Daily Archives: September 30, 2009

Precedent Sets a Standard

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.

As a long-time and avid newspaper reader I keep up-to-date with what’s going on locally and nationally, even if I find out the day after. I can’t imagine starting my day without enjoying a healthy breakfast while reading the newspaper. I read through all sections, though I may not thoroughly read each and every article. I also make sure to read through the letters to the editor, not just to find out about goings-on I might have missed, but to gauge outrage or support for a particular topic.

The wife of the Fort Lauderdale (FL) chief of police fired a gun at her husband while in their home and then proceeded to fire off two more shots outside the home as she was chasing him. The police chief’s wife was apparently quite distraught over his suspected cheating which, to my knowledge, has not been proven or disproven. Fortunately no one was injured as she missed not only her husband but also any innocent bystanders. In statements she informed that she did not mean to specifically put a bullet in her husband, but was distraught and looking to get his attention or something to this effect.

During her recent court hearing, the gun charge was thrown out as if no gun was used at all, and the wife was charged with lesser offenses.

Based on the letters to the editor, there is considerable outrage that — it would seem once again — money and political connections favor those who have them in what should be courts of law that are supposed to be neutral ground where only the law should be discussed. This is — from my understanding — especially true in criminal cases where laws are written down and are relatively “fixed”, as opposed to civil cases where precedent (prior case outcomes) sometimes set a standard. The newspaper’s own “news columnist” was also quite direct in his criticism of how this case was handled, and asked whether regular folk in the same situation would have been treated the same.

But there is a bigger issue in here in how this particular courtroom drama is playing out: how the precedent of this case will set a standard for future cases. There is no disagreement that she fired three times from a gun while aiming in the direction of her husband, who has not pressed any charges against her. The outrage from the community is that someone with lesser political connections and financial resources would have been treated much differently — and more harshly sentenced — by the court. With full admission that she did fire a gun three times, how is it possible for this fact to be simply omitted by the court when considering her punishment for breaking the law? Based on quotes in the newspaper from legal experts, quite a few people are wondering about this.

Organizations must set clear rules on how it stands for fraudulent behavior, and must definitively abide by its own rules in administering actions against employees, customers, or suppliers who perpetrate fraud.

To fail to create and publicize clear rules may make it difficult for the organization to punish fraudsters, especially when it’s their own employees. Organizations should not be complacent in believing that all employees understand what constitutes correct behavior, and an employee’s status has shown to not be a good indicator of such knowledge.

To fail to adhere to policies in terms of actions — which may include and require termination — against employees who are found to have committed fraud sends a clear signal to everyone else that the organization lacks the fortitude to follow through and make the hard — yet necessary — decisions. This could easily serve to actually encourage more bad behavior because employees who were possibly on the fence about committing fraud now know that there is no punishment if they get caught.

If your organization does not have policies for behavior and procedures for violations of behavioral standards, there is a risk of allowing bad behavior to be conducted, if not also condoned, and being left with few repercussions to deal with the source of the problem.

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Norman Katz, Katzscan

Service Leaders Speak: Ashton Udall of Global Sourcing Specialists on “Supply Chain Sustainability and Transparency”

Today’s post is from Ashton Udall, a Global Sourcing Specialist (and author of the GSS Blog).

As optimism returns and some of the challenges of the downturn begin to recede, we are quickly reminded that many challenges and trends which played at the forefront of business concerns, prior to the economic fallout of 2008, will return. How are sourcing organizations evolving to meet customer needs in the next decade? Surely, strategic sourcing, spend management, and risk assessment and mitigation will see continued development and increased sophistication. But there is another trend that has come to the fore in the last few years; a trend that requires many sourcing and procurement organizations to stretch outside their traditional bounds because of its interdisciplinary and cross-functional nature. Whether one likes it or not, for reasons of consumer demand, cost reduction and risk, and good ol’ conservationism, environmental sustainability will grow in importance and the supply chain will increasingly be dragged into the limelight on this topic.

Companies will face a demand for greater transparency as a result of growing consumer awareness and changing priorities, the continued spread of technology — cell phones, video, and internet access, and executive leadership. Authenticity and transparency will become greater drivers of brand loyalty, and companies will be expected to do as they claim, and show what they do.

Waving the green flag of sustainability is not enough. Smart companies, those who are ahead of the curve, will assume greater market leadership in years to come. These companies are working hard to find win-win situations in which both the financial and environmental bottom line benefit. Walmart is leading the charge, in one recent example, recently reporting that adherence to its sustainability goals has led to a reduction in toy packaging, saving the company 727 shipping containers and 1,300 barrels of oil in comparison to the previous year, which adds up to an impactful $3.5 million.

Packaging reduction is considered a low hanging fruit of environmental initiatives, but a survey of topics to be covered at the 3rd SustainableSupply Chain Summit (North America, 2009), includes issues such as carbon footprint, ROI on green initiatives, supplier collaboration and partnerships to attain greater efficiency, and the emergence of the Chief Sustainability Officer. Packaging reduction is only the beginning.

Design and product development teams will hand over greater requirements in the realms of sustainable packaging, sustainable materials, lower carbon footprint, and certified labor conditions to the sourcing and procurement departments, and it will be up to sourcing and procurement to provide solutions to meet these needs. Smart companies will get out in front of these issues and not remain in a reactionary state. Sourcing leaders will need to develop greater sophistication in assessing supplier operations and risk. Specifically, sourcing leaders will require more robust methods of identifying and calculating risk to CSR and marketing programs that emphasize the social and environmental perspective, vendor monitoring and compliance, and supplier capacity development. Opportunities will not be limited to finding ways to reduce environmental footprint and informing consumers. Creating and capturing value will entail sourcing professionals to develop the ability to create scenarios in which cost is continually reduced in the supply chain by reducing energy inputs, material waste, and operational inefficiencies, while simultaneously fulfilling CSR goals that build brand loyalty. Inorder for this to occur, compliance, procurement, and brand management will need to act cross-functionally, and in concert, to drive optimal results.

Sourcing solutions providers which continually investing in their staff to understand this new and rapidly evolving field, building relationships with service providers that specialize in compliance and capacity building programs, and expand and refine their network of suppliers that meet higher requirements, will be in a strong position to increasingly add value to customers’ top and bottom lines as we enter the next decade of transparency and sustainability in supply chains.

Thanks, Ashton.

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