Outsourcing, CSR and Supplier Management — Curious Intersections (Part 3)
Continuing our series exploring AMD's Tom Mohin experience and observations in managing CSR-related activities and metrics within an outsourced manufacturing environment, we fully agree with his assertion that "if the customer assumes too much of [the responsibility for auditing and micromanaging corrective action requests], the supplier's ability to self-manage these programs can be diminished. A seemingly better approach is for the customer and supplier to agree on a set of clear expectations and work in a close partnership to manage performance."
Yet what are the best ways of doing this? Leveraging an integrated supplier information management platform from the likes of Aravo, RollStream/GXS, HICX, SAP, Oracle, Emptoris, BravoSolution and others is a great place to start. But by having a common environment to collect and manage supplier information and share program results in a transparent manner, both buying organizations and vendors can develop a common language, understanding, and framework to drive further development efforts. Then, we would suggest, procurement organizations can more effectively take to heart Mohin's recommendation that "one of the most effective processes for managing social and environmental performance is to incorporate these issues into regular business reviews."
Beginning with an automated framework to collect, manage, analyze and disseminate information (e.g., quartile-based performance for how suppliers are meeting a given standard or code of conduct), companies can also get on the same page internally about what they want to manage with their suppliers. As Mohin suggests, "since business reviews are the primary forum where senior executives from both companies meet, this process can help bring increased awareness and focus to these issues." So what we're left with is audits ultimately playing a linked but not individual role in the effective administration and management of an overall supplier lifecycle engagement effort. As Mohin points point, "compliance audits still play an important role, but in this context, are used to verify self-declared information and as a mutually accepted process to help improve performance."
To this we would also add that they provide another set of metrics and data by which we can synthesize and feed back performance information to drive improvement and understanding with both internal line of business stakeholders and suppliers. So don't kill the audit, or consider it just a way of keeping suppliers honest. Rather, look at audits as part of a continuous process of gathering, distilling, sharing and collaborative acting on information. Just make sure you capture it in a platform first!