must be both all-natural and genuine b. Purchasing: buying locally grown produce creates supply variability. The company pays significantly above market prices for produce to guarantee both quality and supply c. Operations: the company tries to reduce energy use in pizza delivery, packaging, and restaurant operations - Depends on corporate strategy

collective approach -1

1. MNCs collaborate with competitors and major suppliers - develop/disseminate industrywide standards -recognize that a single MNC cannot be expected to fight alone against the problematic labor / environmental practices of global suppliers - expensive / unfair to have to do it alone bc most major corporations use the same suppliers

ex: starbucks support centers

1. Starbucks has established Farmer Support Centers in Costa Rica (2004) and Rwanda (2009) to provide local farmers with the resources and expertise that help lower the cost of production, reduce fungus infections, improve coffee quality, etc. 2. Mbeya, Tanzania—started ground operations in 2011 a. Usually owners of these farms—low education, need training b. Starbucks - created these farmer support centers c. Have an office in each of these countries - helps farmers replacing fertilizers basic training in human resource practices - In certain countries farmers for starbucks - MUST pay minimum wage 3. Yunnan, China - opening in 2012

2 important rules

1. buyer should commit their attention/energies for the org benefit rather than personal enrichment at the expense of the org - dont accept gifts or favors that violate the companies ethics policy - ethical buyers dont have personal financial arrangement with suppleirs --> conflict of interest NOT GOOD

act on knowledge from improved china transparency --all 7

1. encourage training of more chinese environmental professionals 2. put skin in the game 3. learn from other suppliers and facilitate learning among suppliers 4. collaborate with other buyers to drive change in common suppliers 5. find liked-minded buyers with whom to build collaborative auditing/remediation processes at shared factories 6. to reach lower tier suppliers you need friends 7. tailor programs to local realities

why is sustainability importance

1. enhanced company image and goodwill 2. competitive adv. 3. customer loyalty 4. empoyee engagement

3 pillars of sustainability

1. environmental - impact on the business on the quality / quantity of natural resources - improved pollutions/emissions mgmt - minimize waste, water, emissions, pollution - reducing energy consumption - investment in clean tech - recycling how do we protect the environment - companies forget to engage their suppliers - worried ab internal goals but important to engage suppliers

best practices

1. establish long-term sustianability goals 2. require first-tier suppliers to set their own long-term sustainability goals 3. they include lower-tier suppliers in the overall sustainability strategy 4. task a point person on staff with extending the firms sustainability program to first/lower tier suppleirs

solves 3 problems

1. helps business develop better products - more efficient -cost less to make 2. engage employees -make them more productive -increase retention -happier workplace 3. sell more products - premium price - new market

Collaboration offers many benefits

1. increase efficiencies for suppliers - use standardized self assessment or audit - satisfy many customers avoid duplication 2. initiatives can draw in many suppliers - suppliers with many customers have same sustainability requirements tend to be more willing to participate - collaboration makes initiatives more feasible --> industrywide training is subsidized by members 3. When MNC help first -tier suppliers, htey become full members of association - those suppliers must comply w industry standards - which means they have to assess their own suppliers sustinability

how to implement CSR

1. map your supply network a. identify first tier - then ask them about their suppliers identify countries with - excessive working hours - poor working conditions EX: mexico--> sexual harassment and bribery mapping= identify countries /most prominent issues

corporate social responsibility

1. org has obligation to society that extend beyond compliance with regulation/laws 2. CSR means that a company's business model should be socially responsible envrionmental sustainable activities: - should benefit society - should not harm the environment

summary

1. orgs are not only responsible for environmental/social practices within their own premises BUT also for environmental and social performance at their suppliers / ultimately the entire supply chain 2. orgs should pursue broader structural changes and take a holistic approach to make environmental and social practices a reality 3. orgs should promote: - internal practices (employee training, creating employee volunteering opportunities, sharing experience among employees) -external practices (training of personnel at the supplier facilities, fostering incentives for suppliers in terms of long-term contracts and enlarged volume if they implement codes of conduct, regular plan audits

avoid embarassment; get to know your supply chain

1. provide incentives for identifying, disclosing, and addressing problems - chinese dont often see need to address issues - effectiveness of audits (avoid bribery) - promote chinese supplier to look for/disclose deficencies themselves

why do unethical behaviors happen

1. purchasing has direct control over large sums of money - responsible for multimillion dollar contract may find unethical sellers using any means avaliable to secure a favorable position procurement professionals have a lot of power - aggressive sales targets - incentives in place --> salespeople will do anything in their power to make sure the procurement professional chooses them 2. pressure placed on salespeople - seller meet aggressive sales goals might resort to questionable practices

china / taiwan

10 lower tier suppliers - marginal environmental practices - dangerous working conditions - chronic overtime issues

ex: CDP 209 supply chain report

35% program members engaged with suppliers on climate change in 2018 - as suppliers become more mature in understanding sustainability issues --> advance their approaches for taking action - evidence = improving their efforts to cascade positive change downward through their own supply chain - MNC have asked suppliers to report emissions - this info influences them to contract with suppliers

2012 apple

38% of suppliers met its standard for - 60 hour max work week - atleast one day off every seven 2016: - Illegal student workers in Foxconn plants a. Chronic problem, didn't just happen 1 or 2 times b. Hire more and more students c. Couldn't find people overworked them - First time they released a list and address of their suppliers - NGOs pushing apple to be more transparent they can target

whats inside the fairphone

40 materials go into a phone 4 in particular tin tungsten tantalum gold

mexico

5 lower tier suppliers all lacked envrionmental management systems 4 lacked- procedures for handling red flag social problems a. sexual harassment, retaliation by supervisors, and hazardous labor conditions 3 companies made up nearly 50% temporary workers turnover rates --> 100% - difficult to implement viable envrionmental / health/ safety programs

united states

7 lower tier suppliers 3 had concentrations of airborne chemicals / lack of systematic accident reporting **pattern is worrisome** - all suppliers connected to model firms that were working proactively to encourage sustainability

study represented

9 top tier 22 lower tier based in mexico, china, taiwain, and hte US

apple hired ..

Apple: - Hired Environmental Protection Agency Administrator Lisa Jackson to work on these issues - Apple/Samsung in many ways = catching their breath after a decade of explosive phone growth - They have to figure out how to balance these concerns with the priorities of customers and investors

interview with Adam Werbach

BUILD A STRATEGY FOR SUSTAINABILITY - envrionmental activist - sustainability strategy --> most worthy

direct ivnestment

Building new supplier infrastructure in diff. country or region will take considerable time & money EX: - China opened its special economic zones in 80s a. No indigenous suppliers and had to rely on far-flung global supply chains b. On logistics specialists who procured materials from around the world and kitted them for assembly in Chinese factories **took 20 years for them to build a local base capable of supplying vast majority of: a. electronic components b. auto parts c. chemicals d. drug ingredients for domestic manuf. shifting production from China to Southeast Asian countries - different logistics strategies as well - unlike china, those locations don't have efficient/ high-capacity ports that can handle the largest container ships OR the direct marine liner services to major markets *means more transshipment through Singapore, Hong Kong, or other hubs and longer transit times to reach markets*

responsibility in an org to articulate the meaning of this

CEO

CNN - iphone factory struggles w suicides

CNN- IPHONE FACTORY STRUGGLES W SUICIDES Foxconn - Maker of apple iphone, ipad - Secrecy and security - Less than a square mile - Live, sleep, work here - First job away from home - most of them Either killing themselves or trying - Never seen anything like this before - Workers spend long hours Apple, dell, hp - Wake up, have breakfast, go to work - 8 to a room - Roommates don't know each others names - No sense of community Foxconn - Admits that they will abuse workers if they don't meet deadlines - Change bad attitudes during workers - Recreational facilities are few - Company set up a hotline a. One month= more than 30 Counselors called in - Stress room - Employees can hit/ take out frustration Another suicide—matter of when , not if - Prevention that they have in place rn is not enough to stop suicide trend Suicide cluster - Idea of suicide spreads among group of people - 100s line up hoping for a job - Some people might find it stressful/difficult - Young workers - job at Foxconn is better than staying at home on the farm

concerned buyers have learned...

