Your Worst Sourcing Nightmare: Getting Caught in a Sweatshop Scandal

Published : May 28, 2015

frustrated-businessmanEvery company wants to make the headlines, but finding yourself on the evening news as part of a sweatshop scandal is likely not the kind of publicity you had in mind. As a supply chain manager, your supply chain risk mitigation planning probably encompasses issues like material shortages or transportation delays, but looking into the operations of your manufacturers and suppliers can be just as important.

There are five things that you should be doing to prevent a sweatshop scandal and keep your company on the right side of the legal and ethical line:

1. Be Clear in Your Initial Terms.

Supply Management's Charlotte Eaton notes that it takes an estimated average of 15 sub-contractors to produce a single finished product. That's a lot of chances for things to go wrong, for bribes to be offered or less-than-legal labor to be used. When you’re setting up or switching a supply chain node, always schedule a sit-down with the heads of each new facility and explain your expectations, both verbally and in writing. Make sure there are consequences—up to and including contract termination—for egregious violations and be certain to give your agents the power to hold surprise audits in facilities on a regular basis.

2. Be Willing to Research.

Even surprise audits can have some kind of warning beforehand, diminishing the value of such inspections.

Consumer consciousness is at an all-time high and rising. According to a 2013 survey by marketing agency Good Must Grow, 60% of more than 1,000 respondents said that buying from socially responsible companies was important to them. Use of consumer-level research tools can still provide a lot of insight for supply chain risk mitigation, and Wired's Issie Lapowsky recommends and the FRDM Software Platform as potential starting points for ethical product sourcing research

3. Decide How You Will React

Though you will hopefully never have to put it in play, mocking up a press release and recovery strategy is a prudent step. Obviously key details should be left blank, but working out the overall tone and recovery steps ahead of time will give you more space to focus on the actual issue of sweatshop violations, should they arise. This would also be a smart time to line up firm secondary suppliers, which will also come in handy if there is a transport or shortage issue at a primary supplier, even if ethical employment issues never darken your doorstep.

4. Ask the Hard Questions

If one supplier has much lower prices, turnaround times or other benefits that far eclipse their nearest competitor, it's your job to ask why. While it may be tempting to lock down the contract and ask questions later for the sake of your company's bottom line, you could ultimately be exposing yourself to scandals and liability by failing to do research.

Whenever possible, tour the factory, talk privately to several employees at the facility and obtain references to make sure that good deal you're eyeing doesn't come with an invisible price tag. 

5. Let Transparency Serve as Self-Monitoring

When athletic shoe and sportswear leader Nike found their prospects in severe decline following sweatshop issues in 2005, they became the first company in their industry to release a full list of their factories to the public. This transparency became a major part of the strategy Nike used to rescue their image. If your company released a similar list tomorrow, what kind of reactions could you expect from your customers? If there's any doubt or concern about such a move, that's a signal you need to look more closely at who you're doing business with. 

Good risk mitigation requires a supply chain that is just as involved with the people it affects as the products it delivers. Use these five points as a guide to sweatshop scandal prevention—you won't just be doing the right thing by your company, you'll be doing the right thing period.

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Topics: Supply Chain Logistics

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