Following a story featured in the Business Week post, Wal-Mart Fires Supplier That Used Bangladesh Factory, our sustainability consulting revisits the topic of sub-tier supplier risk. In this case, a non-authorized supplier was subcontracted without knowledge of the retail giant. Despite the lack of direct engagement, this tragedy and its affects could have been avoided.
“Take an active interest in the processes of your suppliers and other partners. This practice shouldn’t be limited to your first tier: make sure you’re aware of your suppliers’ suppliers’ production methods, too.” –Procurement Strategy Council
Seeking further guidance on solutions, our sustainability consulting refers back to the CFO.com structured three-prong framework to sustainable supply chain risk mitigation. Key components of this comprehensive advice include:
- Look Beyond the Obvious – Some organizations focus on mitigating risks that are palpable and overlook less-obvious ones.
- Expect the Unexpected – Organizational risk-management plans may deal with known or suspected risks but fail to provide a comprehensive overview of the risks inherent within the supply chain.
- Practice to Be Perfect – Some risk-management plans are contained neatly in binders and placed on shelves. That doesn’t mean those responsible for implementing these strategies are aware of the origin, likelihood, and severity of risk that exists. Effectively planning for risk requires full disclosure of risks, and all risk-mitigating and contingent actions that may be required, to all who will have to perform such actions.
A common characteristic among sustainable organizations is the ability to effectively manage the flow of information across key business stakeholder relationships. While many organizations target immediate value, some of the more well known leading organizations continuously assess the health of their supply base. This provides for opportunity to immediately determine risk. In fact, the true business sustainability differentiators are those who understand and effectively mitigate the potential derailleurs of supply down to their sub-tier partners.