CONCERNED MNC BUYERS HAVE LEARNED THAT ENVIRONMETNAL PROGRAMS AT HOME NOT NECESSARILY ROLLED ON THE SAME WAY IN CHINA - Must tailor programs to meet human resources constraints and other local conditions - While providing incentives to encourage suppliers to take ownership of environmental initiatives Energy efficiency programs first step toward helping Chinese suppliers take charge of environmental improvement and self-reporting *easy for buyers to encourage suppliers to implement them promise cost savings* Environmental compliance / working on wastewater quality = harder sell - Programs don't offer supplier immediate economic rewards Once they see improvements/savings from energy efficiency program - they will be more willing to move onto bigger projects & take ownership EX: - Walmart reports that 119 factories participating in China energy efficiency achieved more than 5% increase in efficiency

separate function of sustainability

Chief sustainability officer - a. Director of the Enterprise Sustainability Strategy Team (Kimberly Clark) b. Vice-president of sustainable business and innovation (NIKE) c. Vice-president of CSR, sustainability, and community affairs (Campbell Soup)

fairphone DIFFERENCE

Fairphone DIFFERENCE - Marketing of radical transparency - For the first time people are thinking about what is inside their phone - Where it came from / who touched it before I did - Human concerns are the next hot smartphone feature first step is to make us care

foxconn

Foxconn spokeswoman - Conducted its own audits of 448 suppliers - Found "no severe braches" of its code of conduct - including forced labor - Company = consider additional measures after reviewing the Know the Chain report

gold in smartphones

GOLD - smartphones need for connectors - fuels = violent rebels in the Congo - now more valuable illegal export than cocaine in Colombia and Peru slavery is a part of the supply chain a. forced labor - workers make up a 1/3 of the migrants in Malaysia's electronics industry - more than guilty conscience at stake - most phones = designed to look good, but cost a lot to repair - upgrade camera = buy whole new phone

'know the chain' ethical electronics graph

HP apple intel -- eradicating forced labor within their supply chains rated electronics companies on how well they institute policies/practices - apple came out near the top BUT leading supplier (foxconn) at the bottom

sustainability recognition

SUSTAINABILITY RECOGNITION Dow Jones Sustainability Index in collaboration with SAM CDP: driving sustainable economies BDR: Billion Dollar Roundtable

global sourcing

Involves integrating and coordinating common items, materials, processes, technologies, designs, and suppliers across worldwide buying, design, and operating locations - shares its resources with its branches all over the world

ex: leather working group

LWG- sanctioned auditors with leather industry expertise - Use protocol to monitor and rate qualified tanneries as bronze / silver / gold - LWG suppliers support this forum a. Fewer audits b. Auditing companies understand leather-manufacturing processes and can provide recommendations c. They also like that the audit is specific to the tanning industry promotes comparison of environmental performance - Rather than with software and other less-polluting industries - LWG also initiated collaboration among the tanners themselves a. Now they discuss their energy number/ what their environmental practices are / better waste disposal options and other issues Multinational brands support LWG - Share auditing costs via a member fee - Standardized platform for comparing tanneries - Get tanneries moving in right direction Credit collaboration with LWG - Improving green house gas emissions & water consumption by more than 15% between the first and second audits (18 months apart) EX: - Timberland wants all its leather suppliers to be LWG silver-rated by the end of 2010 Buyers need to keep close eye on 3rd party monitors via environmental collaborations (like LWG) LESSON - LWG and its members silver rating - Two Chinese Tanneries that IPE flagged in 2009 in imbroglio with Timberland - Leaned on LWG to strengthen its auditing protocol **Even if you are not collaborating with other buyers or not buyers will rely on third-party monitors with expertise in environmental issues to carry out tier 2 assessments in china (rather than relying on in-house auditors)** FEW buyers are sophisticated enough or have the resources to monitor Tier 2 often more complicated environmentally than tier 1 EX: - Patagonia - Assesses tier 1 suppliers itself - Working with Switzerland based Bluesign technologies to monitor tier 2 in China and elsewhere CHALLENGE: for most buyers will be to find third-party monitoring companies in China that have environmental expertise needed to work effectively at Tier 2 a. NGOs can help b. BSR can help buyers set up mechanisms for sharing info about which third-party monitors are credible

room for improvement - preapproved suppliers

MNCs engineering and procurement units often preapprove lower tier - criteria doesnt include enviro/social considerations - only address the first 3 ps of sustainability (profit= cost, quality, delivery, tech) over looks people planet have to work with them whether they like it or not "i am just using the supplier you asked me to use"

collective approach-2

MNCs in the study were all founding members of industry associations that: - develop sustainability standards - provide assessment tools - offer training to first / lower tier suppliers

PROBLEM is the ...

MNCs themselves - frequently place orders that exceed suppliers capacity OR - impose unrealistic deadlines --> lead supplier factories to demand heavy overtime from their workers

networking

NGOs - help you run a better business

nike using forced labor in malaysia

NIKE using forced labor in Malaysia - Contract - Undercover investigation Two sides to nike Public face; hidden misery Remote factories, poorly paid factories Malaysia - human trafficking on a massive scale Recruiters - look for desparate men/women - Guaranteed work in Malaysia - Up front fee - Now in debt - Passport taken Viertnamese workers—must sign 3 year contracts in a language they cant read - Virtual prision - Buy out their debt but their pay is so little, escape is impossible - Trapped, lied to Nike contractor - Hytex - Nike signs everywhere - Living quarters filthy - Crammed - 26 men per room - So many people, not enough room Conditions are even worse outside - Next to toilets, where they prepare food 100 men living on top of each other - Heat - Stench 6 days a week, $45 australian dollar - No way of escape - Forced labor "unsuitable and not up to nike standards" "investigating claims" Nike pays tiger woods 22 mil a year - But men working get less than $6 a day to live like this -

company has an... for ethics

OMBUDSMAN - employees / anyone else can confer - dont hesitate to stop doing business with suppliers who business pracitces are not set up to its own high standards --> regardless of quality/price

HP contraact

RBA code of conduct

supplier sustainability scorecard

SPLC sustainability leadership procurement leadership coalition create a framework and show people what indicators they should include in their scorecard child labor community engagement human rights violations salary working hours health and safety

avoid embarassment- collaborate with NGOs to facilitate monitoring and help suppliers self-identify problems

a. A shift from adversarial to collaborative relationships b. Evaluation and monitoring of second-tier suppliers c. Timberland case: bejing-based Friends of Nature and Institute of Public and Environmental Affairs (IPE) d. Apple case: In 20013, 59 of 200 biggest suppliers were reported in the IPE database with 114 violations (supplier sustainability report 2014)

continuous flow manuf.

