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Part 2: Managing Risk In Your Global Supply Chain – Establishing Terms of Engagement

Part 2: Managing Risk In Your Global Supply Chain – Establishing Terms of Engagement

April 28, 2017

In the first installment of this three-part blog series, we discussed the importance of Corporate Social Responsibility (CSR) and outlined the first step in implementing a CSR program – Setting Standards of Vendor Engagement. In addition to adhering to the Standards you set, there are specific Terms of Engagement vendors should be expected to fulfill, which we’ll discuss in this installment. If upheld, these terms will prove to be the foundation for a healthy, lasting and successful relationship with your vendor(s).

There are four critical terms of engagement we believe every successful vendor relationship should adhere to: Transparency, Accountability, Responsible Sourcing, and Worker Non-Retaliation.

Transparency is a fundamental component of any good relationship, after all, you have to be able to trust your partner. Vendors, just like people in general, aren’t perfect, so issues may arise. The key is for the vendor to be forthcoming about potential risks, and to work together to take appropriate corrective actions immediately. With that in mind, vendors should also be expected to provide you with complete access to all relevant records and documentation during both the initial evaluation process, and at any time during your working relationship. Access to employees, including managers and those who work either directly or indirectly for the vendor, should also be granted.

Accountability, taking responsibility, whether direct or indirect, for any non-compliance issue and addressing it immediately is also important. Again, we all know that mistakes happen, but the sign of a true partner, one you can trust, is one who owns up to his/her mistakes and takes action to correct those mistakes. In some cases, you may work together to devise Corrective Action Plans (CAPs) and monitor the vendor’s improvement. The key is to make sure all parties understand what is expected of them, and so vendors should train their employees, both managers and employees, on their rights and responsibilities as outlined in your Standards of Vendor Engagement. To ensure full and proper understanding, training should be done in the local language, and documented.

The next term of engagement deals with Responsible Sourcing. By responsible sourcing, we mean that you, as the company, are committed to upholding the FLA’s Principles of Fair Labor and Responsible Sourcing. To put it simply, you too are committing to a set of standards, and will uphold the same commitment to investigate and respond to any concerns of non-compliance as you would expect of your vendors.

The final term of engagement relates to Worker Retaliation, which should be strictly prohibited. Going back to Transparency, you should have access to all employees during an evaluation, at which time they should be able to speak freely without any interference or discouragement by the vendor, or worse yet, threat of punishment for communicating with your evaluators.

With both parties, you and your vendor(s), agreeing and committing to upholding these four Terms of Engagement and the Standards of Vendor Engagement you outlined, you’ll have a solid foundation for a successful, lasting working relationship. The key, as with any relationship, is clear communication, and this can be achieved through proper vendor onboarding and ongoing vendor management. With the solutions available today, like NGC’s Vendor Compliance solution, this once arduous task is a lot easier to manage.

NGC’s Vendor Compliance solution provides a centralized system to evaluate, manage, and report on all details related to your vendor(s). Access to real-time data lets you know immediately when issues arise, to mitigate risk earlier, providing a portal for issuing and managing CAPs. And working with a solution partner that has overseas offices, like NGC, helps when it comes to providing training in a vendor’s local language.

So, don’t get yourself into a bind like Nike did back in the late ‘90’s when the brand was associated with ‘slave wages, forced overtime and arbitrary abuse,’ at the hand of their overseas vendors. Ensure your vendor(s) are held accountable and correct issues so that their work practice aligns with your standards in order to avoid any public relations crises.

Stay tuned for our last installment in this blog series on ‘Managing Risk In Your Global Supply Chain’ where we discuss the Vendor Assessment Process.