The Gap's Supply Risk Management Gap

Earlier in November, Business Week featured a story about the Gap's response to improving its supply risk management practices involving its supplier's use of child slave labor. The story notes that the venerable retailer is "pulling 50 percent of its orders placed with a vendor whose subcontracting led to children sewing some of the retailer's clothes in squalid conditions in India." I suppose that reactive, punitive approaches such as this are one way to address the issue. But after-the-fact enforcement will do little to stop the problem of labor issues or working conditions -- not to mention other forms of supply risk -- in the first place.

Nearly two years ago, I sat on a panel with a procurement executive from The Gap tasked with supplier scorecarding and performance monitoring (which encompassed, among other areas, labor and contracting practices, as I recall). I recently learned through the Spend Matters grapevine that the funding for this initiative -- involving both headcount and technology -- was reduced or eliminated shortly after the panel discussion because of the Gap's broader financial challenges. I suppose that in retrospect, a few million dollars of continued investment in proactive supplier performance measurement, management, and interventions, would have been cheap relative to the damage caused to the retailer's overall reputation. Consider that just the other day, rather than buy kid and baby clothes at the Gap -- the retailer I used to head to for such purposes -- I went to Costco instead and found even better deals. Unless I purposely sought out a different retailer because of the Gap's labor practices, I would never have discovered that Costco even competes in this category.

Jason Busch

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