Tag: ethics

Guest Post: Learning from Bangladesh – The Socially Responsible Supply Chain

andreas_wielandrobert hanfieldToday’s Guest Post today comes from 2 researchers in the SCM field, Andreas Wieland (left) at Berlin Technical U. and Robert Handfield at N. Carolina State U. 

Two recent disasters in the garment industry, the Tazreen Fashions fire and the Rana Plaza building collapse, have caused outrage over the lack of social responsibility across global supply chains. As we discuss in our new article in Supply Chain Management Review, “The Socially Responsible Supply Chain: An Imperative for Global Corporations,” integrating social responsibility into a supply chain strategy is not easy. Because of the emphasis on cost efficiency and supply assurance as the basis for supply chain strategy, other targets like focusing on social aspects have often been ignored. This is made even more challenging by the fact that customers are often unwilling to pay more for socially responsible products. Using this rubric, sourcing from regions with the lowest possible labor costs has been the most important criterion for Western retailers when selecting suppliers. Social responsibility not only competes with cost efficiency, but also with other targets such as customer requirements and flexibility.

There are three core principles that are essential for ensuring socially responsible business practices and successfully managing the extended global supply chain. First, a program to audit both products and suppliers (beyond tier-1 suppliers) needs to be implemented. Second, visibility (perhaps using smart technologies) is important for those categories of supply that cannot be directly controlled. Finally, collaboration is needed to successfully managing a socially responsible supply chain; this includes collaboration across the industry–and with local partners.

An excellent example of these principles in action is an approach adopted by the Swiss clothing manufacturer, Switcher. Each garment bears its individual Respect Code, a number sewn into each product, along with the Code’s web address. This code can be used by the customer to find online information about the product’s supply chain, including social and ecological information of each plant. Using the code, consumers may learn that production of a certain jacket took place in Portugal, that the plant is ISO 14001 certified, and that the CO2 footprint is 7.6 kg. Consumers can also see when the plant was last audited.

It is time to become serious about socially responsible supply chain management.

OM in the News: Ethical Issues and Bengladesh’s Clothing Factories

Factory workers in Dhaka, bangladesh
Factory workers in Dhaka, Bangladesh

A group of 17 major North American retailers, including Wal-Mart, Gap, Target and Macy’s, just announced a plan to improve factory safety in Bangladesh, drawing immediate criticism from labor groups who complained that it was less stringent than an accord reached among European companies. The American plan, according to The New York Times (July 11, 2013), commits $42 million for worker safety, including inspections and an anonymous hot line for workers to report concerns about their factories, and more than $100 million in loans and other financing to help Bangladeshi factory owners correct safety problems. But unlike the accord joined mainly by European retailers, the plan lacks legally binding commitments to pay for those improvements.

Labor rights groups estimated that it would cost as much as $3 billion to bring Bangladesh’s garment factories up to an acceptable safety standard.  “Wal-Mart, Gap and the corporations that have chosen to join them, are unwilling to commit to a program under which they actually have to keep the promises they make to workers and accept financial responsibility for ensuring that their factories are made safe,” stated five of the groups. They faulted the plan for being “company-developed and company-controlled,” adding that “under the Gap/Wal-Mart scheme, brands and retailers are not obligated to pay one cent toward the renovation and repair of their factories in Bangladesh.”

The problems in Bangladesh’s garment industry have not affected the retail industry’s demand for cheap goods made there. Exports in June rose 16.3% to $2.7 billion, based on strong clothing sales. Bangladesh has quickly grown into the world’s 2nd largest apparel maker after China. But in a race to keep up with demand, many older buildings that lacked structural support were converted into factories, and building codes were ignored.

Discussion questions:

1. What is the responsibility of US and other firms that contract to have their products made in Bangladesh.

2. Are the critical labor rights groups correct in that US firms need to make stronger commitments to revamping the infrastructure?

OM in the News: Shipping Our Batteries to Mexico for Cheaper Recycling

When we discuss the 3R’s of Sustainability in Supplement 5 we emphasize how important it is to build sustainable production processes.  But the  lead article in The New York Times (Dec.9,2011) asks what really happens when our American car battery industry claims to have the highest recycling rate for any commodity–97% of the lead is recycled–and most states mandate that stores take back old batteries. It turns out that spent batteries we turn in are increasingly being sent to Mexico, where their lead is usually extracted by crude methods that are illegal in the US, exposing plant workers and local residents to dangerous levels of a toxic metal.

The rising flow of batteries is the result of strict new EPA standards, making domestic recycling more difficult and expensive. (The allowable lead levels have dropped by a staggering amount in the past 3 years and cost of compliance is about $20 million per plant). So about 20% of batteries (20 million) are being legally shipped to Mexico this year (up from 6% since the new EPA rules), with many more smuggled across covertly. “Along the border, where US vigilance focuses on drugs and illegal immigrants, there is little effort to staunch the flow”, writes the Times.

Whereas lead battery recyclers in the US now operate in sealed, highly mechanized plants outfitted with scrubbers, the vast majority of Mexican plants just break the batteries, releasing the lead as dust and emissions. Spent batteries house up to 40 lbs. of lead, which can cause high blood pressure, kidney damage, abdominal pain in adults, and serious neurological development in children. Lead pollution remains in the ground for decades. The EPA says it “does not inspect, monitor, or verify the Mexican facilities.” Adds a Dallas recycler: “We’re shipping hazardous waste to a neighbor ill-equipped to process it and we’re doing it legally, pretending it’s not a problem.”

Discussion questions:

1. Do your students view this as an ethical dilemma?

2. What other harmful products do we ship abroad for recycling, and why?

Teaching Tip: Dealing With Cheating in Your OM Class

Today’s front pages headlines here in Orlando have centered on a sensitive topic, but one we must address nonetheless–cheating in our classes. The story concerns a B-School prof at U.of Central Florida (UCF), which is now the 2nd largest college in the US, with 56,000 students. This, of course, means large classes–often shown on closed circuit TV. In a class of 600 Strategic Management seniors, the instructor used a 300 question Test Bank (which he thought to be secure) to create the midterm of 55 multiple-choice questions.  Unusually high grades led to 206 students admitting they had studied from the Test Bank.

Nationally, about 21% of students admit to cheating, with more problems on large campuses and in large lecture classes. As the DSI Meeting takes place at this moment in San Diego, maybe this is a good time to raise the issue.

Yes, Test Banks are more and more available on-line, despite threats and suits by publishers. Our own publisher has taken legal action against people using our copyright material. But some schools using our OM text actually buy copies of the Solutions Manual and Test Bank and sell them as study tools to their students. So it is a fair assumption that some “ambitious” students will try to get an edge gradewise by whatever tool is on the market.

Jay and I have discussed the problem many, many times and have tried to foolproof our system to this extent: (1) we have a massive Test Bank, with well over 2,000 questions, and a text with over 900 problems. This gives the ability to keep from repeating the same questions from semester to semester; and (2), we created MyOMLab with a goal of making it as integrity-driven as humanly possible. The key is the algorithmic nature of the on-line problems that come from the text. You can assign them “bookmatch” (ie, identical to text), or “algorithmic” (ie, where each student gets her own data).

Randomizing questions from large Test Banks, using new assignments each year, and MyOMLab are just 3 ways to deal with this visible issue. Please share your comments.