Detecting unethical practices at supplier factories, to include monitoring and c

Question

Detecting unethical practices at supplier factories, to include monitoring and compliance, is a major challenge to say the least. Yet, wages drive cost and it’s an absolute necessity to maintain the lowest cost in production of any good. Or is it???

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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

1) Detecting unethical practices at supplier factories, to include monitoring and compliance, is a major challenge to say the least. Yet, wages drive cost and it's an absolute necessity to maintain the lowest cost in production of any good. Or is it???

Wages may not necessary drive the lowest cost of production for one good. The reason for this is that the organization or supplier can seek to eliminate on other areas of improvements to ensure that goods are being produced at the lowest possible price. The company can look to eliminate the amount of rejects and defects produced to help lower the overall cost. More importantly, a higher wage can increase employee morale and productivity. Productivity gains are main driving forces to help lower overall process and production costs. So in this case organizations need to seek alternate ways to produce goods at a lower price before decrease or offering a low wage to an employee.

(2) 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?

It is important for companies like Nike and Walmart to have a supplier code of conduct, however all because the organization has a supplier code of conduct does not mean it is actively being followed. It would be almost impossible for these organizations to monitor every working condition from the companies that it sources their products from. I would suggest having the organization and sourcers of products to join the FLA and adhere to their standards, this will have a more positive impact on the conditions of workers in low wage companies opposed to the organization creating their own supplier code of conduct.

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