How to Ensure Supply Chain Growth Doesn’t Lead to Reputational Risk
Business Solutions If they want to better manage supply chain intricacies, chief procurement officers must find a way to stay 10 steps ahead of its process.
Kris Van Dalen, Vice President Onsite Solutions, Fastenal Company
What is supply chain diversity and how does it benefit manufacturers?
Supply chain diversity is the strategy of connecting with a supply base that brings a broad range of capabilities and expertise. Manufacturers with diversity within their supply chain gain access to a multiplicity of ideas, which fuels innovation. It can be a powerful way to add balance, resiliency, and creativity to the business.
How does building an integrated supply chain help manufacturers improve their safety and productivity?
Supply chain integration places a laser focus on organizational core competencies and continuous improvement. In manufacturing, a supplier-managed safety program can drive worker compliance, and compliance drives worker safety.
What are the most important things for manufacturers to consider when building out their supply chain?
Never lose sight of the ultimate goals of your organization. The suppliers you choose, the products they supply, the method of how those items are delivered and consumed, even finance and accounting practices – everything should contribute to that journey. The key is aligning the metrics for measuring supply chain performance with those major organizational goals. When manufacturers achieve that alignment, they get an amazing level of commitment from their suppliers.
Where do you see the future of supply chain heading?
Prices, labor, transportation capacity, working capital, tariffs – these issues are challenging every single organization out there today. Success won’t come through adversarial negotiations, but rather through supply chain collaboration. The long-term benefit is a more sustainable supply chain with the agility to navigate the next wave of business challenges.
Eighty percent of chief procurement officers (CPOs) report directly to their CEOs because the CPOs’ decisions now have profound effects on corporate health, intellectual property, environmental compliance, quality and even sales. Participation in reputable continuing education programs, many of which are online and can fit into a demanding day, can help CPOs stay current on emerging risks and ways to proactively manage upstream to keep their supply chains, and reputations, solid and shatter-proof.
A double-edged sword
Having a lean, agile supply chain network in the hyper-competitive global marketplace is imperative. However, increased reliance on contractors and their subcontractors brings greater risk and, with it, heightened responsibility to closely vet and monitor supplier performance and behavior.
According to CAPS Research in 2015, a whopping 83 percent of all corporate spending went to hundreds of thousands of global suppliers—with only 17 percent going toward corporate manufacturing plants, personnel and operations infrastructure. Parsing out spending to provide continuing education for CPOs can be challenging. But, this budget re-allocation can save critical resources, including reputation.
High stakes require vigilance
Today, Fortune 1,000 firms face heightened levels of complexity in protecting their ethical imperatives, image and standing, when firms can have as many as 10,000 suppliers under contract. How those contractors behave while working for the firm can make or break multibillion-dollar corporations. In addition, government regulations now enforce corporate social responsibility, and consumers punish companies that don't handle themselves responsibly.
Volkswagen is expected to lose billions of dollars and significant market share because of ethical lapses. But what about suppliers? Chipotle continues to be under scrutiny for its protracted problems finding the weak links in its supply chain that led to contaminated food being served in its restaurants, sickening customers. Walmart and H&M were accused of profiteering from unsafe, inhumane working conditions when a factory that made clothing in Bangladesh collapsed, killing more than 1,000 workers and injuring many more.
These cases, among others, reinforce the imperative for proactively rooting out poor working conditions, loose financial transactions, skirting of environmental regulations, or substandard quality in parts or materials among suppliers (and their subcontractors) to prevent their morphing into scandals that negatively affect the contracting organization. As a result, constantly vetting and monitoring supplier performance and behavior becomes a necessary added responsibility for corporations.