Collaborative and ethical consideration in the vendor selection ...

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Int. J. Process Management and Benchmarking, Vol. 6, No. 3, 2016

Collaborative and ethical consideration in the vendor selection process Terry Damron* Department of Marketing, Austin Peay State University, Clarksville, TN 37044, USA Email: [email protected] *Corresponding author

Amye Melton Department of Management, Austin Peay State University, Clarksville, TN 37044, USA Email: [email protected]

Alan D. Smith Department of Marketing, Robert Morris University, Pittsburgh, PA 15219-3099, USA Email: [email protected] Abstract: Few doubt the importance of supplier collaboration and integration decisions faced by management, as both supply chain management (SCM) and inventory management are critical to operations efficiency and global competitiveness. These strategic variables include extent of coordination from suppliers, the degree of information sharing with suppliers, and the level of organisational integration. Lean production principles alone may fail to synchronise with customer demand when companies need to develop long-term supplier relationships. Underpinning these relations is an expectation of socially and ethically responsible behaviour on the part of suppliers. Using a qualitative case-study method, the present study explored the importance of supplier relationships with H.J. Heinz and American Eagle Outfitters, as both firms have worked with their partners to ensure social and ethical responsibility. Keywords: automatic identification and data capture; AIDC; business ethics; case study; green supply chains; operations strategy; supply chain management; SCM; supplier collaboration; supplier integration; supply chain technologies. Reference to this paper should be made as follows: Damron, T., Melton, A. and Smith, A.D. (2016) ‘Collaborative and ethical consideration in the vendor selection process’, Int. J. Process Management and Benchmarking, Vol. 6, No. 3, pp.404–418.

Copyright © 2016 Inderscience Enterprises Ltd.

Collaborative and ethical consideration in the vendor selection process

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Biographical notes: Terry Damron is a Marketing Instructor in the Department of Management and Marketing at Austin Peay State University where she teaches social media marketing, sales management, and retailing management. A practitioner-turned instructor, she worked in non-profit marketing for nine years before moving to academia in 2014. Her work earned recognition from the Council for Advancement and Support of Education and the Tennessee College Public Relations Association. She holds an EdD in Leadership and Professional Practice from Trevecca Nazarene University in Nashville, TN. Amye Melton is a Management Instructor in the Department of Management and Marketing at Austin Peay State University where she teaches business strategy, strategic management, organisational behaviour, and organisational development. She received her BS from Campbellsville University, MBA from Middle Tennessee State University and DBA from Walden University. She has had an extensive career in higher education administration for 19 years. She currently resides in Clarksville, TN with her husband, John. Alan D. Smith is presently a University Professor of Operations Management in the Department of Marketing at Robert Morris University, Pittsburgh, PA. Previously, he was Chair of the Department of Quantitative and Natural Sciences and Coordinator of Engineering Programs at the same institution, as well as Associate Professor of Business Administration and Director of Coal Mining Administration at Eastern Kentucky University. He holds concurrent PhDs in Engineering Systems/Education from The University of Akron and in Business Administration (OM and MIS) from Kent State University, as well as the author of numerous articles and book chapters.

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Introduction

1.1 Vendor selection There are many corporate strategies a company may follow; however, from an operational standpoint, management must decide whether to pursue cost leadership, product differentiation, or a combination of both. Supply chain operations and the associated technologies have evolved immensely over the past few decades and, if properly leveraged, can improve productivity, standard operations, and logistic activities (Mateen and More, 2013; Park and Min, 2013; Snider et al., 2009) for overall improved financial returns. During the 1970s, supply chain technology improvements were initially developed to improve labour and capital costs. In the 1980s, electronic tracking equipment, such as scanning barcodes, became available. Such automatic identification and data capture (AIDC) technologies were extremely important in revolutionising supply chain technology and its management (Smith, 2008, 2010; Smith and Offodile, 2008a, 2008b). The technology allowed stores to scan an item’s correct price at the register, immediately send reordering information, and view trends concerning items sold via point-of-sale (POS) data capture (Collins et al., 2010). Further technological advances in the 1990s allowed firms to work more closely, reducing lead times, stock-outs, and cost reductions. Increased use of the internet during this period resulted in the growth of e-commerce and e-procurement. The 2000s brought about the adoption of radio frequency identification (RFID) systems, smart cards with

