The Gap's Child Labor Blow-Up: When Supplier Performance and Risk Investments Fail
In the past few weeks, two of the more advanced companies from a supplier performance and supply risk management perspective have encountered problems, despite their investments in people, processes and technology. The first to hit the headlines was Boeing, whose 787 will now take flight six months behind schedule thanks to supply-related delays. The latest supplier performance and risk related news on the Gap hit the wire over the weekend.
According to MSNBC's coverage of the event, "An Indian vendor assigned work on an item for the company's GapKids line to an unauthorized subcontractor." The UK Observer broke the story originally noting that this subcontractor's facility was "smeared in filth, the corridors flowing with excrement from a flooded toilet” and that "child workers" were present at the facility. The irony of this development is how sophisticated Gap has been in the past relative to its peers from a supplier performance perspective. I actually had the chance to sit in on a panel with an executive from the Gap to discuss supplier performance and risk issues a couple of years ago. And I can vouch for the sophistication of their monitoring, audit and forecasting processes, at least back then. Still, mistakes like this can -- and do -- happen, even to top performing organizations.
- Jason Busch
According to MSNBC's coverage of the event, "An Indian vendor assigned work on an item for the company's GapKids line to an unauthorized subcontractor." The UK Observer broke the story originally noting that this subcontractor's facility was "smeared in filth, the corridors flowing with excrement from a flooded toilet” and that "child workers" were present at the facility. The irony of this development is how sophisticated Gap has been in the past relative to its peers from a supplier performance perspective. I actually had the chance to sit in on a panel with an executive from the Gap to discuss supplier performance and risk issues a couple of years ago. And I can vouch for the sophistication of their monitoring, audit and forecasting processes, at least back then. Still, mistakes like this can -- and do -- happen, even to top performing organizations.
- Jason Busch
They happen with a wink and a nod. The subcontractor is the key. It allows the disavowing of any responsibility.
It happens in this country too. The cable companies don't actually employ illegal immigrants to dig holes in which to bury fiber optic cable. They employ subcontractors to do it, for which they can deny all accountability when the entire subcontracting crew turns out to be from Honduras, or Venezuela. They said they were all legal! We didn't know!
Spare me your stunned surprise.
Jason is right to note that Gap Suppliers Performance Systems are best in class, and that their level of investement in suppliers assessment resources is high.
But one key difference of sustainability supply chain risks, is that contrary to other supply risks (financial, delays, shortages,..) which tend to be 'absorbed' by intermediaries (ex: distributors, wholesalers), the reputational risks will impact your organisation even if the issue was far below in the supply chain.
In order to adress these issues, a company individual effort (such as GAP's) are not enough : better standards, indicators, and supply chain CSR tools need to be developped : As a leading purchasing organisation, you also need to make sure that your suppliers can benefit from the same tools in order to assess the CSR risks of their own suppliers.
Besides it is also good business. An unprofessional work environment is likely also an insecure one. Few companies want that risk or that of negative media to save a few pennies...