a. Innovation could sig increase the resilience of supply chain for small-molecule generic drugs by making producers less dependent on the imported active pharmaceutical ingredients b. US defense advanced research projects agency (DARPA) funded one initiative in this area development of flexible miniaturized manuf. platforms and methods for producing multiple APIs from shelf-stable precursors as a specific medical needs arise

avoid issue... work with multi brand forums to standardize chinese supplier audit data at first/lower tiers

a. Multi-brand forums to create standardized social and environmental audit protocols b. Fair Labor Association (FLA) is creating a standardized audit for EHS and labor compliance and a database with relevant information

first tier suppliers rarely concern themselves with their own suppliers practices......

because they are often dealing with those issues themselves

REDUCE PROBLEMS

both first and lower tier suppleirs

walmart ex

brought together respresentatives from 15% of supply base - non-competing groups to share experiences

americas most and least trusted professions

business executives are at the bottom by lobbyists - nurses at top - teachers at the top no marketing around nurses gov. officials clergy

supplier diversity programs

by seeking out women and minority-owned businesses to purchase from and by promoting outreach projects sponsored by Women's Business Enterprise National Council and National Minority Supplier Development Council

international purchasing

involves commercial transaction between buyer and supplier located in diff. countries - independent offices in other nations / autonomous, don't share resources with one another

buyers

cant find a qualified point person at chinese suppliers to drive environmental - auditors are necessarily best people to judge expertise

learn from suppliers and facilitate learning among suppliers

chinese suppliers = share environmental data and plans with buyers--> begin to grow

sustainable procurement -- setting sustainability goals examples

coca cola and chrysler - supplier minority program that covers tier 1 and tier 2 suppliers johnson and johnson - requires that its top 2 sustainability goals depending on their processses - goals must be public -ask these goals are relevant to business - want them to be accountable for the info shared w suppliers walmart/loreal/apple - demand that suppliers report carbon emissions through CDP (carbon disclosure proejct) platform = used for all suppliers to disclose - NGO in London - CDP: carbon disclosure project provides a platform that can be used for all supplers to disclose - Send survey to everyone, they fill it in, and at the end CDP ranks them (gives them a grade) companies like HP, include the CDP ranking and monitor the progress overtime - Come ask suppliers about specific progress

collaborate w other buyers to drive change in common suppliers

collaborated on - joint efforts on EHS and deeper enviro issues nike, levi, adidas - work w liked-minded buyers - share monitor

use companies tools / policies

collaboration training (buyers/suppliers) code of conduct supplier self assessment tools supplier sustianability databases scorecard

find like minded buyers to collaborate with whom to build collaborative auditing and remediation processes at shared factories

collaboration on EHS audits with one or two toher brands - Concerned buyers - don't share Chinese factories with brands that put as many resources toward EHS auditing as they do limits the # of suppliers at which concerned buyers can attempt to collaborate with - When they succeed in finding an equally committed brand at a shared factory a. EHS standards b. Priorities and competence of two audit teams may differ greatly - Globally accepted environmental accountability standard does not exist yet - Buyers tend to use audit instruments and methods of collecting info developed on their own makes integrating one brands findings into another EHS rating system dangerous **especially if sourcing decisions are based on those findings** - Need to make sure they are comparing apples to apples so, they aren't treating the factory unfairly CHOOSING PARTNERS: - Nike determines degree of similarity of buyers audits on its own - Tries to focus on identifying critical problem that both buyers see as a priority at a particular shared supplier a. Poor waste management work together to encourage the supplier to upgrade wastewater treatment capability

a more sustainable supply chain

companies tend to focus on top tier suppliers real risks -- lower down

CHALLENEG

companies with existing production lines have assets that are fully depreciated - exec may be tempted to retain them rather than invest in newer/more competitive plants and equipment - depreciation expense no longer factored into the cost of production-- marginal cost of boosting production

conflict of interest situations

company clearly controls its own destiny - may arise ex: EX: - China - Country where some people may see conflict of interest issues Plant manager in China - Chinese national - Felt afoul of our prohibition against conflicts of interest - Acceptable in his country, but NOT acceptable to Eaton Replaced the supplier that was providing a commodity to our plant - With a supplier in which his wife had a financial interest - Clear his decision - not based on quality/price issues with previous supplier UNTIL THEN - Pleased with the executives performance - Highly valued employee in whom wed invested considerable training - Including almost 4 years of cumulative operations experience in the US and China - Despite investment in employee had to let him go a. Could not let his action be allowed / endorsed when it was a clear violation of the code "when a supplier or business partner acts without integrity we trust that our employees will make it clear that if the unethical action does not stop, the business relationship will"

if alternate suppliers are not immediately avaliable .....

company should determine how much stock to hold in the interim / in what form / where along the value chain Safety stock - carries with it the risk of obsolescence and also ties up cash runs counter to popular practice of JUST IN TIME replenishment/ lean inventories Savings from these practices - have to be weighed against the costs of: a. disruption b. lost revenues c. higher prices that would have to be paid for materials if there is a sudden short supply d. time/effort that would be required to secure them

ex:

company violated 60 hour workweek limit "didnt wanna tell our customers that we couldnt produce the products on time" - customers didnt give us enough time to hire enough skilled people for the job

NIKE ex IPE

contacted by IPE about wastewater discharge violations at some chinese suppliers - now urges current/prospective suppliers to a. post analysis of violations b. indicate corrective actions they took/provide envrionmental performance update

criticisms and concerns

corporations are only responsible to their shareholders and not to society as a whole - some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation however --> programs distract the public from ethical questions posed by companies core operations - companies claim to promote CSR and be committed to sustainable development BUT simultaneously engage in harmful business practices better governmental and international regulation and enforcement (rather than voluntary measures) are necessary to ensure that companies behave in socially responsible manner

**AUDITORS ARE SUSCEPTIBLE TO BRIBERY**

corruption is widespread - audit companies have the power to hurt factories--> so lots of bribery goes on internal auditing - preferable BUT companies need to manage them carefully - many people often hired from the local community, potential for corruption is still there if chinese supplier identifies the problem--> then they should not be punished for htat

shift from narrow

cost reduction to emphasis on globally integrated and coordinated sourcing strategies - improve competitiveness

benefits of global sourcing

cost/price quality access to tech availiability competition to domestic sources presence in foreign markets `

indirect approach part 2

create preferred supplier programs - aimed at fostering peer learning ab sustainability - corp invites its most socially/enviro responsible suppliers to join an exclusive group that enables them to strengthen relationships with the MNC a. exchange best practices among one another b. several of these suppliers have started to set their own sustainability requirements for the suppliers they use

procurement keeps an eye out for ...