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microchips, and mobile technologies. Although there may be conflicting evidence that RFID can lead to a firm’s enhanced financial performance when aligned with a firm’s strategic goals, there is sufficient evidence verifying its usefulness (Smith, 2015a, 2015b). Future applications for RFID include smart shelves that authenticate and verify drug doses for patients, grocery scanning that does not require consumers to remove items from their carts, etc. (Chien et al., 2011; Condea et al., 2012). Perhaps, as suggested by Collins et al. (2010), a firm’s greatest opportunity to develop value for customers exists in the implementation of a strategic supply chain management (SCM) view that builds agility, adaptability, and alignment throughout the supply chain. Proper management should employ the use of performance metrics, enabling firms to view their standing, prevent unknown inventory levels, and avoid mispricing items. Improvements to the supply chain may be connected to the firm’s overall performance through resource utilisation and output measures, categories of performance metrics. Using the correct set of metrics to evidence increases in the value of the firm can improve the odds the firm will invest more in supply chain technology (Carvalho et al., 2012). By relating this supply chain technology with knowledge management, firms can capitalise and build a competitive advantage in their industry. AIDC-related technologies and strategic planning are essential for successful SCM implementations (Bhamu et al., 2013; Fumi et al., 2013; Idris et al., 2013).

1.2 Green and richer operational strategies A number of researchers (Vesilind et al., 2006; Young et al., 2010; Zhu et al., 2008), have suggested management needs to properly examine the effects of weighing green supply chain management (GSCM) decisions against what is best for a firm, especially financial profits. Some have suggested that firms need to stay current on green standards in order to remain competitive (Sahu et al., 2014). These standards may include, but is not limited to, obtaining a leadership in energy and environmental design (LEED) certification. Perhaps poor communication from management to employees and other internal stakeholders is one of the main causes for the slow progress of GSCM adaption and widespread acceptance with in the corporate community (Smith and Minutolo, 2014). Much research in the field of GSCM stresses the importance of working with suppliers that are in line with a company’s sustainability strategy. Members of a supply chain can influence other members to become greener. Each member of a supply chain should maintain the highest level of transparency in order to attract and retain green customers. Maintaining maximum transparency requires firms to report more than their internal activities to customers; the activities of suppliers must be shared, as well (Murugan and Rajendran, 2014). With the economy in a rebuilding phase, maintaining GSCM strategies can be quite challenging. Management, as well as employees, should envision benefits of green strategies and believe in them. Management must effectively communicate GSCM policies to the workforce. Ideally, businesses should strive for ISO 14001 certification as a means of displaying commitment to these policies. Sustainability can be achieved through the minimisation of uncertainty and complexity throughout the supply chain as well as producing goods that encourage reverse logistics and recycling. While green-conscious consumers support government policies that improve the environment, their support does not always carry over to eco-friendliness at the personal level (Vesilind et al., 2006; Young et al., 2010). An individual’s desire to behave in a


