Monday, September 10, 2012

Ethical Dilemmas Posed by Volatile, Global Supply Chains


Tradeoffs are a central part of supply chain management as evidenced by many of this week's readings. Supply chain managers must continually ask, what decisions will guide how we replenish our inventories? How much should we listen to the analysts, and when should we go with our gut? From the reading entitled Managing Inventories: What is the Appropriate Order Quantity, inventory management decisions showcase one instance of these tradeoffs, where the "appropriate" decision is guided by a proper analysis of the alternatives.[1] But with growing supply chain volatility magnified by globalization, are these tradeoffs in danger of being defined solely by analytical and bottom line decisions without regard to moral ones?

According to Industry Week, ethical challenges in the supply chain represent a huge issue impacting a company's market share, based in part on customers' perceptions of a product's integrity and thus affect revenues.[2] However, handling these challenges has been complicated by the structure of today's average product. An organization can more easily address ethical issues with a small, intimate supply chain, but most supply chains now rely on systems and materials that are much more difficult, time-consuming and cost-consuming for an organization to manage. This is one reason companies must increasingly be aware of external factors; decisions controlled by others, such as labor circumstances, political and cultural differences affecting worker rights and wealth distribution, not to mention environmental realities.[3]

Industry Week offers some suggestions for managing the ethics of a supply chain, including: consider ethics when selecting suppliers, keep track of your suppliers' compliance history, and assign compliance personnel to manage supplier relationships.[4]

A broader suggestion from one of the readings seems to have farther reaching appeal: when considering these trade offs, also consider the long-term rationality of ethical supply chain decisions.[5] For example, do higher short term costs to modernize production methods justify lower environmental impact in the long term, taking into account that lower environmental impact might also mean greater sustainability, and decreased reliance on raw materials?

Or when we look at the larger picture, are these decisions just too difficult to land on the right side of? Does our first world thirst for highly manufactured goods run too deep? Does ethical supply chain management have a chance at substantial infiltration?

[1] Freeland, James, and Robert Landel. "Managing Inventories: What is the Appropriate Order Quantity." Darden Business Publishing University of Virginia UVA-OM-1006 (2003): 1-11. Print.
[2] Thomas, Andrew. "How Ethical is Your Supply Chain? | Companies & Executives content from IndustryWeek." Industry Week Home Page. N.p., n.d. Web. 8 Sept. 2012. <>.
[3] den Butter, Frank, and Kees Linse. "Rethinking Procurement in the Era of Globalization." MIT Sloan Management Review Fall (2008): 76-80. Print.

[4] Thomas, Andrew. "How Ethical is Your Supply Chain?
[5] den Butter, Frank, and Kees Linse. "Rethinking Procurement in the Era of Globalization."

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