currency fluctuations

graph about factors that have led to changes in our business model as a result of sustainability considerations what is the top

customers want sustainable products - political pressure - resource scarcity

companies can map their supply networks based on

hotspots country political risk

integration through info tech

data warehouse- centralize many companies have grown through mergers and acquistions - ability to aggregate common requirements across buying units - address issues by creating global data warehouses - contract repositories that use companywide coding schemes - leading companies rely on web-based systems -easier aggregation of requriements web based systems - online manual that describes companies gloabl sourcing - template -contract terms and conditions checklist

long run-- mistake to cut china out of picture

deep supplier network - large/efficient ports - transportation infrastructure - highly competitive source for years to come

indirect approach part 1

delegate elements of the lower tier supply chain mgmt to the first tier suppliers approach is effective because MNC is hands on - offer training to suppliers -- provide incentives for implementing sustainability practices - trainging--> led to substantial changes in manuf. process- begin to ask THEIR suppliers to adopt similar sustainability standards

starbucks

development of greener cups (MIT) and promotion of reusable cups CAFÉ program - workers pay has to meet or exceed the minimum - adequate health, safety, and living conditions for workers prohibition on child labor limits on agricultural chemicals --> starbucks buy first from certified farmers and suppliers and pay premium prices to top scores and those who show continual improvement - loan programs - supplier diversity programs

sustainable purchasing

development of greener inter-firm processes - reusable pallets/containers - required its suppliers to use reusable containers to in order to reduce "waste" of amount of containers and pallets recycling programs - philips helped chinese suppliers to implement a recycling program/address their envrionmental vioaltions addressed by IPE

room for improvement - functional units of MNC

different units pursue diff. agendas for 1st and lower tier - can damage overall sustainability effort - undemine credibility AVOID THIS BY - setting goals and align incentives across all functions that interact w first/lower tiers

issue many years ago for eaton

doing business w product development established timetables - development -testing -shipment customer expected fully tested product to be shipped at end of particular quarter -- end of the quarter not alll of them were tested 2 senior operating managers - falsified test results - misinterpreted the product readiness for shipment - both signed reports willingly - felt they needed to do it to meet the timetable - violted quality/ethics policy - terminated - both ahd high potential

three pillars of sustainability

economic environmental social

engagement

engaging employees so they are the center of the initiative - helping htem understand why these initiatives are so important -> most important

halfway there....

environmental compliance doesnt happen overnight - gradual process that requires engagement with suppliers vp of walmart- need to push what our supplier base is comfortable with, if we are halfway up the mountain and the rest of our supply base isnt then we are not really halfway at all

ex - textile and garmnet manuf. in china

esquel - operations - proactively taking measures to improve enviro transparency and sustainability implemented energy & water conservation programs - developed comprehensive framework for measuring product carbon foot print -voluntary publish data - teach concerned buyers lacking in buying expertise on how to fix problems

who are the leaders in sustainability

europe north america australia asia pacific

how your smartphone was made -- no one really knows

fair phone -startup uncomfortable in African mines/asian assembly lines --> phone supports labor/warlords

take adv. of process innovations

firms relocate: suppliers move w them -unfreeze org routines and revisit design assumptions that are underpinning the original process

getting to know your supply chain

sustainability in efforts in China MUST start by creating a context that facilitates identification & visibility into the supply chain

challeneges --

first tier suppliers- dont have a direct relationship particular MNCs business doesnt mean that much to a supplier ex: american/japanese automakers rely heavily on certain seat maker - they demand that it adheres to their sustianability requirements BUT the seat makers have a hard time getting its suppliers to follow suit OR doing business with a foam manuf. that has other big customers - electronics - appliance -health care industries --> each of which has diff. sustainabiility requirements *foam manuf. has little incentive to conform to the automakers sustainability requirements BC they only account for a small frction of its total business**

patagonia

forum for exchange through the footprint chronicles video supplier profiles chat groups track imapct of specific products - Believe that more has been accomplished within Patagonia's supply chain by suppliers viewing what other suppliers are doing than almost anything else Patagonia has done

ex: Apple - Foxconn

foxconn suicides are a reminder of the human cost that come with the low cost of manu. US tech companies demand - excessive overtime and poor working conditions -CEO said "suicides are higher in california, so its better in china" 2010/11 the number of suicides in foxconn plants - no info ab being apples suplpier, very secretive ways to address problem: set up nets outside, so they could jump but wouldt commit suicide

ex: electronics maker Flex

full member of RBA - supplier to many MNC - second tier supplier is unlikely to refuse a request from flex for a complaince audit --> knows that Flex has passed it and know that in order to stay competitive = other suppliers will start issuing same request

indirect 3

further encourage first-tier suppliers to cascade MNCs sustainability requirements into their own networks - use suppliers sustainability awards - long term contracts -preferred status

enhanced company image and goodwill

gain legitamacy patagonia - product that will last for many years - less chemicals build strong sustainability brand reputation - enhanced image

"we dont practice..."

geographic ethics - set one set of ethics worldwide a. If the laws/regulations of a given company differ from our own company standards then we comply with whatever requirement represents the higher standard of behavior in that situation - Common knowledge -governments in certain parts of the world demand substantial payments in exchange for the conduct of business a. Unacceptable geographic ethics - not tolerated at Eaton

ex: global appraoch- carbon disclosure project supply chain program

global data collection platform in which suppliers can disclose info ab their carbon emissions microsoft, Johnson&Johnson, Walmart --> use this platform to engage suppliers in being more transparent about their environmental imapt

employee engagement

higher employee retention/satisfaction -lower costs of recruiting/retention/training

samsung

hold ourselves and suppliers to highest standard - continuously improving

vital to ascertain..

how long you company can ride out a supply shock - how quickly an incapacitated node could recover - or be replaced by alternate sites when an entire industry faces a disruption related shortage *depends on how flexible your manuf. capacity is and can be reconfigured* is it a semi automated assembly line OR is it highly specialized and difficult to replicate your operations are

contract

how much legal language are we willing to change - only few companies willing - most use it for monitoring mechanism know that many suppliers will violate their own code of conduct

incentive to align w strategy

if sustainability effort doesnt serve the bottom line ---> not good enough product manuf. - fuel - how can you pull fuel out and make things more efficient - how can a group of employees get together to talk ab how you can make processes more efficient

conflict of interest

if u have a certain amount of shares - tempted to favor them and give them more business when you join a company--> you have to tell them the potential conflicts of interest that you have

*code of conduct only works if you enforce it**

if you have contracts - clauses about violations

china has the second largest exonomy in hte world

important for firms to maintain a presence there to sell in the markets/obtain competitive intelligence

sustainability supplier award

incentivizing suppliers who have made investments - chrysler/johnson and joshnson

ex: of supplier scorecard-CDP

include the program rating in its scorecard-- monitors ratings annually

competitive adv

increased profit, grow, and market share - source of innovation

ex: flex factory complex in Guadalajara Mexico

increases in productivity - company moved smaller assembly lines into another building during each move-- they redesigned steps to use less space, less labor, boosting productivity

ex: Zara

inditex - how company demands certain social, environmental practices versus how a company "develops" these requirements --> difference - where do you actually enforce it if there are no penalties - cheating the code of conduct

INTERVIEW WITH CEO OF PEPSICO AND ACCENTURE

indra nooyi being a responsible company -- maximizing long term profiability and societal impact 2011 2011 - Indra Nooyi (chairman and CEO of pepsico) - Companies either force for good or force for bad - First thing that came to mind - "I want pepsico to be viewed as a responsible company in every society we operate in" a. Not about corporate philanthropy b. Not enough money to give away to be considered responsible Responsible company- has to start knowing that they are working within the laws of limited society - Bc we owe every society we operate in a duty of care - Start with basic premise a. Don't think about short term, quarterly results b. Think about long-term sustain impact changed thinking of company If u focus on short term - Do things u might not do if u are focusing on long term in addition to the short term - Needs to be a balance William d. green(chairman of Accenture) - Important to recognize to not hide at the quarterly focus - Do need profiles and courage - Leaders-> principles about the company to take the long term view, not afraid to stand tall a. Character of our company / ultimately the value - High performing company = commitment to sustainability in the community in which it works/lives broadly RECRUITMENT FOR TALENT OF COMPANY - We want to come to ur company bc your performance and agenda Accenture - 76% of recruits - Ask question about commitment to corporate citizenship and responsibility - 94% of companies do business w us ask to share w them on what we do for the companies in which we work and live in Weaving in societal responsibility into core mission of company - Everything we do/act changes everything "not doing business during the day, philanthropy in the evening" If companies do as right checks - Not getting this agenda into their dna - Dna. = need , makes change happen

work with multi brand forums to standardize chinese supplier audit data at tier 1 and subtiers

instead of developing their own--> work together in multi brand forums to create standardized social/enviro audit protocols fair labor assoc.