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sustainable way can be diminished by the influence of peers and colleagues. Even if a company has green mechanisms in place, they may not be effective if not communicated well to employees. In their research, Smith and Minutolo (2014) found many participants felt their employers needed to be green, but experienced mixed opinions concerning whether suppliers also should engage in green practices. Employees tended to wait and see if management was serious about new policies before taking them to heart, except for matters involving recycling and practices that attract and retain new customers. The study further revealed a need for management to improve its awareness of internal customer perceptions concerning the value of green programmes and their relationship to the firm’s mission statement. In general, a firm’s green reputation is more important to well-educated professionals than to the general public. It is assumed that the implementation of GSCM practices directly correlates with profitability and enhances a company’s reputation. A ranking of the segments by employees surveyed showed eco-friendly policies were the most important to those who participated in the survey. A supplier’s green performance has been linked with the performance of manufacturing firms within the same supply chain, and sustained performance is based on maintaining this relationship. If GSCM practices are to succeed, they must be heart felt by those practicing them. This extends from management to employees and from supplier to manufacturer. The authors point out an obvious lack of research outlining how to maintain supplier relationships in the literature to date. There is a need for working ideas about how to react to supply failures which can increase a firm’s transaction costs through added slack (Pati and Kile, 2014). Suppliers and manufacturers alike must be committed to practices improving green relationships and are urged to not just use them as a public relations ploy (Laroche et al., 2001). Greener and leaner practices lead to increased levels of sustainability (Mainieri and Barnett, 1997). For example, a study by Matsubara and Pourmohammadi (2010) found the lack of modular manufacturing (i.e., increased use of unibody construction) in the automobile industry was counterproductive to the greener technology movement. Automobiles built via full-frame or modular construction, as opposed to unibody construction, can be completed with fewer parts while using less space. Compared to unibody construction, modular construction is faster, easier, and requires less manpower. Further, modular cars could be more easily recycled after an accident, employing reverse to make use of undamaged parts. The authors emphasise that green practices must be committed practices. In the short-term, green practices are less cost effective than, for example, petroleum-based alternatives; however, in the long run, green practices will prove more efficient. Not only will they pay emotional dividends, but they may represent the only way a firm can positively impact all three Ps of the triple-bottom line (i.e., planet, people, and profit).

1.3 Purpose of study In the past, vendor selection may have hinged on lowering operational costs; in today’s business climate, socially conscious consumers, the proliferation of the internet, and 24/7 media coverage lead companies to choose vendors more carefully. Firms must look beyond costs and quality to consider possible environmental costs. To augment traditional low-price and high-quality products, companies must engage in ethical and

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social responsibility to improve their corporate image and responsiveness to the needs of stakeholders. For example, a firm must consider how its suppliers treat their workers. Companies such as American Eagle Outfitters (AEO) and H.J. Heinz face ever-increasing consumer demand to improve environmental stewardship and the quality of life for factory workers. Often, profit and legal forces promote offshoring firms’ production facilities. Many of these facilities are located in countries where the workers, sometimes children, work long hours in substandard and unsafe factories, earning low wages. Although no federal laws require companies to maintain a transparent supply chain, some states have enacted legislation requiring a degree of transparency, enabling consumers to learn whether companies and their supply chain partners engage in illegal or unethical practices. For example, companies operating in California must adhere to the California Transparency in Supply Chains Act of 2010. This law requires companies conducting business in the state to disclose corporate policies and steps taken to eradicate slavery and human trafficking in their supply chains. To ensure the integrity of their supply chain partners and prevent consumer backlash, companies can inspect factories during the vendor selection process. Such inspections require supply chain partners to meet specific standards such as those concerning employee age, wages, and health and safety.

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Background

Some researchers, such as van Weele and van Raaij (2014), have made a plea to the academic community within the purchasing and supply management (PSM) field to make a greater effort to adhere to more rigorous approaches to research. In general, one of the main applications of PSM theory is to reduce operating costs of any given firm, it is not the only consideration for serious research. Unfortunately, there appears to be less attention given to value added by firm and more given to value added to the firm by the supplier. SCM as a discipline is different than PSM. SCM has repositioned itself from a relatively simply a focus on the flow of goods to examining more closely the relationships between different players along the supply chain. Through the creation of value for a specific customer market, there is increasing emphasis being placed on proceeding as efficiently as possible (as opposed to effectively). This may be accomplished through strategic management principles, at which point, according to van Weele and van Raaij, generates research that will hold no value unless the findings are executed. In the wake of the recent financial crisis, major challenges confront business in the volatile global economy. Uncertainty has caused companies to rethink how they can better respond in such a rapidly changing environment. There is renewed attention to the supply chain and how a manufacturer can respond to customer needs through close coordination with their supply chain. Today’s businesses must focus on creating and maintaining customer loyalty as a means of improving competitive stance. A number of firms have developed proactive strategies toward adaptation of both a lean and agile supply chain strategy (Primo et al., 2007; Wan and Chen, 2008; Watts et al., 2008). Although lean strategies include an ultimate goal of no waste, increased productivity and waste removal alone cannot create the greatest value for a company. Agility is necessary in order to respond to unpredictable customer demands.


