Creating Socially Responsible Supply Chain

Corporate Social Responsibility. Image Credits: Sophia Griffiths

Supply chain management or SCM in short, easily qualifies as one of the most researched topics when it comes to business or management. Ever since Toyota adopted the lean SCM model back in the seventies, a noticeable paradigm shift was seen in nearly every organization that directly or indirectly added some value to this supply cycle, one that starts from the supplier and ends at the consumer. With the passage of time, new developments in the supply chain were instrumental in bringing about a change no less than some revolution. One such harbinger was the concept of ‘social responsibility’. Various permutations and combinations revolve around the accepted definition of corporate social responsibility (CSR) but for the layman, it can be penned down as, “giving back to anyone and everyone involved in the supply chain hierarchy, both morally and economically.” Industry veterans like Intel are publishing yearly reports that testify the increase in revenue owed to incorporating corporate social responsibility in SCM. And we all know that numbers don’t lie, especially when recently elected governments across the globe are going to great lengths for the sake of fault-finding in the way companies, be it tech or any other domain, are functioning. Researchers are publishing papers filled with crazy mathematical equations centered on the integration of social responsibility within the supply chain.

On closer inspection, the existence of such ethical and moral code is a must since various entities, poles apart in their ideologies and background, dovetail to ensure that the end consumer gets what he wants. The lack of such a system can have disastrous consequences, the 2013 Rana Plaza collapse being a case in point to supplement this claim. To mitigate future incidents, measures on the global scale are being introduced; formation of the Electronic Industry Citizenship Coalition (EICC) is one such step that IT companies have come together to preach and practice. The awareness among the general public and the corporate industry about gender and diversity inclusion, environmental concern, fair pay, conducive working conditions, etc. has scaled the nadir. If a company bucks the trend by failing to act along this line, it won’t be long before it shuts down! Business schools are coming up with suggestions and statistics-backed methods to create the ultimate sustainable supply chain bolstered with the desired "socially responsible" tag. Outlined in the remainder of this writing are strategies for creating the SCM model that favors the local community and society at large:

Supplier selection: The long-term survivability of a supply chain is intertwined with the supplier who represents an essential part of the chain. The right selection of the supplier (operational excellence is what one should consider here) plays a major role, particularly when dealing with strategic components. Some of the KPIs’ of an effective component supplier are:

1. Ability to endure the bullwhip effect and act accordingly.
2. Compliance with the necessary standard certifications, such as ISO.
3. Willing to adopt and adapt to lean/agile SCM models.
4. Emphasis on waste reduction and achieving it whenever and wherever possible.

    Evaluating the boundary of vertical integration: As an organization, it’s important to be aware of the control you exercise over other aspects of the supply chain. You can’t bring about a change that isn’t in tandem with the other entities that work alongside you. To prevent such unnecessary consequences, one must know about the boundary beyond which actions are seen more as an act of trespassing rather than bringing in benefits. Vertical integration makes you cognizant of the same.

      Modeling the CSR initiatives around the identified core competencies: For any company or individual, it’s imperative to master the act of giving, be it charity or any other notable cause. And the ROI on such actions (need not be monetary) is maximized when they align with your company’s strengthens, a.k.a the core competencies. Dr. Kellie McElhaney of UC-Berkeley has aptly described CSR as the “intersection between business and social/environmental returns.”

Diversity and inclusion: Gender equity and intolerance towards any kind of discrimination is the first and foremost requirement for the supply chain to thrive. Large corporations are sharing new initiatives every other day to show their support for bridging the gap between discriminating and ‘open-to-all’ workplace. Google’s innovative approach to supplier diversity was a fresh take on how to deal with nimble workplace culture. And mind you, this was around four years back! Then there’s the survey by Gartner which shines light on the increase in the proportion of women constituting the senior-level ranks across businesses. Companies are slowly coming to terms with the myriad of advantages that lie ahead for them by embracing such diversity in their traditional, corporate hierarchy.

Outsourcing v/s Offshoring: Each comes with a set of pros and cons, and one may even outweigh the other on a case-to-case basis. The pivotal point here is the amount and level of technological superiority of the in-house design/production capability the company has at its disposal. Factors such as flexibility, productivity, and cultural & social differences, etc. need to be taken into consideration before settling on outsourcing or offshoring.

Happy employees, both emotionally and financially: When companies resort to having their products manufactured in developing or third world countries, they begin exploiting workers in the name of extracting maximum profits. When the world got to know about Nike’s unfair treatment of its Vietnam workforce in 1997, business organizations across geographical boundaries came under scrutiny. To avoid such unwanted exploits that could leave you with disgruntled employees and maybe even loss of lives in the worst case, mold your buying decisions as a company around ‘supply chain visibility’ and the standard, strict code of conduct. The transparency of a conducive supply chain setup is the need of the hour.

Periodic feedback and review: Even with initial measures in place, the need for constantly reviewing them can’t be eliminated. The changing dynamics in the workplace imply what was considered as acceptable yesterday may not be today. Find the time to talk to the component supplier, ask him if the terms of negotiation are still favorable for him, and keep a tab on the factory conditions in that remote location, the workers might be planning on a revolt silently. Attune your organization to their wants if persistent peace and harmony in the SCM lifecycle is what you seek.

This list of suggestions could go on forever especially with new measures being implemented by the industry regularly. Fiscal benefits shouldn’t be compromised with but doing so at the cost of values is detrimental to a company’s success. Customers would then start seeing the company’s mission and vision as phantasmagorical. To sum it up, a sustainable supply chain that is socially responsible ought to be spread across the following four dimensions: environmental responsibility, philanthropic initiatives, ethical business practices, and economic responsibility.

Fulfilling customer solutions while being part of the global ecosystem may seem as daunting and a possible stymie in the path of maximizing profits. But if Apple, the second most valuable US company, can achieve it, the mapping that should exist between supply chain management and being responsible is plausible and possible for every organization focusing on bridging the gap between the supplier and the consumer.

PS: This article of mine was chosen by OperaZeal, The Operations Club of IIM Amritsar. You can find the certificate I received for this in my Recognition post.