yuen thai industrial ex

instructed the EHS auditors - most important multinational buyers on this method of recycling water/reducing emissions from boilers

ethics lesson

integrity can be broken down at any level, no matter how much you preach/teach it

go to HR

is it common here - make it clear why you are leaving

only thing bad about the local supply

is that most of us go to grocery store w a big list

PR cardan

italian brand, expensive - best shoes - half of her office, full of gear - every single supplier - wanted to show appreciation - part of mkting strategy "sent me a nice gift, so ill choose them"

academy in china

jiangsu

have to respect their...

know how, their intellectual property - can only file a lawsuit if you are both in the US

EHS auditors

know what suppliers need to achieve

new processing tech

latest chemical manuf. equipment a. uses less energy and solvents produce less waste less capital insensitive less expensive to operate

avoid...encourage environmental transparency as an efficiency tool

ll

global approach

make a point to collaborate with international orgs/ NGOs to share their goals - all 3 joined the UN global compact - international effort to promote corporate responsibility

NIKE

makes negative disclosures reflect positively suppliers records

ex: direct approach - survey

manually survey first tier suppliers to gather info not only about a. health b. safety c. labor d. environmental practices but sustainability perfromance of their lower tier suppliers

hard to put into practice

many of these corps have faced scandals brought about by the suppliers --> despite being aware of the sustainability standards -- have gone on to violate them

define sustainability

meeting the needs of the present without compromising the ability of future generations to meet their own needs

AVOID EMBARASSMENT???

minimize risk-

PROBLEM

no direct relationship with nike, apple - no contact - apple has contract with foxconn but not foxconns suppliers - make it hard for the MNC company

do you believe that eaton is "too tough" in its emphasis on refusing to allow bribery, even in countries where bribery is acceptable

no, because they want to run their business in an ethical manner - takes a long time to build a brand, and one move can destory that (not worth it) - want results but not at the expense of integgrity

levi strauss

normally gives supplier that provides false/inconsistent records a "zero tolerance" violation - 2 to 3 warnings apparel company usually terminates the relationship with the factory - suppliers know if they volunteer the correct data ab

single code of ethics

not only strengthens own org-- but org we do business w "rising tide lifts all boats" - situation changes

ethical sourcing

not only the company's brand, but your brand - how do you want people to know YOU - "only thing you have is your brand"

lower tier suppliers

not well known - receive relatively little attention/pressure from media NGOs other stakehodlers even if they do attract attention ---> (sexual harassment or chronic overtime) - dont feel the need to address the issues invovled UNTIL MNC intervene

lower tier suppleirs are least equipped to handle sustainability requirements

often dont have expertise OR resources - may be unaware of accepted social/envrionmental practices and regulatons - frequently located in countries where these regulations are nonexistent lax or not enforced at all typically dont know much ab the sustainability requirements imposed by the MNCs - dont have incentive to comply - explains why lower-tier suppliers in teh study didnt have progrmas to dispose of toxic waste and had no envrionmental mgmt program whatsoever

act on knowledge from improved china transparency

once the buyers have created an envrionment that provides visibility into the supply chain--> they need to respond effectively on what they now know

ex: of influence

one corporation created an award to recognize supplier that improved the most

when in rome, why not do as the romans do? do you agree or disagree with this sentence as it pertains to eatons policies in dealing with international gov.

one set of ethics worldwide - dont want to do business in an environment where the ethics of local officials are v diff from own

separate sustainability reporting process

operating KPIs tied to sustianability such as: - energy -water use - waste generation - sales of environmentally innovative products executive pay is tied to performance of financial and non-financial measures - link between sustainability and financial incentives GPI - tell you everything you need to disclose if u opt to use this framework

training

organize courses in health and safety, social responsibility, and environmental management promote cross functional teams with your professionals and those of your suppliers foster supplier visits

improving working conditions plant A and plant B

overtime: mandatory and over limit v voluntary and within limit multiple tasks v single task

currently, MNC currently

performs EHS compliance audit - standing guard, checklist approach --> done little to change this concerned buyers have realized that the money and time spent on EHS auditing and labor compliance -- not yielded the expected returns ex: research based working conditions -underscored the limits of audits alone as a tool for improving supplier performance 2006: chinese factories adept at hiding problems from auditors --> revealed growth of indigenous consulting industry designed just for that purpose

PSPs

personal sustainability projects ENGAGEMENT - Personal sustainability projects - PSP - simple ways that people can take sustainability into everyday life Ex: a. riding bike to work once a week b. parking car in the furthest spot from the store instead of getting really close—exercise c. diet - organic meal d. placing plants near light switches - people tend to turn them off more things you can do that are good for YOU, THE PLANET, AND THE COMMUNITY Ex: Walmart - shared PSP with entire work base - committed big 1. powered 100% by renewable energy 2. zero waste 3. sell only sustainable products in store - goal

room for improvement- little contact with first tier suppliers

poorly informed about requirments - cannot communicate with them clear enough to enforce requirments AVOID BY - inviting personnel to sustainability training sessions - encourage them to participate in industry wide standard - engage top exec at first tier a. emphasize importance b. goal of motivating to catalyze dissemination to lwer tier

patagonia contract

private supplier code of conduct

ethics in procurement

procurement decisions that affect suppliers - every time we ask for a discount, squeezing the supplier unethical decisions by procurement personnel - we work w suppliers everywhere -certain things are acceptable in diff. places - we are accountable for selecting and hoping that they will comply w minimum requirements

sustainable procurement -

procurement should be involved in developing new products - engage new suppliers / develop existing ones to have greener raw materials (not just about the products but about the packaging) ex: dell uses bamboo - change raw material--> change supliers - china bamboo = super cheap, goes very fast ex: starbucks -- greener coffee cups

revisit the tradeoff between

product variety and capacity flexibility - during pandemic many companies shifted from supplying one market segment to supplying another ex: - US grocery market - companies had difficulty adjusting to the plunge in demand from restaurants and cafeterias and the rise in consumer demand

consequences

professional rep employment termination litigation firms rep

desired effet from surveys

prompted 1st tier suppliers to engage in internal discussions -- about whether they should /could alter

put skin in the game

prospects for ownership of environmental improvements - NIKE - over last 6 years has implemented intensive envrio engineering programs at 40 footwear suppleirs in china, vietnam, and indondesia - program: - set improvement targets . baseline increasing efficiency reducing hazardous waste maximize scrap utilization

business context- how can sustainability serve at core service

protect enviro care about culture social responsible econmic sustainability

groups the lessons based on

the "knowing doing gap" -what you need to know - how you should act on what you know

"knowing envrionment"

providing incentives for identifying, disclosing, and addressing problems collaborate with nongovernmental groups to facilitate monitoring and help tier 1 and subtier suppliers self-identify problems make use of improving chinese gov. data to augment internal supply chain transparency efforts work with multibrand forums to standardize supplier audit data at tier 1 and subtiers encourage envrionmental transparency as an efficiency tool

rather than......leading companies are.....

