"How can you justify doing business with that supplier after the CEO was on television last night supporting the latest political conspiracy theory?" stammered Karen’s marketing manager. "Calls for boycotts on social media are already building, and I’ve received two calls from major customers this morning demanding to know why we do business with companies like that. Find another source — and quickly."
As the director of purchasing, Karen was well aware of supplier reputation issues including human rights violations, ecological disasters and the use of conflict minerals. She had done a great job identifying and removing questionable sources as she embraced a more ethical and social sourcing strategy. In fact, that strategy was now part of her company’s marketing message of social consciousness.
Yet a random comment from a supplier’s executive on a cable TV show sent her company into damage control mode. And it sent Karen into an emergency Zoom meeting with her staff to look at the impact of finding an alternate source for an important commodity, upending years of relationship building with the existing supplier.
An early morning news story about financial malfeasance or a social media post with a tawdry comment from a company exec not only impacts the supplier, but companies that use that supplier. If the news is bad enough, customers may not be happy that your company uses that particular vendor — and they could express their discontent in ways that have tangible effects on your business.
Not only do we need to monitor the performance of the supplier, we need to also keep an eye on their public persona and reputation.
We’ve seen the righteous indignation from consumers when they discover companies producing their favorite brand of sneakers depend on sweatshops and child labor to keep their costs low. We’ve seen immediate consumer boycotts of goods from canned beans to bedding, in addition to a broad range of advertiser boycotts should a cable television talking head from either side of the aisle say something cringeworthy.
The court of public opinion dispenses swift judgement.
Call it guilt by association. And it is yet one more element of supply chain risk. Not only do we need to monitor the performance of the supplier, we need to also keep an eye on their public persona and reputation.
Prepare to distance yourself from a toxic supplier, even if their operational performance is up to speed.
What can a buyer do to manage risk rippling down from suppliers? It depends, and there are a few options.
A knee-jerk reaction to replace the supplier may be a costly one.
Do nothing and hope for the best
The best part of a 24 /7 news cycle is knowing there will be another tempest coming up shortly. Even the most ardent consumers may support a boycott for a very short time and move on quickly to other issues. There is a good chance that the squall blows over.
A knee-jerk reaction to replace the supplier may be a costly one. Take the opportunity to put the supplier on notice about the issues they are causing. If you see that it's not a one-off issue, but the beginning of a pattern, it may be time to actively search for a less radioactive supplier.
Scan continuously for supplier news
Standard operating procedure these days calls for being aware of news around your industry, your commodities and key members of the supply chain. Google major suppliers on a regular basis, subscribe to relevant press releases and just keep a general eye out for news about your suppliers (and theirs). Connect the dots.
Reinforce the importance of 'good behavior'
Add reputation and discretion to your supplier performance metrics and risk assessments. Remind suppliers of the importance of civil discourse. Some suppliers may choose to use their business as a platform to address issues of the day. That is their decision. If it impacts your business negatively, changing suppliers is your decision.
Keep your own house in order
Remain true to your supply chain and supplier performance strategies. There are things you can control and things you cannot. Buyers are not expected to manage public relations crises or overreact to the daily news cycle. But they cannot keep their head in the sand when the hyper political environment we live in impacts members of their supply chain.
Gracefully accept the new elements of supplier risk and understand that our jobs are that much harder. But be careful if you Tweet about it. Your suppliers, and customers, may be watching.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.
