Professional Documents
Culture Documents
ETHICAL AND
SUSTAINABLE
SOURCING
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 4
LEARNING OBJECTIVES
You should be able to
Understand and appreciate the trends in ethical
and sustainable sourcing
Define and describe the terms used in ethical
and sustainable sourcing
Describe the differences in ethical and
sustainable sourcing
Understand how ethical and sustainable
strategies are developed and implemented
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
LEARNING OBJECTIVES (Continued)
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2015
3
CHAPTER OUTLINE
Introduction
Ethical and Sustainable Sourcing Defined
Developing Ethical and Sustainable Sourcing Strategies
Ethical and Sustainable Sourcing Initiatives
Early Supplier Involvement
Strategic Alliance Development
Rewarding Supplier Performance
Benchmarking Successful Sourcing Practices
Assessing and Improving the Firms Sourcing Function
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Introduction
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Introduction
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Ethical and Sustainable Sourcing
Defined
Business Ethics is the application of ethical
principles to business situations
Utilitarianism
Rights and duties
Corporate Social Responsibility is the practice
of business ethics
Ethical Sourcing is that which attempts to take into
account the public consequences of organizational
buying or bring about positive social change through
organizational buying behavior
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Ethical and Sustainable Sourcing
Defined (Continued)
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
Ethical and Sustainable Sourcing
Defined (Continued)
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Ethical and Sustainable Sourcing
Defined (Continued)
4. Child labor shall not Persons under 18 shall 9. No harsh or inhumane Physical abuse or discipline, the
be used not be employed at night treatment is allowed threat of physical abuse, sexual or
or in hazardous other harassment or other forms of
conditions intimidation shall be prohibited
5. Living wages are Wages should be enough
paid to meet basic needs
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
10
Ethical and Sustainable Sourcing
Defined (Continued)
8. Regular employment Work performed must be on the basis of recognized employment relationships
is provided established through national law and practice. Obligations to employees under
labor or social security laws shall not be avoided through the use of labor-only
contracting, sub-contracting, or through apprenticeship schemes.
9. No harsh or Physical abuse or discipline, the threat of physical abuse, sexual or other
inhumane treatment is harassment or other forms of intimidation shall be prohibited.
allowed
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
Ethical and Sustainable Sourcing
Strategies (Continued)
Sustainable Sourcing
Green purchasing is aimed at ensuring products or
materials meet environmental objectives e.g. waste
reduction, reuse and recycling
Sustainability is the ability to meet current needs of
the supply chain without hindering the ability to meet
future needs in terms of economic, environmental,
and social challenges
Supports the three Ps - people, planet, and profit
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
Ethical and Sustainable Sourcing
Defined (Continued)
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
DEVELOPING ETHICAL AND
SUSTAINABLE SOURCING
STRATEGIES
Functional Products - MRO items & other
commonly low profit margins with relatively stable
demands & high levels of competition
Innovative Products - characterized by short
product life cycles, volatile demand, high profit
margins, & relatively less competition
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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DEVELOPING ETHICAL AND
SUSTAINABLE SOURCING
STRATEGIES
Framework for ethical and sustainable
sourcing strategy development
Step 1 Establish corporate ethical and sustainable sourcing
policies
Step 2 Train purchasing staff and implement policies
Step 3 Prioritize items based upon ethical and sustainability
opportunities and ease of implementation
Step 4 Develop performance measurement system
Step 5 Monitor progress and make improvements. Increase use
of green and fair trade products
Step 6 Expand focus to include other departments
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Ethical and Sustainable Supplier
Certification Programs
Supplier certification programs are used to
identify strategic supplier alliance candidates
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17
Outsourcing Products and
Services
Outsourcing allows a firm to
Concentrate on core business activities
Reach its sustainability goals
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18
Early Supplier Involvement
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19
Early Supplier Involvement (Continued)
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20
Early Supplier Involvement (Continued)
Co-managed inventories
Buyer and supplier reach an agreement regarding inventory
Preferable for high value items
Supplier co-location or JIT II
Suppliers employee is embedded in buyers purchasing
department to forecast demand, monitor inventory & place
orders with access to sensitive files & records
Advantages
Purchasing organization gets the use of a cost-free
employee who understands their particular problems and
requirements
Supplier gets the security of future purchases
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
Strategic Alliance Development
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22
Strategic Alliance Development
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
Negotiating Win-Win Strategic
Alliance Agreements
Collaborative negotiations (aka integrative
negotiations)
Both sides work together to maximize the outcome
or create a joint optimal result
Requires open discussions and a free-flow of
information between parties
Distributive negotiations
Refers to a process that leads to self-interested,
one-sided outcome
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Negotiating Win-Win Strategic
Alliance Agreements (Continued)
Steps Description
(Table 4.4)
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Rewarding Supplier Performance
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27
Assessing & Improving the Firms
Sourcing Function
The sourcing function is one of the most value-
enhancing functions in any organization
Sourcing or purchasing functions performance are
periodically monitored against set standards, goals,
and/or industry benchmarks.
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
28
Assessing & Improving Firms
Sourcing Function (Continued)
2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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