rather than monitoring chinese compliance with local/enviro/health & safety standards leading companies are - giving suppliers tools & incentives to independently improve environmental performance - help them overcome traditional reluctance

diversify your supply base

reduce heavy dependency on one medium or high risk source - add more sources in locations that are not vulnerable to the same risks

chinese

reluctant to disclose problems when they dont know how to fix them - low fines - spotty enfoorcement - unsophisticated factory management - find paying pollution fines easier than fixing the problem

why is CSR important

reputation enhancement creation of trust among customers recruiting high quality employees charging a premium price

ex: RBA

requires full members to conduct audits annually for atleast 25% of their own high risk facilities and 25 % of their high risk suppliers facilities - labor - health/safety - enviro - ethical dimension

to reach tier 2, you need friends

resource constraints/complexity of having all conditions in palce for a. successful buyer 2 buyer collaboration on environmental monitoring and remediation b. collaboration via multi stakeholder foums led by NGOs or industry groups may offer greater hope for environmental improvement

ex: industry associations

responsible business alliance - HP, Apple

recent years

rising number of multinational corps - pledged to work only w suppliers who comply w those standards - ask in turn from compliance from their suppliers - who ideally will ask their suppliers

automation

robots - pay for themselves - reduce need for labor in preparing products for shipping pandemic--> automation even more attractive

hong kong based apparel maker ex

said IPE helped to decide which sub tiers to work on improvements w and which to shift away from - company has success

ex apple and hp

scrutiny for sourcing electronics from overseas companies that required employees to work in hazardous conditions

direct approach

set / monitor social and enviromental targets for their first tier suppliers regarding 2 tier suppliers

transparency

sharing your challenges outwardly - be clear about what your challenges are TRANSPARENCY IMPORTANCE - Businesses that can share their challenges, can find a solution to them - Network solutions - Computer industry a. Dell challenge—recyclability b. Asked gov. to come in to help them create a framework c. Engage competitors that will lower their cost

greenpeace international

singled out Nike, Adidas, and other major brands (2011) - doing business with big chinese textile group that was discharging toxins into a local river

evaluate alternatives

social/environmental impact of each alternative

RESULTS

starbucks has locked in quality suppliers that are environmentally and socially responsible and that are willing to continuously improve

loan programs

starbucks offers loans to farms trying to achieve high scores and provides training and support to ones failing to do so

how can companies avoid unethical behaviors

statement of ethics ethical training developing consistent behavior rotation policy

adams book

strategy for sustainability "only strategy worth following is sustainability"

ex direct approach- automotive industry

strong commitment to supplier diversity - requires 7% of procurement spending to minority suppliers some 1st tier - already meeting target - other made substantial changes to do so - changing perfromance criteria for purchasing manager MNC periodically checks to see if the target is being met and creates opportunities to help them network with minority lower tier suppliers

ex nike and adidas

suffered from using suppliers that were dumping toxins into rivers in china

fiat chryler automobiles contract

supplier minority program that covers tier 1 and tier 2

sustainable procurement

supplier selection / evaluation supplier sustainability scorecard sustainable procurement sustainable purchasing

self assessment tools

survey ask suppliers a. do you have child labor b. do you have a safe working environment

measure success through

the bottom line - want to change the world, not be just a little bit greener MEASURING SUCCESS - Through the bottom - Healthy business - core to a sustainable business - Wanna work with people who are committed and want to make a change in the world Ex: worked with frito lay - Committed to internal sustainability initiatives Toyota - Prius - Iconic sustainability brands in the world ASK THE HARD QUESTION: IS THIS THE BEST YOU CAN DO FOR YOUR BUSINESS? - If answers no, go find someone else

" we care about the results but not at

the expense of integrity

if you have poor or dubious sustainability performance

then the MNC does business with them - can endanger their reputation and suffer profound repercussions -losing customers - being forced to find new suppliers -having supply chain disruption

encourage environmental transparency as an efficiency tool

things will get done *closer look into supply chain= things will get done* - walmart - pinpoint ingredients scrutiny= organic cotton supply chain - led walmart to purchase and ship cotton directly from tureky to guatemala for processing RATHWER cotton in china shipping to guatemala - change lowered Co2 emission and walmarts costs

some brands overcome chinas human resources by banding togehter

timberlnad, walmart, nike, ge - work w chinese gov and institute for sustianable communities - US based nonprofit org - jiansgu academy = train 4000 managers a year

fairphones purpose

to be open - phones translucent back cover lets you see the cirucits inside Founder, Bas van Abel & Collegues - Create longer-lasting modular cell-phone designs - Source at fair-trade mines - Look for new ways to work with factories in China - Post blogs and videos about their successes/failures at changing the ways phones get made a. Haven't created the 100% fair phone b. Showing through own supply chain—what's wrong with the supply chain FAIRPHONE AWARENESS CAMPAIGN, 2010 - Campaign over conflict minerals - "model for what can be done" still have to show that it can work Fairphone's tiny scale - Put it at a disadv in the marketplace Fairphone 2 costs - almost as much as the iPhone 6s and Galazy S7—isn't as fast or as sleek - Currently sold in US, might come to US Used it as Primary phone for a week - Rugged body / removable battery missed those other phones' fingerprint readers and superior cameras

AIM

to create a cascade of sustainable practices that flow smoothly throughout the supply chain

fill gap

training staff at chinese suppliers - once trained = employees are hard to retain - buyer can control how much a supplier pays newly minted EHS professionals (often poached by other suppliers) - lured away by the prospect of a higher salary --> insufficiency of EHS professionals/enviro engineers

leading MNCs have learned to not push

transparency too hard/too fast - can backfire - Company airs its contractors "dirty laundry" in a way that causes them to "lose face" with industry peers and buyers a. Start to hide / falsify info b. Financial bonuses for improved performance can make it worse by giving suppliers incentive to hide bad behavior / problems

some companies ...

turn to suppliers/contractors that narrowly focus on one area - lot of flexibility in what goes into your product - able to incorporate newest tech

identify your vulnerabilities

understand where your risks lie - goes beyond the 1st/2nd tiers and mapping your full supply chain a. distribution facilities b. transportation hubs --> time consuming and expensive

types of unethical purchasing behaviro

unethical behavior by supervisor/mger accepting suppliers favors/gifsts (consistent behaviro) - very popular in procurement - favor suppliers over others conflict of interest (personal/financial) - if you have a connection w a certain supplier ex: father owns shares in particular supplier - never reported it - huge conflict of interest bc ur giving business to a. family member --> have to be transparent, cant have influence on the situation personal buying -asking for a discount - procurement take adv. of the discount that companies recieve from supplier --> to receive a smaller discount for personal consumption - not worth it employers tell toher employers sharp practices - willful use of misinfo - exaggerating problems requesting bids form unqualified suppliers - sharing info on competitive quotations - taking unfair adv. of suppliers financial situation

social concerns in the supply base

use of child labor dangerous working conditions excessive working hours/poor wages lack of union rights race and gender discrimination supply diversity

once you identify your risks --

use that info to address them either by a. diversify your sources b. stockpile key materials or items

ex: Nike - Hytex

vietnam - violation of min wage and overtime laws cambodia and pakistan - child labor malaysia - living conditions and forced labor

