Thomas Kase recently wrote about how Walmart has taken a lead role in disclosing supplier problems by providing specific details on the results of supplier audit reports. We applaud these efforts towards transparency, and based on our own experience managing and developing global suppliers in various markets (our deepest experience being metals and professional services), we know the sanitizing effect that daylight and data can have on supply chain and supplier behavior.
Unfortunately, try as others might, there is no question compensation funds (i.e., well intentioned feel-good “guilt funds”) would have the same effect. Which is why I think Walmart is in the right not to support them and to focus supplier management investments in other areas to prevent future tragedies.
For further detail on how Walmart is not agreeing to play a role in these compensation funds for the victims of plant/facility accidents, see the New York Times story: U.S. Retailers Decline to Aid Factory Victims in Bangladesh. The author spends a good deal of time shaming Walmart and other, primarily American, retailers who are not participating in an effort “to compensate the families of the more than 1,200 workers who died in those disasters.” This does not mention the tens of millions of dollars (if not more) Walmart is investing annually in new or enhanced supplier management initiatives. As the story notes in this regard, “ to the dismay of those pushing to create the compensation funds, neither Walmart, Sears, Children’s Place nor any of the other American companies that were selling goods produced at Tazreen or Rana Plaza have agreed to contribute to the efforts.”
The story quotes “industry analysts” that note “Walmart, Sears and other American retailers are reluctant to join the compensation efforts because they fear it could be seen as an admission of wrongdoing, perhaps leading to legal liability.” But my view is that Walmart is leading the retail world in investing in better supplier management for the future, rather than going for the easy, “PR” way out.
No doubt, we can and should applaud the charity that other retailers, unions, and individuals are bestowing on the victims of the tragedies. But such deeds will not systematically change a supply chain as much as a giant like Walmart creating a new rules set for global suppliers and holding them accountable to it. If we want to prevent tragedies in the future, we should applaud Walmart for taking a leadership role in creating a new global set of expectations rather than shaming them alongside other retailers for not agreeing to a victim’s fund.
For further reading on supplier management: