Outsourcing, CSR and Supplier Management — Curious Intersections (Part 4)

- July 30, 2012 7:07 AM
Categories: CSR, Jason Busch, Outsourcing, Suppliers |

Please click here for Part 1, Part 2 and Part 3 of this post.

Throughout this series, we’ve examined a number of perspectives that AMD’s Tom Mohin shared in a Huffington Post column about the limits of traditional approaches to vendor management in an outsourced environment, including how auditing alone is not enough. To this end, Mohin posits that it’s the two-way relationship that counts. Not just sticks. And not just carrots. But dialogue as well. He captures this notion when suggesting the importance of “weaving social and environmental considerations into the fabric of the business relationship is a far more efficient, effective and sustainable solution than the compliance-based model.” Such thinking also requires a paradigm shift not just in how one views the role of supplier management and engagement in the broader sourcing, product and customer lifecycle, but also the roles and responsibilities for production, wherever it may occur.

Capturing this rather complex thought, he notes that “A key to help make the relationship work is a change in thinking about the supplier-customer relationship: In an outsourced business model, suppliers’ factories become the manufacturing floor, their environmental footprint is part of a business’s environmental footprint and their labor relations are part of the business’s labor relations. When companies make this paradigm shift, it can become natural to consider social and environmental issues as a fundamental element of the customer-supplier relationship.”

However, relationships (and production) do not exist in isolation. We are operating in an increasingly complex global environment a range of variables contribute to an information gap that must be bridged around not only supplier practices and behaviors when it comes labor, but also product and substance level visibility (even extending to waste disposal). Not only do we have to manage expectations and performance (our own and our suppliers) across a greater number of geographies and physical plant locations, but we also need to do this in the context of cost and capital. Indeed, as we’ve suggested before, the movement to outsourced production combined with localization has created greater variability in cost and lead times and forced organizations to consider Western standards of accountability even when operating in emerging markets with different sets of standards.

Here are two other factors are also complicating the situation that Mohin does not have time to tackle in his analysis:

  • Sourcing (and product) cycle times are shrinking, requiring faster decision making (often with incomplete sets of information) which can take away from the time to truly engage suppliers
  • Data collection and access to information has not kept up with front-end analytics designed to analyze a range of content

In the final post in this series, we’ll conclude our observations with Mohin’s closing words and our related analysis.

- Jason Busch

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