DANGER OF A MORE SUSTAINABLE SUPPLY CHAIN

your supply chain is only as strong as its weakest link

structured approaches to communication

- Participants in global sourcing initiatives—located around the world a. Make real-time & face-to-face interaction more difficult - Participants may speak various languages and adhere to diff. business practices, cultures, and laws IMPORTANT FOR SUCCESS: - Well-established approach to communication & coordination Leading companies - Rely on various methods to manage communication requirements a. Regular strategy review meetings b. Training sessions involving team members from each site/region c. Regular project updates reported through the intranet *rely on scheduled conference calls, usually on a weekly basis* - video conferencing, web-based meeting tools - Commit time / budget to conduct strategy review and coordination sessions a. Often face to face b. Provide opportunity for managers to better understand the global strategies c. Review sessions= reduce redundancy, misunderstanding among global participants and worldwide locations

rigorous and well defined process

- accelerate learning as participants become more familiar and experienced "builds in" best practices and knowledge that enhance the likelihood of success allows orgs to document, measure, and continuously improve - helps overcome differences that exist among many locations 1. social culture and laws 2. personnel skills 3. business culture

executive commitment to global sourcing

- authority/ability to translate vision into practice best practice companies - recognize important of high-level indiv. who can develop/communicate a global sourcing vision and is responsible for its overall success leaders- access highest exec levels - help diff. successful from non successful some have a steering committee or council that is formed to oversee the proceess

R&D

- brands invest in R&D in other places other than the US - potential - enough skilled people to do it - country becomes highly competitive - gov. can incentivize the company **chinese could have given apple alot of money to incentivize them**

ex apple

- considered exports - research institutes criticized bc they opened up a research facility that wasnt in the US

staffing

- firms must hire experts and develop specialists who have experience in global: - purchasing mgmt -quality control international business law accounting --> global company, global suppleirs

achieving excellence in global sourcing

- large, north american based multinational

italy impact from covid

- luxury brands (northern area of Italy) - if Asian tourist spend double the amount of money on any luxury brand compared to an italian person --> no asian tourist coming in so it has a HUGE IMPACT chinese buy luxury brands in Italy - impacts everybody

availiability of needed resources

- resources can produce/interfere with translation of global vision into effective practices - find places where these are located avaliability: potential to separate ex: - executive steering committee at one company provides travel and living budget at time work team is formed alleviates concerns of company's functional managers BEST PRACTICE: identify those indiv. who support global initiative before forming project team - Once team is made, they identify people external to the team "as needed" resources **USE OF TEAMS to analyze / propose sourcing strategies remains popular/growing org design option BUT leaders should keep in mind the barriers to their use** Global sourcing demands unusual amount/variety of info - Diverse and dispersed operating locations 1. Needed data include info about existing contractors and suppliers 2. Incumbent supplier performance and capabilities 3. Project demanded by commodity and location 4. Capabilities of potential suppliers (including in emerging markets such as China) 5. Internal customer requirements Lack of info about potential supplier = results in reliance on current suppliers - Might not best sourcing option

international trade gap- China

- reverse from US -sell more than what they buy

procurement implications

- search, evaluate, and work with suppliers around the world - develop efficient operations and maintain controlled risks with these suppliers - keep cost down

risks of global sourcing

- tornado, pandemic - if all your suppliers are in one place--> risky

what drives companies to move from domestic to international purchasing

-because they are confronted with a requirement for which no suitable domestic supplier exists OR because their competitors are gaining an adv. due to their sourcing practices a. supply chain disruption b. rapidly changing currency rates c. declining domestic supply base d. inflation within home market e. emergence of new supply sources

globalization

95% of the worlds population lives outside the US - only 5% of people live in the US

success

1. cross-functional leaders participate on a global sourcing steering committee or council 2. designated executive has the authority to translate the global vision into reality 3. exec. leaders work to gain support for global agreements/processes from cross-functional groups/buying locations 4. global sourcing leaders make strategy presentations to executive committee and the board of directors 5. executive leaders recruit qualified participants to join global sourcing project teams

success from avaliability of resources

1. exec make critical resources, such as budgets and qualified participants, avaliable to support hte global initiative 2. process involves indiv. who have ability to take global sourcing perspective rather than local/regional perspective 3. relevant info is accessible to project teams and participants

five levels of sourcing

1. level 1 2. level 2 a. IP only as needed - on ad hoc/reactive basis 3. level 3 a. IP as part of sourcing strategy 4. level 4 a. GSG strategies integrated across ww locations 5. level 5 a. GS strategies integrated across ww locations & functional groups

amount we purchase from china than what they buy from us

5x

standardize operations

EX: - leading electronics company steering committee - VP of research VP of SCM corporate controller VP of marketing/sales VP of info tech - each committee member is responsible for championing a global project that relates to the major purchase category - steering company reports to the CEO a. CEO says development of global sourcing = primary initiative - support of global sourcing from functional managers and willingness to take on steering committee responsibilities

success for structured approaches to communication

SUCCESS: 1. Project teams meet regulary, either face-to-face or electronically to coordinate efforts 2. Strategy review and coordination sessions ensure understanding of global initiatives and buy-in from them 3. Project teams regularly report progress to exec leaders 4. Advanced communication and coordination tools are available, including video conferencing and web-based collaboration tools 5. Project info and updates are posted on a company intranet

risks

highest risk- communication equipment - apparel - chemicals - automotive

from a buyers perspective

access to goods/services worldwide - if majority is located in ohio, michigan, or PA - now w global markets --> can work w suppliers in mexico/canada/india - benefits with working with those suppliers - materials, labor - automakers - plants in the Mexico --> lower labor cost

costs of global sourcing-- higher in global sourcing

admin costs: 1. identification 2. qualification 3. travel 4. brokers fees

how do i make companies invest more in R&D in THIS COUNTRY

build a research a lab

international trade gap- US

buy more than export - big gap - buy more than they sell

worldwide trade war - 2019

canada imposed tariff EU imposed tariff mexico imposed tariff- stell, pork, cheese turkey (tripled tariff)- steel, aluminium india- raise import tax on nuts

important we recover from COVID

china- improtant for them to recover

quality issues

comapnies may have increase their - quality control processes/supplier audits - consume more financial resources - overtime every country shows how they are capable of producing a high quality product

TIM COOK ON WHY APPLE STILL MANUFC. IN CHINA

companies go to china for a low labor cost BUT THEY GO FOR reason: - skill -quantity of skill - adv. tooling-- precision and working with materials -tooling skill is deep in china vocational expertise is deep in china

level 5

coordination among the WHOLE VALUE CHAIN - procurement works w R&D - standardize process a. way you select suppliers b. doesnt matter where you are c. companies have corporate policies d. you have to follow this corporate policy --> if sustainability is apart of it then include that - highest global sourcing level -integration/coordination at a. ww buying locations b. across functional groups

success fro integration through info tech

data warehouses provide access to required data and info on a real time basis - companywide intranet provides access to global sourcing support documents, guidelines, templates, and progress updates - contract repositories store global agreements and provide warning of expiring agreements

ex: air products / allentown

desings/operates industrial gas and chemical facilities - experienced the benefits of adv. global sourcing 3 years experience - 100 global sourcing agreements in place - average unit cost savings = 20% worldwide engineering and procurement centers--> better aligned strategies with one another and the companies business strategy sourcing managers--> work w marketing staff a. include expected savings from global agreements when bidding on new business opportunities

knowledge/skills

differ drastically most companies --> create decentralized supply orgs that are proficient at managing transactions and material flows BUT global sourcing requires them to collaborate

distance

distance between firms is significant in terms of time zones and physical location - internet capabilities provide partial solution a. face to face is preferred for some sensitive issues - diff time zones - majority in vietnam, south korea, china

top risks for CPOs

economic downturn/deflation - internal complexity -managing complexity/risks -trade war

china

electronics clothing 98% comes from textiles - heavily rely on china, bangladesh chemicals - india/china

