Tag Archives: supply chain ethics

TGINF- Thank God Its Not (Black) Friday

We should probably  all be grateful that Black Friday is over and done with for another year. But what have we learnt from the biggest shopping day of 2017? 

There’s nothing quite like the cold panic of a missed opportunity. Particularly if said opportunity comes in the form of a heavily discounted HD television, bargain flights to Majorca in  mid-January (who wouldn’t?!) or a half price sofa-bed (ideal if you can carry it out of the store mid-customer stampede).

Media hype surrounding “Black Friday”, which slowly seems to be evolving into “Black Week” and surely soon to be “Black Month”, increases year on year.  Retailers face intense and  increasing pressure to slash prices and offer the biggest and best best deals to entice Christmas shoppers and out-perform their competitors. As such, the fuss and excitement leading up to the biggest shopping day of the calendar year is palpable. The world’s consumers anticipate great things.

But does the propaganda live up to the reality? And what are the downsides of events like this for our supply chains, our procurement organisations and SMEs?

Black Friday 2017: The stats examined

Spend: It’s hard to argue against the importance of Black Friday to the economy. According to the National Retail Federation’s 2015 report,  up to 30 percent of a retailer’s annual sales occur between Black Friday and Christmas. Last year 101.7 million Americans braved the crowds, an increase of 37 per cent from the previous year and spent $655.8 billion over the four day weekend. This year, that figure is expected to have increased to a whopping $682.0 billion, and that’s just the U.S.!

Savings: The debate rages on over the true value, to the consumer, of Black Friday. Are you really nabbing a bargain? Aside from the obvious fact that many consumers wind up purchasing un-needed items, statistics show that many items, as much as six out of ten, are actually cheaper at other times throughout the year.

An Underwhelming start to UK’s Black Friday: Some members of the British public were seemingly raging on Twitter on Friday morning over the perceived anticlimax of Black Friday.

Others meanwhile, poked fun at the distinct lack of chaos in stores across the UK, noting the ever-present, ever-respected British culture of courteous queuing!

 

Debt: According to a 2016 survey by TD Bank, 25 per cent of Americans will take three months to pay of the debt racked up on  Black Friday and the remainder of the holiday season

South Africa: South Africa has been hailed this year as the nation most devoted to Black Friday.  Last year “South Africans made 226 per cent more purchases [than at any other time of year] on [Picodi]‚ more than twice as large a percentage increase as that of any other country.” And the frenzy doesn’t seem to have lessened this year with media reporting the mayhem inside shopping centres.

The demand of black Friday on our supply chains

As the BBC pointed out, whether they like it or loathe it, “most retailers on – and offline – will find it difficult not to join in” with Black Friday. If they don’t partake they’ll lose significant custom, which places enormous pressure on smaller, or struggling, organisations with tighter margins and less turnover.

However YouGov research commissioned by Amazon found that nearly 1 in 4 UK SME retailers intended to participate in Black Friday 2017 and 82 per cent of those participating are expecting to sell more stock on Black Friday than on an average day. The key to success for these SMEs is getting the pricing and forecasting right.

The anticipated frenzy also makes it difficult for organisations to accurately forecast volume of stock. According to data collected by Love the Sales, there was an unprecedented 43 per cent increase in the volume of items on sale in October this year compared to last year. Buy too little from suppliers, and  they’ll run out of stock, buy too much and face having to do further discounting in the new year to shift products.

In these circumstances, buyers must ensure their supply chains are strong enough to cope with the increased demand for products and, most importantly, that their suppliers meet their compliance requirements.

According to courier insurer Staveley Head, more than 82,000 lorries will be on the road to deliver on Black Friday, with Royal Mail bringing in an additional 6,800 vans just for the peak period.

Edie.net urged organisations to run traceability checks to identify any exploitative labour practices within their supply chain and recommended  using the Internet of Things to track supply chain processes and spot any unusual patterns of behaviour.

