Executive Briefings

The All-Important Role of the Supply Chain Manager

The people who manage a company's supply chain determine what a company is made of - or at least what its stuff is made of. It's hard to imagine a more important role. And it's a difficult one.

Supply chains are increasingly fragmented and tough to manage, as specialization and outsourcing have become standard practice. That experience isn’t limited to sourcing food. Today most brands are logos with wallets, outsourcing their manufacturing and production - in the case of the apparel, footwear, and electronics industries, to countries where labor protections are weak and enforcement weaker. Tragedies such as the 2013 Rana Plaza factory collapse in Bangladesh show the risks of a far-flung supply chain.

Dan Undermanned is CEO of Verite, a nonprofit that works with such companies as Warby Parker, HP and Disney to improve working conditions in their supply chains. He calls today’s infinite fragmentation the "Humpty Dumpty economy," saying that the "dynamism of the outsourcing economy is faster and better compensated than those of us who are trying to put the pieces back together."

The companies that have benefited from the growth in outsourcing over the past few decades now dwarf their buyers, and have suppliers and sub-suppliers themselves. Foxconn, which makes some 40 percent of the world’s electronics, has hundreds of thousands of employees at sites around the world.

Even the biggest buyers comprise only a tiny percentage of these companies’ business, which means individual companies have little leverage to enforce labor standards or environmental controls, violations of which are rarely visible in the final product. It’s much easier to hold a supplier to account for using the wrong kind of paint than for cheating workers out of overtime.

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Supply chains are increasingly fragmented and tough to manage, as specialization and outsourcing have become standard practice. That experience isn’t limited to sourcing food. Today most brands are logos with wallets, outsourcing their manufacturing and production - in the case of the apparel, footwear, and electronics industries, to countries where labor protections are weak and enforcement weaker. Tragedies such as the 2013 Rana Plaza factory collapse in Bangladesh show the risks of a far-flung supply chain.

Dan Undermanned is CEO of Verite, a nonprofit that works with such companies as Warby Parker, HP and Disney to improve working conditions in their supply chains. He calls today’s infinite fragmentation the "Humpty Dumpty economy," saying that the "dynamism of the outsourcing economy is faster and better compensated than those of us who are trying to put the pieces back together."

The companies that have benefited from the growth in outsourcing over the past few decades now dwarf their buyers, and have suppliers and sub-suppliers themselves. Foxconn, which makes some 40 percent of the world’s electronics, has hundreds of thousands of employees at sites around the world.

Even the biggest buyers comprise only a tiny percentage of these companies’ business, which means individual companies have little leverage to enforce labor standards or environmental controls, violations of which are rarely visible in the final product. It’s much easier to hold a supplier to account for using the wrong kind of paint than for cheating workers out of overtime.

Read Full Article