Supply Chain

Companies Are Only As Strong As Their Riskiest Supplier

In a recent Industry Today article, Ivalua’s Daniel Amzallag discusses how companies can identify common red flags within their supply chain and avoid working with risky suppliers.

A common strategy used by organizations to help minimize costs and speed up production is to diversify their supplier base. In this push for savings and efficiency, business leaders have blinded themselves to labor practices, and the risks posed by partnering with suppliers who violate them. Companies that overlook supplier labor conditions can suffer major consequences—anywhere from lawsuits to a tarnished reputation—making supplier due diligence a critical step in the sourcing process.

Some examples of labor malpractice within the supply chain are:

1. Using child and student labor – In an effort to drive costs down, more companies look to child and student labor. Apple has battled child labor claims in its supply chain since 2010, when nearly 100 underage workers were found in its suppliers’ Asian factories. Apparel retailers from Nike to L Brands Inc. have also been investigated for suppliers’ child labor violations.

2. Health and safety violations – Another labor malpractice plaguing supply chains is the lack of health and safety standards. Many factories and plants subject their workers to long hours and hazardous working conditions.

These are just two of the many supplier risks manufacturers run into. So, what can companies due to prevent running into these risks? Do their homework and thoroughly evaluate any prospective supplier and their labor standards before forming a partnership. In addition to supplier due diligence, it’s important that businesses also assess third-party firms that their suppliers work with.

By honestly assessing suppliers’ labor practices up front, organizations can enjoy the compliance, reduced risk and limited production delays that guarantee business success for years to come.

If you’re interested in reading the full article you can find it here:

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