SCM 301 - ethical sourcing
business ethics
application of ethical principles to business situations
from buyer-firms perspective
supplier tracks inventories, determines delivery schedules and order quantities
supplier ethical data exchange
focuses on responsible and ethical business practices, helps reduce risk associated with outsourcing
strategic sourcing
managing the firms external resources to support firms long term goals
Ethical Trading Initiative (ETI)
an alliance of organizations seeking to take responsibility for improving working conditions and agreeing to implement the ETI Base Code
framework for ethical and stainable sourcing strategy development
1. establish corporate ethical and sustainable sourcing policies 2. train purchasing staff and implement policies 3. prioritize items based upon ethical and sustainability opportunities and ease of implementation 4. develop performance measurement system 5. monitor progress and make improvements. increase use of green and fair trade products 6. expand focus to include other departments
functional products
MRO items and other commonly low profit margins with relatively stable demand and high levels of competition (ex: office cleaning products)
sustainability
ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, environmental, and social challenges
supplier certification programs
are used to identify strategic supplier alliance candidates
from suppliers perspective
avoids ill-advised customer orders, supplier decided inventory set up and shipments, opportunity for supplier to educate customers about other products
co-managed inventories
buyer and supplier reach an agreement regarding how information is shared, order quantities, when order is generated and delivery timing
ethical policies should include:
determine where all goods originated and how they were made, knowledge of suppliers workplace principles, inclusion of ethics as performance rating, independent verification of vendor compliance, report of supplier compliance to stakeholders, provision of detailed ethical sourcing expectations to suppliers
drivers of strategic sourcing
development of ethical and sustainable sourcing initiatives, managing and improving supplier relationships and capabilities, identification and selection of environmentally and socially conscious supplier, monitoring and rewarding supplier performance
green purchasing
ensures products or materials meet environmental objectives eg: waste reduction, hazardous material elimination, recycling, remanufacturing, and material reuse
supply base rationalization (supply base reduction/optimization)
firms seek to reduce purchases from poor-performing suppliers while concentrating purchases among their top-performing suppliers
formal certification programs
firms that use in-house formal certification programs require ISO 9000/14000 or similar certifications as part of the certification process
sustainable sourcing
focus on respecting human rights and reducing poverty by creating profitable trade, working within the finite limits of planets resources, and moving towards a low carbon economy
sustainable sourcing should seek to..
grow revenues (new product), reduce cost (increase resource efficiencies), manage risk (link brand to social consciousness of consumer), and build intangible assets (social and environmental)
early supplier involvement
highly effective supply chain techniques where key suppliers become more involved in the internal operations of their customer (manage inventories at customer points of use, participate in customers new product and process design processes)
Fair trade product
manufactured or grown by a disadvantaged producer in a developing country that receives a fair price for their good
strategic alliances
more formalized type of collaborative relationship involving commitments to long-term cooperation and trust, shared benefit and cost, joint problem solving, continuous improvement, information sharing
examples of ethical sourcing practices:
promoting diversity by intentionally buying from small firms, ethnic minority businesses, women-owned enterprises discontinuing purchases from firms that use child labor and unacceptable labor practices buying from firms in underdeveloped nations
buyer-supplier partnerships are easier with a rationalized supply base and result in...
reduced purchase prices, fewer supplier management problems, closer and more frequent interaction between buyer and supplier, greater levels of quality and delivery reliability
innovative products
short product life cycles, volatile demand, high profit margins, relatively less competition (ex: tesla model S, new robotics system)
ethical sourcing
sourcing that takes into account the public consequences of organizational buying or bring about positive social change through organizational buying behavior
vendor managed inventory
suppliers manage buyer inventories to reduce inventory carrying costs and avoid stockout for buyer
rights and duties
a theory stating that some actions are right in themselves without regard for the consequences
utilitarianism
ethical act creates the greatest good for the greatest number of people
ethical and environmental certifications
used by various organizations to identify rogue suppliers and suppliers who fail to certify according to ethical requirements
legal process of sustainability
3/4 of US had a sustainability report in 2014, EU requirements for sustainability reporting went into effect in 2017
value engineering
activities help the firm to reduce cost, improve quality, and reduce new product development time
outsourcing
firms purchase materials or services instead of producing them in-house helps - concentrate on core business actives, reach sustainability goals
social investors
investors backing ventures that generate social, environmental, and financial returns on investment
corporate social responsibility
practice of business ethics
modern goals of sourcing
reduce - dependency on suppliers, delivery cycle time, and carbon footprint improve - quality, customer service, and ethical reputations
