You will be caught out

Roger OakdenGlobal Logistics

Doing the wrong thing.

Allowing impoverished children to make the products you sell is not the road to higher profits, but to unwanted publicity about your corporate practices – mobile phones and social media are available and cheap.

Put yourself in the shoes of a buyer within a large retail business. A supplier with whom you have dealt with before offers you a product, in this case rugby balls, at a very low price. This means that the balls can be sold at a competitive price with a big gross margin.

Unfortunately, there are still buyers who do not ask the obvious questions, like “how can this product be offered so cheaply?” and “are children used in the production of these balls?” If these questions had been asked (and truthfully answered) a major retailer in Australia would recently have saved considerable embarrassment and the cost of taking a product off the shelves in multiple shops.

Only one year after the major supplier of sports balls in Australia was exposed for knowingly using child labour in India, its competitor has been shown to be doing the same thing! After initially denying the situation, the company admitted to the practice, stating that contractors were at fault and the incriminating photographs were ‘fakes’.

So now we have a known retailer and a brand company having to defend the indefensible.

Why do retail buyers and purchasing staff in developed countries continue to sign contracts that can cause big trouble for their business?

Actions in your business

  1. Reflect on the external risks for your business that can be reduced by professional procurement. Some of the higher risks your business is likely to face will be caused by the actions of those who are not company employees – suppliers, sub-contractors, service providers, contract employees, agents and consultants. Remember, they are in business for their reasons, not yours and their primary reason is to sell you something.
  2. Procurement is not an afterthought. It requires professional and preferably qualified people in your business. A part of their role is to:
    a. Provide a written document concerning expectations of your suppliers. This must be on one page and written in a simple and direct style; there should be no misunderstandings concerning suppliers’ behaviour and your relationship with them.
    b. Ensure that third parties you contract with are trained or otherwise can show their understanding of ethical practices. Look beyond the piece price.
    c. Comply with commitments you make – if your business says it will help factory workers children with their education; ensure that your agent in the developing country makes it happen.
    d. Complete the reviews defined in contracts with suppliers; let them know you mean what you say.

If you intend or have sourcing from low cost countries (LCC), these steps will at least reduce your risks, especially your reputation risks.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...