Globilization has created the emergence of sophisticated supplier networks, creating management challenges as exposure to volatility and complexity of global sourcing has emerged. While Western organizations have met shortterm cost reduction and flexibility goals through outsourcing, it has been at the expense of lower transparency into suppliers’ operational processes within these far-flung areas of the globe.
Many enterprises have limited or no visibility into their second-tier or third-tier suppliers, due to subcontracting activities that occur without their knowledge. Opaque supplier networks leaves supply networks exposed to environmental or labor practices that are non-compliant with enterprise sustainability objectives and codes of conduct.
Increased risk to the brand, and associated financial impacts due to consumer reactions, has occurred in such cases. Wal-Mart, Nike, Gap, BP, Baxter, Apple, Aldi and others can attest to the dramatic impact of sustainability risks on their brand image and customers. This has brought about a recent understanding of the role of transparency in sustainable supply chains, in support of a diverse set of stakeholder needs.
It has now become clear that simple monitoring through a self-managed set of narrowly defined evaluative activities is no longer enough to meet stakeholder demands for accountability in the supply chain. Organizations must move towards a multi-faceted view of stakeholder accountability through increased transparency of activities in its extended supply chains.
By Robert Handfield