CHAPTER III

ETHICS IN SUPPLY
CHAIN
MANAGEMENNT
Introduction

Let’s look at two issue that Operational Management must address

everyday when defining with a supply chain ethics and sustainability. We
consider three aspects of ethics the personal ethics, ethics within the
supply chain and ethical behavior regarding environment. As the supply
chain becomes increasingly international, each of these becomes even
more significant.

Because so much money passes through the supply chain, the

opportunity for ethical lapses is significant.
Three Aspects of Ethics

1. Personal Ethics
2. Ethics within the Supply Chain
3. Ethical Behavior Regarding the
Environment
PERSONAL ETHICS
Ethical decisions are critical to long term success of
any organization. However the supply chain is particularly
susceptible to ethical lapses. With the sales personnel
anxious to sell and purchasing agents spending huge sums,
temptations abound. Sale people become friends with the
customers, do favours them, take them to lunch of present
small or (or large) gifts. Determining when tokens of
friendship become bribes can be challenging. Many
companies have strict rules and codes of conduct that limit
what is acceptable.
Recognizing these issue, the Institute for Supply Management has
develop the following principles for ethical behaviour:

 Promote and uphold responsibility to one's employer; positive supplier

and customer relationships; sustainability and social responsibility;
protection of confidential and propriety information, applicable law;
regulation and trade agreements and development of professional
competencies.

 Avoid perceived impropriety; conflict of interest; behaviors that

negatively influence supply chain decision and reciprocal agreement.
Ethics within the Supply Chain

In the age of hyper-specialization; much of any organizations resources are

purchase putting great stress on ethics in the supply chain. Managers may be
tempted to ignore ethical lapses by supplier of offload population to supplier.
But firms must establish standards for their suppliers, just as they have
establish standards for themselves. Society experts ethical performance
throughout the supply chain. For instance, Gap Inc, reported that f its 3,000
plus factories worldwide about 90% failed their initial evaluation
Gap found that 10% to 25% of its Chinese factories
engaged in psychological or verbal abuse, and more
than 50% of the factories in sub-Saharan, Africa
operated without safety device. The challenge of
forcing ethical standards is significant, but
responsible firms such as Gap are finding ways to
deal with this difficult issue.
Ethical Behaviour Regarding the
Environment

While ethics on both a personal basis and in the supply chain are
important, so ethical behaviour in regarding to the environment. Good
ethics extend to doing business in a way that supports conservation and
renewal of resources. This requires the evaluation of the entire
environmental impact, from raw material, to manufacture, through use
and final disposal. For example, Darden Restaurant and Walmart both
acquire shrimp and fish supplier in Southeast Asia to abide by the
standards of the Global Aquaculture Alliance.
These Standards must be met if supplier want to maintain the business
relationship. Operations managers also ensure that sustainability is
reflected in the performance of second-and third-tier of suppliers.
Enforcement can be done by in-house inspectors, third party auditors,
governmental agencies or nongovernmental watchdog organization.
What are the supply chain ethics?
as sourcing has become more global, instances of exploitation and
malpractice have come to light, raising questions about how ethical
concerns may be cut to produce goods cheaply.

 When talking about ethics in the supply chain, experts generally focus
on;
 The eradication of child labour

 Safe and Hygiene working conditions

 Appropriate pay and working hours

 Humane and non-discriminatory treatment
 Anti-bribery and corruptions

 Environmental awareness

In the past these ingredients of an ethical supply chain were largely

governed through the values of individual business and countries but
over recent decades this has become codified in international law.
5 Different Approaches towards Ethical Behaviour in Business

There are different ways of thinking about ethical behaviour. Some

situations offer clean-cut choices. Stealing is unethical. There is no
debate about it. There are other situations where two or more values,
rights, or obligations conflict with each other and a choice has to be
made.
 1. Teleological approach

Also known as a consequentiality approach, it determines the

moral conduct on the basis of the consequences of an activity. Whether
an action is right or wrong depend upon the judgment about the
consequences of such an action. The idea is to judge the action moral if it
delivers more good than harm to society.
 2. Deonotoligical approach:

While a “teologist” focuses on doing what will maximize

societal welfare, a “deonotologist” focuses and doing what is “right”
based an his moral principles. Accordingly, some actions would be
considered wrong even if the consequences of these actions were good.
[Link] approach:

This approach is proposed by A.J. Ayer. He suggest that morals and

ethics are just the personal viewpoints and “moral judgements are
meaningless expression of emotions.” The concept of morality is personal in
nature and only reflects a person’s emotions.

This means that if a person feels good about an act, then in his view, it is a
moral act.
 4. Moral-rights approach:

This approach views behaviour as respecting and protecting

fundamental human rights, equal treatment under law and so on. Some of
these rights are set forth in documents such as Bill of Rights in America
and UN.
5. Justice approach:

The justice view of moral behaviour is based on the belief that ethical
decisions do not discriminate people on the basis of any types of preferences,
but treat all the people fairly, equitability and impartially, according to
establish guiding rules and standards.
From organizational point of view, all policies and rules should be fairly
administered.
Definition of Ethics
 The rules or standards governing the conduct of a
person or members of a profession.
 The discipline dealing with what is good and bad
and with moral duty and obligation.

