There’s this financial guy, Ty J. Young, who opens his TV ads with the following statement, “The world has changed. Clearly it’s not the 80’s and 90’s anymore.” A truer sentiment could not be stated describing the world of customer-supplier relationships, particularly related to risk in the global supply chain.
Supplier risk used to be a simple deal. The main questions were, “Have we decided to do business with a supplier who will consistently provide us the highest quality, on time, at the best price?” Not very complicated and fairly easy to monitor and assure. Not so anymore!
Now that we’re in the third millennium, more risks must now be recognized, assessed, and dealt with. In a “White Paper” titled SCRLC Emerging Risks in the Supply Chain 2013, the Supply Chain Risk Leadership Council has identified contemporary risks that are now in play. To summarize, they are related to non-traditional areas (to most folks in quality-land) such as climate change, increasing social inequity, gender imbalance, population migration, global democratization movement, dependence on IT, government financial crises, government social policies, global economic disruptions, social media threats, and growth of mega cities, just name a few. And there’s more. I never thought of these issues as supply risks.
A growing influence in customer-supplier relationships is the area of Corporate Social Responsibility, or simply Social Responsibility. ASQ’s 2011 Futures Study identified Global Responsibility as the #1 force that quality professionals see as having an impact in the profession in the years to come. So now when we (quality-land folks again) look at the suppliers we have in our supply chain, in addition to the standard assessments of quality, delivery and price, we need to be cognizant of much more. For guidance, you need to look at ASQ/ANSI/ISO 26000-2010, Guidance on Social Responsibility for help.
More and more you will be looking at suppliers for their adherence to the principles described in this document, namely; accountability, transparency, ethical behavior, respect for stakeholder interests, respect for the rule of law, respect for international norms of behavior, and respect for human rights. You will be assessing how they are integrating these guiding principles with the social responsibility core subjects of; organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues and community involvement and development.
Wow! The world has changed! Overwhelmed? No need to be. How are we, the quality-land professionals, going to handle all this stuff when evaluating our suppliers and supply chains.
SO WHAT DO YOU DO NEXT?
I see several key needs going forward.
- Education. “Update your database” is an appropriate term. Get informed about the new risks that we face in this changed world. Break out of the “quality-delivery-price silo” and learn all you can about the risks that your organization is facing today. In the future, the reputation of your company and brand will probably depend more on these new areas of risk than any you used previously.
- Due diligence. This can’t be overemphasized. As defined in ISO 26000, it means a “comprehensive, proactive process to identify the actual and potential negative social, environmental and economic impacts of an organization’s decisions and activities over the entire life cycle of a project or organizational activity, with the aim of avoiding and mitigating negative impacts.” This sounds a lot like what we would call good risk management.
- Practice. Start to define and use new methods of evaluating potential suppliers and monitoring and auditing existing suppliers. The more you do it, the easier it will become.
Bio:
Richard (Dick) A. Gould is a trainer based in Surprise, AZ who provides sourcing solutions through training in the areas of supply chain management, supplier development, supplier certification, auditing and risk assessment. Dick is a Fellow of the American Society for Quality (ASQ), and a charter member and past-chair of the Customer-Supplier Division of ASQ and past-member of the Board of Directors of ASQ. Dick has presented training seminars at local, national, and international levels.
Email: dickgouldcsp@aol.com