In 1997, shortly before I joined the M&S Merchandising team, Corporate Social Responsibility (CSR) was a major issue. Awareness regarding CSR increased after a child labor scandal was exposed in Moroccan factories. Basically, our suppliers were employing underage workers to make children’s clothing. During this time, sourcing and procurement teams had a very difficult time trying to police their suppliers in low-cost countries. The lack of robust controls to monitor supplier performance created a negative impact on the M&S brand when news spread about the underage worker scandal.
As a consequence, supplier performance management and risk management have remained very close to my heart. After all of these years, I was surprised when I read a similar issue happened with Ikea. A recent article in The Times reported that Ikea, one of the world’s largest buyers of Timber, allegedly sources timber from areas plagued with illegal logging. The article said Ikea does not tell its customers which products are made from certified wood. When undercover reporters at The Times asked Ikea staff where the timber was sourced from, they said it was from sustainable sources. In reality, the article said only 16% of all timber sold by Ikea came from certified suppliers; however, they promised to be at 30% in 2006. Meanwhile, competitors such as Homebase and B&Q achieved an excess of 75% from certified suppliers. Ikea’s brand trades on sourcing from sustainable and environmentally friendly sources; yet, these figures contradict that image.
The article indicated Ikea needed to source from the lowest cost supplier to maintain the rapid business growth. The scenario Ikea faced is a perfect example of when companies are forced to make a decision to maintain savings and growth by working with a low cost supplier or work with a more expensive supplier that follows your company’s CSR guidelines and initiatives.
The supply chain disconnect from CSR will not last long. This month, both Apple Computers and Intel Corporations stopped sourcing minerals used for its high-tech products that are found in the Democratic Republic of the Congo. With this renewed focus on CSR, supplier performance and risk management should become more robust in the coming years. The only way to achieve a strong supplier information management program is to directly align existing suppliers with the company’s corporate goals. The program should be built into any future tools to monitor risks with key suppliers. The company should also develop a process or system to monitor and measure their supplier performance using Key Performance Indicators (KPI’s) on regular intervals. More importantly, companies should develop a plan of action for when suppliers do not meet or fall below company expectations and goals.