In other procurement news this week…

Apple’s Illegal Labour

  • Apple’s main supplier in Asia has been employing students illegally working overtime to assemble the iPhone X, as it struggles to catch up with demand after production delays
  • 3,000 students from Zhengzhou Urban Rail Transit School were sent in September to work at the local facility run by Taiwan-based Apple supplier Hon Hai Precision Industry, better known as Foxconn
  • They were told that a three-month stint at the factory was required “work experience” that they had to complete in order to graduate

Read more at Financial Times

50 per cent of procurement pros are unhappy with salaries

  • The latest procurement salary guide by recruiters Hays found 56 per cent of procurement employees reported a high level of salary dissatisfaction, and almost a quarter of those surveyed stated they intended to leave their current job because it lacks future opportunities
  • The average procurement and supply chain professional’s salary has increased 2.1 per cent over the past year, above the overall UK average of 1.8 per cent, Hays found. This rises to 3.6 per cent for procurement managers and senior buyers and to 4 per cent in the public sector
  • Hays salary guide is based on job listings, offers and candidate registration, as well as a survey of almost 17,500 employers and employees, including more than 700 working in procurement

Read more at Supply Management

Duty of Care Law: You Got The Green Light In France!

France’s new legislation, The Duty Of Care Law will prevent serious human rights risks and threats to fundamental freedoms. Will other countries follow suit? 

It would be wise for procurement professionals to pay close attention to France’s new sustainable procurement legislation.   The Duty of Care law, which affects organisations with over 5,000 employees, is likely to have some influence on other nations,  starting with those in the EU.

If similar human rights legislation is implemented across the globe; forewarned is forearmed, and sustainable, ethical procurement is a hot topic that’s only getting hotter!

Whilst the progress of global sustainability standards have traditionally been  pushed by individual businesses and activist groups, things are changing. This month saw the publication of ISO20400,  (International Standard for Sustainable Procurement), which creates a standard for every organisation in the world to follow.

The Duty of Care Law

In its much-awaited decision last month, the French constitutional council has given a  green light to the “Duty of Care” law (Devoir de Vigilance) although they stated that there remain some provisions to the French constitution.

The major points of the law, requiring French companies with at least 5 000 employees, including in their French direct or indirect subsidiaries (or 10 000 employees in their direct or indirect subsidiaries worldwide) to develop a diligence plan (“plan de vigilance”), are recognised of general interest. The intent is for the diligence plans to prevent serious risks related to human rights and fundamental freedoms, health and safety of persons and the environment. The constitutional council considers however that the sanctions initially included in the law violate the constitutional principle that penalties must have a sound legal basis. As a result, the civil fine of up to €10 million, as well as its increase to €30 million in case of damages that could have been prevented by implementing the diligence plan, are removed from the law.

Developing A Diligence Plan

The obligation of implementing a diligence plan however, as well as the formal notice and the civil liability mechanisms in case of lack or deficiency of the diligence plan, are constitutional. Consequently, companies are still compelled to implement a diligence plan, even if the law loses some of its deterrent effect, which makes for the first law of this type: it introduces an obligation much more stringent than a mere reporting obligation, such as the ones required by the UK Modern Slavery Act or the California Transparency Act. Companies are required to implement specific concrete actions and cannot limit themselves to reporting on what they do (or do not do).

There are also some talks of developing similar regulations at European Union level.  Eight national parliaments have called for a corporate duty of care towards the human rights and local environment impacted by the company’s operations. They have jointly proposed that the European Commission take action on this matter. This shows that the French “Duty of care” law is indeed the first step of a generalized global movement requiring companies to address their Corporate Social Responsibility (CSR) risks, including throughout their supply chain.

This article was first published on the EcoVadis Blog

Would You Have Managed the Piper Ethically?

No one involved behaved particularly ethically in the legend of the Pied Piper of Hamelin. How can consumers and organisations ensure that all practices are above board? 

Maciej Es/Shutterstock.com

The traditional 12 days of Christmas might not start until the 26th of December. But this festive season, we’ll be bringing you the 12 days of procurement Christmas in the run up to the big day. Catch up with the story so far on the Procurious Blog.

