How Continuously Proactive Supply Chain Engagement Can Be Crucial in Building Brands

This afternoon panel on Wednesday, day three of SB '15 San Diego, offered a unique opportunity to hear from a diverse group of companies, both large and small, national and global, spanning several industries, and with different degrees of complexity in their supply chains. This same diversity offered insights into several potential trends:

1) Regulations and standards seem to follow, not lead, corporate practices. Several of the companies on the panel have decided to strengthen supplier guidelines and standards on their own, and not wait for the industry to do so. Sofia Kelly, Social & Environmental Responsibility Program Manager with HP, shared info on HP’s Foreign Migrant Worker Standard, established in November 2014 to advance workers’ well-being – e.g. suppliers cannot withhold key documents form workers such as passports; and workers need to be directly employed by the suppliers, not by outsourcing companies or recruitment agencies. Creating supplier scorecards can also help; “suppliers want to do better,” Kelly added.

Besides driving standards forward, companies can transform industry practices because they experience firsthand the ins and outs of the supply chain. The team at Taylor Guitars spends a significant amount of time with its suppliers; when Taylor bought a sawmill in Cameroon, Charlie Redden, Director of Supply Chain, decided to move to Cameroon for a year — a proximity that provided new business insights. Thanks to such experiences, Taylor has been able to redefine and establish new wood-cutting techniques that save 60 percent of mahogany; “use what the forest offers you, and utilize all wood,” Redden said. Laws may often be limited: “it takes 200 years for a tree to regenerate, and yet concessions are for 30 years,” he added.

2) Increasing consumer interest in tracing materials may trigger a restructuring of the supply chain. First, supply chains may become more consolidated. Brad van Voorhees, Supply Chain Sustainability Senior Manager with VF Corporation, which has 2,600 factories globally, differentiated between two types of suppliers: transactional suppliers — cost-competitive suppliers that may however pose environmental and social risks, and partner manufacturers — large suppliers whom “we can influence more and in whom we can invest knowing we will be working with them for 10 years,” van Voorhees said. Education may also play an important role. “We cannot be at each supplier site, and that is why we invest in programs for workers to understand their rights,” Kelly offered.

3) The biggest transformations in the supply chain may require industry-wide action.Michael Garrison, Senior Director of Sustainability & Packaging at Chick-fil-A, pointed to the poultry supply chain, which for example requires major capital investment for building new facilities that can deliver antibiotic-free chicken. “We need to work systemically,” Garrison said. To do so, Chick-fil-A is engaging the six major poultry suppliers in a concerted, gradual effort. “It is not hard to engage suppliers who are already engaged — it is harder to engage those who are not — but it is by engaging in a coalition at the industry level that we can make most impact,” echoed Tim Brooks, Senior Director of Environmental Sustainability at LEGO.

4) Collaborations with once unlikely partners may be essential. VF Corporation seeks to connect its suppliers with potential lenders, such as the International Finance Corporation, and has also partnered with a Dutch NGO in order to organize cotton farmers in learning groups and train farmers on pesticide, water, and energy use. “We now also have structural engineers in our team, people we did not have before,” van Voorhees added. To understand the true impact on suppliers and their communities, “we need to work more closely with those people and organizations that have been in these communities for many years,” Redden said.