Supply Chain Management

 The integration of key business processes from
end user through original suppliers that provides
products, services, and information that add
value for customers and other stakeholders.
 It encompasses the planning and management of all
activities involved in sourcing and procurement,
conversion, and all logistics management
activities.
Role of Ethics in Supply Chain Management
Ethics- A code of moral standards of conducts for what is “good” and
“right” as opposed to what is “bad” or “wrong”.
Ethical behavior – That which is right in the context of governing moral
code.

 Legislation
Most developed countries have laws governing ethical business practices
but unscrupulous companies can still profit from the tax practices of
developing nations.
A recent passed in California seeks to change this, however ,by insisting
that any company doing business in the united state demonstrate that its
supply chain does not use slave labour or illegal immigrant workers at any
point. This law insists that companies share responsibility for the practices
of their suppliers, thereby raising standards and making the entire factory
–to- store processes more ethical.
Environmental concerns

Key to the responsible supply chain policy is greater collaboration

between suppliers to improve working conditions reduces carbon
emissions and generally rise the profile of oxygen as a sustainable
business, tapping into the wider benefits such an image brings.

Suppliers who refuse to the new policy risk losing their supply
contracts all together.
Clearly there are other reasons for implementing an ethical supply chain,
many of which produce discernible benefits for a company’s balance
book.
 
Brand image
Computing giant apple has recently hit the headlines owing to
concerns regarding the treatment of staff working in the factories
belonging to their suppliers based in Far East.
Rumors of poor pay, long working hours, unhealthy working conditions,
and series of workers suicides have promoted Apple CEO Tim Cook to
announce a number of inspections to be carried out by an independent
body in an effort to bury claims of unethical trading practices.
Extend to suppliers
If one of your suppliers has a problem whether it’s a problem of
ethics or a problem of quality consumers will hold you responsible for
choosing that
supplier.

Despite the knowledge that consumers assign by association, their

codes did not extend to suppliers.
It is important that your supply solutions look beyond what happens with
your four walls and encompass your suppliers.
Transparency and accountability
All the parties involved in the supply chain process have to be open
and accountable.
Public resources are used by different parties in supply chain which must
adhere to fair usage policies.
Collaboration

The suppliers you choose may or may not have systems in place to
embrace ethics and sustainability.
Instead of writing these suppliers off or holding their breath and hoping
for the best many enterprises are collaborating with suppliers ,providing
them with the tools and guidance they need to bring their practices in
line with the purchasing company goals.
 
Compliance and continuous improvement
Compliance of local laws is a mandatory pre-requisite to local laws.
No party shall bypass the laws of the state nation for their business
motives to gain unfair advantage.
All entities shall work towards fostering a continuous improvement
culture in their supply chain activities and serve as a role model for
others to follow.
Personal integrity
Integrity is a trait in a person who exhibits qualities such as honesty
and having principles that are morally strong.
Personal integrity is a strong sense of commitment towards morality,
openness, and high standards of ethics that an individual stands by and
act as a role model for his/her colleagues.
This in turn ensures the entire supply chain process is ethically right.
 
Professionalism
All participants of the supply chain should exhibit a high standard of
professionalism
It means each entity should treat the other with equal amount of respect
and trust, in no way shall intervene, or command the other.
Information that is deemed to be classified should be guarded safely by
all parties involved adherence to the laid down terms and condition
should be a pre-requisite for all.
Benefits of an Ethical Supply Chain

 Sends a clear message to every part of the supply

chain that ethical behavior is a priority.
 Improves relationships with suppliers.

 Ensures trust, reliability, and lower costs.

 Li and Fung

 Gives the company a good reputation and brand

image.
 Companies are judged based on their suppliers.

 Reduces the risk of unethical behavior by

suppliers.
 Avoids expensive recalls and brand damage
resulting in unethical behavior or lack of
control throughout the supply chain.
 Mattel

 Reduces risk by having more control of the

different areas of the supply chain.
Problems
 Most companies do not include suppliers in their
company code of conduct
 Companies don’t regularly assess ethics risks in
the supply chain.
 Multi-cultural differences.

 Lack of leadership.

 Ineffective communication.
Methods for Obtaining an Ethical Supply
Chain

 Audits.
 Proper training.

 Technology advancements for checking and

monitoring.
 Ethical CEOs and management team.

 Codes and principles

 ISM, CSCMP, etc..

 Mission and values.

 Policies that include punishments for unethical

behavior.
 Supplier Ethics Management (SEM).
Supplier Ethics Management (SEM)

 This is a practice that enables companies to

manage their suppliers and supply relationships
through strategies, programs and metrics that
better align supplier business conduct with
purchaser standards.

 The goal is to reduce a purchasing company's

overall risk of corporate integrity failure in
the supply chain by aligning supplier conduct
with purchaser standards in three major areas .
 THANK YOU!!!

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CHAPTER III REPORTERS