Avoiding supply chain surprises
(08/05/06)

Stimulators:
Sumi Dhanarajan - Oxfam
Mike Barry - Marks & Spencer

Other guests:
Matt Gorman - BAA
Kirsty Johnson - Shell
Annette Fergusson - Vodafone
Peter Stangl - Vodafone
Thomas Lingard - Unilever
Nick Robinson - BP

Context has worked on supply chain issues with several clients, notably with Reebok on a recent report [email us if you want a copy] which broke new ground. Like many others, we have been impressed by Marks & Spencer’s campaign earlier this year which was the first attempt by a major retailer to connect with consumers on these issues. We asked Mike Barry from M&S to tell us more, set against a perspective from Oxfam on these issues.

Sumi called for companies to change their purchasing practices. She said Oxfam has learned a lot in the 10 years since the Clothes Code brought mass coverage to the issues. Using codes of conduct and audits has achieved progress, but there are still very long hours, excessive casual work and low wages. Suppliers blame retailers’ demands for just-in-time delivery, low cost and maximum flexibility. This is why retailers need to address buyers’ incentives and purchasing systems.

Mike said the M&S campaign responded to rising consumer concerns, but was the product of 10 years’ work on some issues and a decision to take leadership on these issues rather than wait for consumer concerns to crystallize. He pointed out that M&S is in a better position than most retailers, because of the very tight supply chain it operates – typically fewer suppliers, and entirely own label. And he identified NGO rankings as a key stimulant to consumer-oriented companies – most companies don’t mind not being top of a league table, but nobody wants to be bottom.

The M&S approach is to focus on providing reassurance about the brand rather than giving consumers detailed information on individual products. And the work has paid off in terms of the largest ever increase in customer perception of the brand.

Most of the discussion was around the potential for non-retailers to connect with consumers on these issues. They don’t have the shop window displays used by M&S.

One answer is to connect supply (and other sustainability) issues with quality. First, in the sense that more responsible supply practices will deliver better quality as it is conventionally defined. Second, by expanding consumer perceptions of quality to embrace sustainability aspects.

The quality analogy also relates to cost. Improving supply chain conditions can result in higher costs. But this can be seen as an investment which delivers returns in the form of improved quality, in the broadest sense.

The motivation for such investment could be that these are becoming competitive issues. With Wal-Mart, Tesco etc becoming more active in these areas, retailers need to assess their CR competitive position.