The Risk of Ethical Gray Areas in the Supply Chain

Meagan Douglas
Fri, Dec 18, 2015
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A history of honest business practices protect companies when supply chain problems occur.

There are procedures companies must go through to ensure their supply chain operations and inventory control practices are legal. Government regulators hold organizations to certain standards to maintain consumer safety and fair business practices. However, companies can follow the letter of the law and still provide products through processes that are less than honest.

Unethical supply chains make merchandise available through means just north of legal. These businesses may take advantage of foreign governments with less strict requirements or regulations that haven't caught up with new ideas.

The moral implications are obvious, but some companies need reminders on how much unethical practices could cost them down the line. Here is a review of some of the biggest problems companies should expect from ethical violations and the advantages of honest business practices:

Common unethical behaviors
Businesses commonly employ unethical behaviors when they believe they can cut costs while sacrificing integrity. By profiting from unfair foreign operations, companies may believe they can reap the benefits without directly participating in unethical practices.

Forbes detailed how manufacturers sometimes procure necessary minerals from regions that utilize unfair labor conditions. The organizations don't break the law, but they do support totalitarian governments and keep local populaces working in dangerous conditions.

Labor problems aren't just a foreign issue. Companies take advantage of local workers by paying them the lowest wage allowable by the government. Sometimes factories and warehouses create and distribute products using a workforce that can't find better positions. A lack of employment options may force people to take jobs that are unsafe or unhealthy.

Customer relations can also be unethical. My Purchasing Center, a business information source, said marketing may still be legal if it misleads but doesn't lie. A common problem is food packaging that implies a certain amount of product but contains mostly empty space.

Costs of unethical supply chains
Unfair practices usually catch the attention of regulators. If a supply chain isn't currently illegal, that doesn't mean it won't change in the near future. For example, Supply Chain Brain said many governments establish trading blocs with countries that don't treat their citizens fairly. If an organization relies on unethical regions to supply them with materials for manufacturing, it should expect new regulations to cut off procurement.

If companies treat their workers unfairly, managers shouldn't expect optimal performance. Tired staff pushed beyond their limits often makes mistakes. Supply chain employees performing tasks in unsafe conditions could experience accidents that close down operations. When the business doesn't care about its staff, the employees won't feel bad about stealing from the organization or lying on timecards. A lack of investment could also lead to mistakes that create low quality or unsafe products.

Modern consumers take ethics into account when choosing products. Many customers won't work with an organization that supports unfair labor practices and instead favor companies that give back to their communities. Even if shoppers don't do their research, they'll notice unethical procedures that directly harm them. A lack of honesty prevents businesses from attracting return consumers.

Opportunities for honesty
When a company prioritizes ethical supply chain logistics management, it ensures business won't come to a standstill once regulators catch on to unfair conditions. The company can create a good relationship with local government officials so when the supply chain experiences problems, regulators have no reason to suspect the company didn't do everything in its power to protect consumers. Officials should count on organizations to provide complete visibility of supply chains.

Transparency is also important for consumer relations. The modern customer is usually very informed. Businesses should expect potential consumers to do their research. Making information easy to find shows a company wants to encourage customer interaction. Some companies can attract buyers by not just avoiding unethical behaviors, but by creating supply chains that give back more than competitors. Many businesses appeal to modern audiences by emphasizing green practices or how the organization provides opportunities for local workforces.

The RFgen white paper "The Food Traceability Survival Guide" said even the most honest company using the best automated data collection technology will still experience supply chain issues. An organization must make sure it has nothing to hide from consumers when products are recalled. A history of honesty is the best defense from setbacks that often turn the public against organizations.

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