currency exchange rates

extremely important to consider with global sourcing because foreign purchases may cost more or less depending on fluctuations in currency market - extremely important but difficult to predict - important to evaluate the performance of the dollar over the length of the contract a. weak- final cost of goods tend to be relatively more than originally agreed upon b. strong - firm can realize savings through exchange rates

success for measurement of savings

finance rep agrees on method for valdating global initiatives global sourcing participants meet regularly with executive leader to review savings measurement systems support calculation of a. companywide savings realized and expected to be realized from global agreements b. impact that sourcing initiatives have on corporate financial measures c. return on investment for indiv. projects d. impact that global suppliers have on buying location performance indicators

what are the differences between level 4 and level 5 level 4:

first of two global sourcing levels in our model - features integrated/coordinated sourcing strategies across buying or site locations operating at this level requires: a. worldwide info system b. personnel with advanced knowledge and skill sets c. extensive coordination and communication mechanisms d. org structure that supports global integrate e. executive leadership that can clearly articulate a global vision --> primarily among buying locations - mainly considers development of global sourcing agreeements

american executive order on american supply chain

first time hearing ab it from the president most useful tool= how do i make this country capable of manuf. their products

exclusively global sourcing costs

foreign costs - duty charges -custom fees - import fees - currency exchange - gov regulations

success for org structure

formal exec steering committee or council oversees the global sourcing process, including the identification of global sourcing opportunities cross functional project teams are responsible for the detailed analysis of global opportunities and the development of sourcing agreements org desin includes separation of strategic activities a. global sourcing/operational international purchasing offices support global sourcing requirements sourcing suppport personnel are a. located near techhnical/marketing perosnnel during new product development - linked orgnaizationally to appropraite sourcing team

methodologies for measuring savings

frustration- inability to articulate savings ex: VP at consumer product company - failure: lack of interest from the finance department in evaluating total savings from gloabl agreemnts - inability to track the savings--> managers see it as an expense rather than an investment **validate the cost savings*8 - consistency -

EX trump admin

gave foxconn tax break - plant in texas - wont do it at the same price -- gov cant manipulate the price, up to the market - products may not be competitive enough

2018 biggest trading partners for the US

germany japan mexico canada china - highest

from a sellers perspective

global brand is the present - creation of market segments that cross geographic and cultural boundaries --> increased competition market for China and India are huge -->live in a global market that we can ignore

concentration per industrial sectors

global innovations huge for 1. mobile / communications 2. furntiure 3. textiles 3. electrical equipment

EX: italy wine and cheese

global sourcing - work w suppliers in Italy - access to high quality products - work w overseas suppliers (increase competition among domestic suppliers) - re bump customer service --> invest in more R&D

manuf. around the world are under..

great political/competitive pressure to increase domestic prouction - reduce dependence on sources that are risky - rethink the use of their lean manuf. strategies

integrated global sourcing

helping a company that operates in a mature yet intensely competitive industry gain new market share orgs must contend: a. longer distances b. increased rules/reg c. currency fluctuations d. customs requirements e. language f. cultural/time diff. global sourcing then must contend to...... a. operational issues - affect the IP while also managing a higher level of cross-functional/cross locational coordination

regulations in america compared to others

is it apples fault/ or chinas regulations --> both - when your doing business with another country you know the weaknesses of those countries **EDUCATE CUSTOMERS FIRST** - if not--> global brands get away with everything a. then no one cares about what you are doing on the ground in Bangladesh

help from outside

legal help= reviewing contracts technical help= evaluating supplier proposals

where do companies spend most of their time

level 3

smaller/medium companies

level 3 might be the most realistic

in moving from domestic to international purchasing orgs must contend w

longer distances increased rules/reg currency fluctuations custom requirements languages cultural/time differences

challenge

making supply chains more resilient without weakening their competitiveness

cause

many companies had not rigorously identified/addressed hidden vulnerabilities

shocks

more frequent more severe pipeline inventory issues/production disruption

dollar strong

more money in our pocket-- more products bought from china - our own products become more expensive to chinese people a. need to balance this

TIME

most essential but least avaliable -

electronics industry

no longer competing w just america

global sourcing agreements

one that applies throughout the entire company, usually with a supplier that has global capabilities a. wide discrepancies - in terms of extent of coordination in major purchasing categories - may be progressive in coordinating of capital equipment purchases across locations BUT - fail to coordinate raw material requirements OR - excel at sourcing facility services but not pursue opportunities with other service areas CHALLENGE: move from having pockets of excellence to addressing global opportunities wherever they exist

gov regulations

only incur if u do global sourcing global sourcing

supportive org design

org design: process of assessing and selecting - structure - division of labor - coordination - control - authority -responsibility --> required to achieve companies goals Businesses that excel usually share three org design features 1. Formal executive steering committee to guide the global process 2. Executive leader who has accountability for global results 3. Extensive reliance on teams to analyze and propose sourcing

global sourcing

practice from sourcing from global market for goods and services worldwide - many orgs strategically deploy global sourcing to remain competitive and survive in todays competitive markets

global supply chains in a post pandemic world: problem

problem: distuptions and shortages during the COVID 19 pandemic exposed weaknesses in the global supply chain, which already faced threats from the trade war

ex

proctor and gamble - wont hear "american brands" - "german brand" - most people will talk about how these are global brands/global markets land o lakes (american brand) - increased competition - competing w American & European brands

most expect to...

progress to this level but most lack ability/willingness/need to operate

most critical resources

qualified participants budgets info time and help from outside

global sourcing considerations qualitative and quantitative elements

qualitative - impact of national interest -ethical consequences of "sweat shop" labor - hazardous working conditions in foreign countries should be evaluated quantitative - capital or knowledge intensive supply chain - direct costs of importing goods a. transportation b. transaction - indirect costs of importing goods a. utilization of fixed assets/pipeline inventories/managerial time/engineering support - exchange rates uncertainties

barriers to global sourcing

resistance to change a. less prominent know b. people are more willing to change lack of skills cultural/customs/language longer lead times increased supply risk currency fluctuations

supply shock

started in feb - temp. trade restrictions - shortages of pharmaceuticals - critical medical suppliers - other products

costs of global sourcing -- common to both global and domestic sourcing

trade off decrease direct labor materials - increase lead time/transparency/inventory

first step

uncover and address the hidden risks - difficult for a single firm to possess the breadth of capabilities necessary to produce everything for itself - left vulnerbale when you depend on a single supplier somewhere deep in your network for a crucial component or material - if that supplier produces the item in one plant/country--> disruption risks are even higher

GAP

way cheaper - people will continue to buy cheapest option unless there is a huge gap in the quality

global sourcing is .... quantiative /qualitative viewpoint than domestic sourcing

way more complex

SUCCESS for process

well defined process is in place that requires participants to establish goals, meet milestones, and report progress to executives executive leader/steering committee-- w input from participants, reviews/proposes process improvements lessons learned sessions are conducted at the conclusion of each project and findings are distribtued to worldwide participants global agreements are continuously monitored/reviewed/and reestablished as required

certain features of a rigorous/well defined process

widely communciated/understood process that becomes the foundation of pursuing integrated global sourcing designation of a process owner-- who has responsibility for reviewing and improving the process lessons learned sessions: conducted at the end of the projects --> forwarded to global teams and leaders

apple - labor conditions/working hours

work 80-90 hours a week - mechanical job - 12 hours a day -- doing the same thing everyday - one day off every other week

POWER OF THE CUSTOMER

you are doing something wrong / you are doing something right