“On the eleventh day of Christmas, my true love gave to me…eleven pipers piping.”

There’s no doubt that the most famous piper in the history of piping is the Pied Piper of Hamelin. Renowned for his hypnotic musical talent, he successfully led away an entire town’s population of rats and, following lack of payment for his efforts, children. Can you begin to imagine the power that could be yielded by eleven of them all piping at once?!

We’d hope that, in this instance, the true love would have been extremely careful and ethical when it came to paying the pipers for their efforts; fairly, ethically and on time.

And if they hadn’t? Would the pipers be forgiven for leading away something precious to the true love? Perhaps they would have taken away all the gifts from the previous ten days!

It all begs the question, who is most responsible for the horrible outcome at the end of the tale, the townsfolk or the Pied Piper? Neither behaved entirely ethically.

Ethics is an issue readily discussed in procurement with regards to the supply chain and the consumer buying an end product or service. Both are, in part, responsible for ensuring that processes, pricing and staff-management are ethical and sustainable.

Where’s Your Consumer Conscience?

At this year’s Big Ideas Summit, Lucy Siegle, journalist at The Guardian, discussed the importance of consumers supporting sustainable fashion.

Fast fashion can be extremely enticing thanks to its competitive pricing and the consumer’s desire for on-trend clothing.  But what is the true cost of this industry? If you purchase an item of disposable fashion at a cheap price, have you considered the working conditions for those at the end of the supply chain?

It’s possible you’re supporting a fashion brand that pays low wages to workers in developing countries in terrible working conditions and, at worst sweatshop labour.

Whilst it might have been easy to claim ignorance in previous years, in an age of ethics and transparency, ignorance and apathy are no longer acceptable. It’s easy to dismiss responsibility by expecting fashion brands themselves to ensure  supply chain purity. But defiant and principled consumers can make an important impact by refusing to buy these products.

Danielle Stewart, Head of Financial Reporting at RSM UK, discussed this point further at our Big Ideas Summit 2015.

And if you’re still unsure whether your fashion purchases are ethical or not, ‘Good On You’ can help!

Is the Future Bright for Green Supply Chains?

Of course, we’re not placing the burden of achieving ethical supply chains entirely on the consumer’s shoulders. Organisations themselves are under increasing pressure to “go green”.

The long-term benefits to procurement alone are indisputable. These include:

  • The achievement of significant savings by focusing on a “whole life costing” methodology for procurement.
  • The incorporation of the “three Rs” (Reduce, Reuse, Recycle), to cut waste and improve the efficiency of resources.
  • The improvement of management information, a focus on business and supply chain risk, and better supplier relationships.
  • Competitive advantage as a consequence of the early adoption of practices, focusing on increasingly environmentally-focussed legislation.

Back in June, the Sustainable Purchasing Leadership Council (SPLC) recognised twelve organisations that are aiding the long term health and vitality of society, economies, and the planet through best practice. These organisations are doing a great job at setting a standard for the rest of the world.

David Noble, Group Chief Executive of The Chartered Institute of Procurement & Supply (CIPS), discussed the issue of ethics in procurement at last year’s Big Ideas Summit:

Changes were also afoot in 2016 in relation to modern slavery in supply chains. New legislations were added to the Modern Slavery Act which came in to practice in April.  All businesses with a turnover of over £36 million must now  prove they have taken steps to remove slave and child labour from their supply chains.

It’s likely that smaller businesses will also be forced to step up to the plate. As the larger companies begin to investigate suppliers throughout their supply chain, everyone will be expected to prove they are slavery-free.

It’s so important for organisations to take a measured and targeted approach to tackling exploitative conditions in their supply chains.

Our festive look at procurement is nearly at an end. However, we have one day left – and a look at what the procurement drum beat will be in 2017.

Fast Fashion – But at What Price?

Is the concept of ethical fast fashion an oxymoron? Do we as consumers have a good enough grasp of the ethical considerations?

Today’s typical fashionista has high expectations. She, or maybe he, wants to buy cheap and affordable trendy clothes in the latest styles straight off the catwalk.

