Discuss how important is it for companies such as Nike and Wal-Mart that source

Question

Discuss how important is it for companies such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct? Would you recommend that a company join the Fair Labor Association and use FLA’s standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort? What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams? Discuss how important is it for companies such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct? Would you recommend that a company join the Fair Labor Association and use FLA’s standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort? What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

Explanation / Answer

Discuss how important is it for companies such as Nike and Wal-Mart that source extensively from foreign suppliers located in countries where wages are low and substandard working conditions are common to institute supplier codes of conduct and undertake programs to monitor and ensure supplier compliance with these codes of conduct?

Common problems

1. Worker related –

2. Quality of products

3. Lack of transparency regarding accounts, bookkeeping, use of sub-contractors and auditing tricks

Why supplier compliance?

In 1998 Nike faced a slump in sales because of protest against its practice of outsourcing to sweat shops in East Asian countries.

Products from countries like China are considered cheap and combined with the images of low wages and sweat shop conditions, the brand perception just gets worse.

Unethical suppliers tend to cheat not only in labor treatment but also in quality issues and this proves costly for the company. The recall of products, as Hp and Dell did for battery issues, is due insufficient supplier compliance.

Would you recommend that a company join the Fair Labor Association and use FLA’s standards and program of factory audits instead of trying to set up its own supplier monitoring and compliance effort?

Criticisms against FLA include

A better one would be to have one’s own surveillance system along with a third party audit

What can a company do to detect and combat the efforts of unscrupulous foreign suppliers to deceive inspection/compliance teams?

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