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Henry Davis York: Engaging with the Supply Chain

05 December 2010 10:22 AM | Anonymous member

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Overview

This programme provides a suggested approach and various tools for firms wishing to undertake sustainability engagement with their supply chain.  

 

In order to embed sustainability within the firm requires thorough engagement, both internal and external.  Engagement with the supply chain is a fundamental aspect of this, but the first step is to consider how the operations of the supply chain may affect the firm. 

Programme Details

We all know that our ability to deliver on whatever product we produce relies on raw materials and input from a diverse supply chain.  Failure by critical members in a supply chain can have a real impact on service delivery; corruption or violation of human rights in a supply chain can often have a reputational flow-on effect ‘upstream’ from the supply chain.  While a significant factor in engaging with your supply chain to ensure their sustainability is for your own protection, a benefit often ignored is the sustainability ‘advocacy’ stance your business is taking, which may often assist the supplier with their own sustainability endeavours. 

 

We have probably all seen examples in our own businesses, where we are suppliers and have been asked to comply with a ‘Code of Conduct’, detailed questionnaires and perhaps external audits, or to demonstrate our own sustainable business initiatives.  A wide range of engagement tools may be used in trying to seek conformance, ranging from cooperative to dictatorial.  

 

Where and how to begin with a supplier engagement program can be challenging.  The tools should be selected depending on the resources, size and nature of each business. 

 

Whatever tools are ultimately used, the following basic model (‘E-TEAM’) should be followed:

 Supply chain

 

 

At the core of the model are your firm’s Expectations of the supply chain.  These should be based largely on your own sustainability or CSR polices or targets.  Research in this area indicates that an organisation cannot begin to focus on influencing the supply chain until it has itself developed a certain level of proficiency in implementing its own sustainable business practices.  It is therefore important that your firm has determined its expectations of the supply chain.  

 

The first phase of this model requires engagement with the supplier and agreement in principle to go on a journey in the same direction.  This is the 'T' phase and considers that training may be required to engage with your supplier.  In this phase, you should articulate your corporate vision and communicate intent and policies to the supplier. This is followed by a phase where the supplier’s values or intent to share your vision are evaluated, termed the ‘E’ phase.  

 

In the ‘A’ phase, you acknowledge the supplier’s efforts.  This may be positive or negative feedback, rewarding improved performance or suggesting improvements.  At this stage, you may deem performance not acceptable and consider contract termination.  The final ‘M’ phase of the model suggests that tools be used to validate performance, acknowledge shortcomings and ‘raise the bar’ through setting targets.  

 

Each phase of the model suggests the use of a number of tools, which can be selected depending on the firm's resources and desired outcome. 

 

This should become a cyclic process, with a view to incremental performance improvements from the supplier. 

 

A more expanded view of the model with some different approaches at each phase of the supplier engagement is detailed below. 

 

Some firms may not have the resources (or will) to conduct supplier seminars, or to engage external assessments of supplier performance, so a list of potential approaches for each phase of the model is attached at the end of this document. 

 

By way of practical example, Henry Davis York’s (HDY) intent and policies are well developed and are articulated in their Sustainability Reports.  HDY is currently in the process of undertaking a supplier engagement program and have communicated intent and policies to their major suppliers (at the ‘T’ phase). 

 

HDY has further asked a number of key suppliers to complete a ‘pre-qualification questionnaire, which addresses ethical, social and environmental issues (at the ‘E’ phase). 

 

HDY value client and supplier relationships and the intent is to encourage the supplier to share the same values and join the sustainability journey with HDY.  Suppliers who share these ideals are rewarded with loyalty and support from the firm (the ‘A’ phase). 

 

HDY is not in the ‘M’ phase yet and, as this article indicates, need to consider the resources required for such monitoring. 


Influence the Supply chain

 

 Phase  Intent  Tools
 

TRAIN 

 

The 'Train' Phase is the initial engagement with the supply chain, where the organisation communicates its core intentions, policies and expectations to the supplier. 

 

While this phase is termed 'TRAIN', it is very much about communication with the supplier.  However, in a collaborative relationship with the supplier, this component is likely to include training.  

 

Use of the suggested tools needs to consider the relative risk profile of the supplier and the organisation's ability to administer and facilitate the systems. 

 

In this phase, the organisation is seeking acceptance in principle from the supply and permission to engage or proceed.
 

Initial communication to the supplier by letter, email or face-to-face, depending on the relationship and risk profile of the services supplied and the resources of the organisation.

 

Elucidate intent, provide policies and outline expectations from the supplier.

 Provide one-on-one or group workshops, training sessions or conferences to educate the supply chain as necessary, within the constraints and resources of the organisation.

 

EVALUATE 

 

Following the TRAIN stage, the organisation should have a good understanding of the level of commitment from the supplier, their  ideals, core values and willingness to cooperate. 

 

In many cases the organisation may find that the supplier already has the requested processes in place. In some cases suppliers may need to be encouraged to implement required systems or to improve. 

 

At this phase we issue the supplier with tools to determine the level of such engagement. 

 

Codes of Conduct, or documents that provide high level commitment from the supplier that they conform to or exceed local and national legislation with respect to the environment and human rights. Industry specific adherence to standards should be considered, where appropriate.


 

Codes of Conduct may take the form of 'pre qualification questionnaires' ('PQQs'), which seek conformance prior to a supplier being appointed.

 Depending on the level of risk, a further detailed questionnaire may be issued. This may request supporting documentation or evidence from the supplier.

A detailed questionnaire may have a scoring mechanism with a minimum performance levels as well as 'bands' of performance.

 

ACKNOW-LEDGE 

 

Acknowledge the supplier's performance relative to the tool used. 

 

If a supplier receives a high score, the firm may want to reward or acknowledge the supplier.

 

The acknowledgement may be 'please do better' and may not necessarily be tied to a reward system. Contract termination may also be explored here. 

 

Because this is a cyclical model, it is expected that 'rewards' may not become apparent until suppliers have repeated the cycle several times. 

 

Rating System.

 

Continued support for the supplier.

 

Recognition (at a conference or perhaps through the organisations publications).

 

More Information

Kelvin O'Connor

Henry Davis York

 





Henry Davis Yorlk 

 

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