Never mind that an item is unlikely to last more than ten washes. Fast fashion is getting faster and cheaper, but what is the real cost to society and the environment? We may have an uneasy feeling about the issues, but generally have a poor grasp of ethics.

How important is this industry?  

The direct value of the UK fashion industry to the economy is around £26 billion and growing fast. Average spending on fashion in Europe is about €700 (>£500) per person per year. Italy, Germany and the UK are Europe’s largest fashion markets in terms of consumption.

Fashion’s total economic contribution is much more if we include activities in indirect and related industries. We may be feeding the economy with our purchases, but we are also harming the environment. Shipping, transportation and logistics are energy demanding, time consuming, and pollution-spewing.

The formula for success in this industry was always to give the customers what they wanted: trendy garments at the right price, of acceptable quality, in the right place, and with a dash of speed. In the last five years there has been a concerted effort by some retailers to become more ethical buyers, employing better human resources policies and safety practices.

Ethics in Fast Fashion

Do procurement teams harbour concerns about sweat shops or care about child labour or manage waste disposal? Or is it more important to buy cheap to satisfy the consumer who just wants to pay £3 for a T-shirt?

Paul Brownhill, Group Chief Executive at Britannia Garment Packaging, says that although the majority of consumers want quick access to the latest trends at an affordable price, they are now also seeking assurances about the way these items are produced. He notes that consumers are increasingly concerned about the quality, safety and environmental impact of the clothes they buy. Is this really true?

The University of British Columbia recently researched this issue and came to the conclusion that, theoretically, young consumers place an importance on sustainability but have a blind spot when it comes to fashion.

“They may care deeply about eating organic foods, but fast fashion consumption is exempt from such moral decisions. This approach can in part be explained by the fact that youthful consumers may fail to fully grasp issues of sustainability, in particular the disastrous future environmental risks associated with unsustainable production.”

Other similar studies demonstrate little evidence that ethical issues have any effect on consumers’ fashion choices or that they are likely to sacrifice their own personal needs for the greater good.

Some Bright Spots

Leading retailers like H&M, Gap and Zara have all signed a pledge to improve factory conditions. H&M, whose tag line is ‘Fashion and quality at the best price in a sustainable way’, was recently named one of the world’s most ethical companies by the Ethisphere Institute.

One of its claims to fame is that it is the number one user of organic cotton in the world. H&M, with 3,900 stores in 61 markets, is also one of the first and largest fashion companies in the world to make its supplier factory list public.

Louis Vuitton Moet Hennessy, (LVMH) a corporation comprising over sixty luxury brands, has been auditing its carbon footprint since 2004. Tiffany & Co. produces a Corporate Responsibility Report, which touts their support of human rights, anti-corruption practices, and commitment to responsible mining. This is all very commendable if it is more than just words on the page.

Fast Fashion and the Ecosystem

For those that do care about the future of our children and damage to the environment, there are a couple of other options. Buyers can check questionable supply sources, read every label, and buy only locally produced items, but this may come at a cost.

What about sourcing second-hand or hardly used items? Re-purposing items creates a positive ethical and environmental impact and can be both cost-effective and trend-setting – it even has possibilities in the commercial environment.

Landfills are full of synthetic material. Cheap clothing goes out of fashion and people end up with a lot of unwanted items. UK consumers ditch more than a million tons of clothing every year.

In poorer countries the problem is less noticeable; items get handed down and re-circulated until they totally disintegrate. In developed countries, they may end up in the rubbish bin.

What can we do to help?

  • We could support ethically sourced products from brands that have committed to best practice
  • We could create more awareness among commercial buyers about poor labour practices and sustainability
  • We could buy fewer higher quality garments to reduce the environmental impact of fast fashion.

The campaigning organisation Labour Behind the Label provides information on what brands need to do to up their game and move closer to employing ethical sourcing practices.

Suppliers are anxiously trying to satisfy the market’s needs for speed and price, at what cost? Is ethical fast fashion” an oxymoron?