Supply Risk Confessional: Learning From Apple’s Admitted Supply Chain Transgressions (Part 2)

Please click here for Part 1 of this post.

Continuing our discussion with D&B's Jim Lawton on the topic of supplier auditing, Jim suggests that a fundamental question companies should ask themselves to expand their supplier auditing reach -- not to reduce on-site auditing costs necessarily -- is how to add a virtual auditing capability to identify potential issues. Regardless of the actual auditing programs in place, however, it is essential for procurement and supply chain organizations to find senior executive sponsors inside their companies who are passionate about not just complying to the letter of the law or CSR supply chain expectations, but view such activity as absolutely core to being a better organization and serving their ultimate customers. In other words, CSR should be a bigger and better-orchestrated company imperative.

Learning from Apple's experience, specifically, Jim suggests that organizations should take specific steps to clean up their supplier management act. The first is to "take inventory of what's going on. Understand your suppliers -- who you're really working with not just on a capabilities and production level, but also a process and values one." Get a clear of understanding of the supplier's corporate family structure, especially crucial when working with overseas suppliers. As part of this first effort, Jim suggests that it's essential to look inward and question the effectiveness of current and planned systems to drive supplier compliance and CSR initiatives.

Additional questions to ask at this phase include: "Where are the issues, and where are they likely to occur? Who's championing the program and each effort at individual suppliers? Is the program treated seriously by executives? What information are we using to make decisions and take action? When do we collect this information and with what regularity?" Next, it's essential to understand and perform an assessment as to how effective these elements/items are relative to a program ideal and what needs to be done. This gap analysis is something no supplier/supply chain CSR program should be without.

Finally, organizations should "be very clear internally as to how they are going to behave as a company to prevent and deal with specific events as they arise in the future." Here, preemptively driving internal alignment is key, not to mention exploring similar areas with the suppliers you're working with." At this stage, having tackled these questions and issues, it's time to take supply chain compliance action and to figure out how to close the gap -- and to do so as quickly as possible. Failure from suppliers to adhere to accepted standards can result in a change of supplier, delivery interruption, and other issues. Thoroughness matters, but so does speed. In many cases, unlike a multi-wave sourcing program, you might not have 18-24 months to achieve the results your key constituents -- customers, shareholders, employees, etc. -- expect. In addition to avoiding risk, CSR offers opportunity to promote a positive brand image After all, one more negative headline is one too many.

Jason Busch

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