Case12, Monitoring Foreign Suppliers The Challenge of Detecting Unethical Practices

Case12, Monitoring Foreign Suppliers: The Challenge of Detecting Unethical Practices
How important is it for companies such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to have supplier codes of conduct and to have programs to monitor and ensure supplier compliance with these codes of conduct? You may use your personal opinion on much of this question.

It is very important. Just in the past year, millions of products have been recalled due to substandard supplier compliance. The issues come with the country of manufacturing. Let’s look at Mattel toys. Christmas 2007, the company lost billions in revenues because products manufactured in China, where lead based paint is legal, was sold in countries where lead based paint is illegal. The consumer assumes the product is safe and purchases it. “Another week, another recall of Chinese-made toys,” said Sen. Dick Durbin, D-Ill., who suggested detaining and inspecting all Chinese toy imports for lead paint. “We can’t wait any longer for China to crack down on its lax safety standards. This needs to stop now before more children and more families are put at risk.” (MSNBC 2007)

This tells the consumer that the companies producing the products are focusing on profits not safety. When a product is manufactured in a country that has minimal safety laws, the parent must be the child’s advocate and read the label advising where the product was made. Avoid product produced in China, as lead based paint is not illegal. Most recently in China, baby formula was tainted and sold to families, killing innocent babies in the name of profit. The parent must always research to see if a product has any recalls attached to it, as not all recalls make it to the news.

Knowing this, Nike and Wal-Mart must cease to sell products that do not meet the stringent laws of those such as in the United States, the European Union and others who have higher standards than these countries, such as China, India, Korea and Malaysia.

Who has the strongest supplier monitoring program – Nike or Wal-Mart?  Why?

“Nike has taken a bold step in publishing details of factories making its product. It has been a long time coming, but Nike’s new corporate social responsibility report is getting a lot of attention – and making others in the industry sit up and take notice. The company has returned to reporting with a flourish with the release of its 2004 report, accompanied by publication of a list of the more than 700 contract factories making Nike products, including the Jordan brand, worldwide. In 2004, Nike says the Nike brand accounted for more than 89% of the company’s revenue.” (Responsible Business 2009) This shows that Nike takes pride in its products while still using countries that have low operating costs.

What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

To ensure compliance, a company must have a representative at the plant to oversee the operations. The cost factor involved in having an employee at the plant will outweigh the cost of a compliance issue, such as what happened with Mattel in China.

References:

Mattel Recall – http://www.msnbc.msn.com/id/20254745/
Tainted Baby Formula – http://www.msnbc.msn.com/id/26661751/

Wal-Mart Tackles Out Stocks, http://www.rfidjournal.com/article/articleview/1551/3/160/

Responsible Business – http://www.ethicalcorp.com/content.asp?ContentID=3690