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Successful agility in the supply chain requires systematic supply chain restructuring that may involve realignment of the supply chain partnership, reorganisation of the business structures and upgrading of the technology infrastructure. Despite the increasing need for supply chain restructuring, there is little known about the antecedents and paths to success. Supplier integration and collaboration are essential for successful strategies that lead to enhanced coordination with suppliers, information sharing with suppliers, and organisational integration. Information from empirical research by Roh et al. (2011) filled a void in little known antecedents of supply chain restructuring and the impact of supply chain restructuring on manufacturing practices. The study offered evidence of alleged causal links between supply chain restructuring and key strategic variables essential for supply chain success from focal company perspectives. These key variables include extent of coordination from suppliers, the degree of information sharing with suppliers, and the level of organisational integration. The authors noted direct labour costs contribute only about 10% to the total sales, and decreases to these costs alone would not significantly increase profits. Therefore, management should direct attention to value-adding activities throughout the production process instead of obsessing over increased cost efficiency in labour and materials. Lean principles alone may prevent a company from synchronising with customer demand. For example, Motorola failed to promptly respond to sudden shifts in customer needs and, in effect, went from 60% market share in mobile phones in 1994, to 31% in 1998, and 16% in 2002. As illustrated in Figure 1, the information sharing and the level of organisational integration with suppliers are essential in building mutual trust and collaborative relationships. Another side effect proposed from an efficiency focus is not fostering an innovation friendly environment. Augmenting information system updating, EDI technology introduction, knowledge management systems should be created and properly maintained. In the companies studied by Hansen et al. (1999), all of them had chosen a distinct knowledge management that best matches their organisation and culture, employee know-how, which are all examples of the strategic assets in the resource-based view of the firm (Michalisin et al., 1997, 2000). The basic patterns were that assemble-to-order product or service strategy emphasised codification and reuse of knowledge. Those companies that offered highly customised services or product innovation strategies invested mainly in person-to-person knowledge sharing. Safeguards should be in place to use these systems properly so that customers that were paying for highly customised services got the services they need so they would not become dissatisfied. Major research areas within the field of SCM include strategic planning, competitive strategy, innovation and competence management, and internal and external resource management. Research by van Weele and van Raaij (2014) revealed that in order for a company to remain competitive, it needed to be ranked either first, second, or third in terms of market share. Those below this level would not command enough of the market to remain in competition with larger players. Much like an investment portfolio, businesses began diversifying their risk by releasing various products across a variety of markets. Profits from so-called stars and cash cows were used to finance potential winners labelled dogs and question marks. The slower economic growth that occurred after the early 1980s caused a shift in competitive strategy theory. This new direction focused on the value chain and claimed that even companies with a small portion of the

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market share could remain competitive. The computer age gave rise to new Asian competitors, causing firms to shift focus to internal matters and focus on soft aspects of management and procurement. As profits became a result of customer satisfaction, firms began to focus on excelling at their core competencies and outsourcing other aspects of their business and shifting to a more supplier-dependent climate (Cheelu et al., 2014). Therefore, competitiveness may not entirely be internal but relies on external relationships with suppliers, as well. Supplier collaboration and integration must be activity pursued to establish creditable external links. Figure 1

Basic ethical and collaborative factors associated with the vendor section process outlined in the present study (see online version for colours)

Clarity of purpose

Developing operational and integrative purposes in easily understand unity of purpose of vendor relationships

Ensuring minimum levels of competency and information sharing among suppliers and host firms in the vendor

Competency of partners

Mutual respect and trust

ETHICAL AND COLLABORATIVE FACTORS IN THE VENDOR SELECTION PROCESS

Prompting common frameworks of socially and ethical responsive behaviors that lay the foundation for trust among all stakeholders Commonality of goals

Concerns of management and supply partners on green and operational ethical concerns in collaborative and integrative initiatives

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Method

3.1 Qualitative business case study The qualitative business case study is an approach to research that helps the exploration of a study of interest within its context using a variety of data sources. This ensures the


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issue is not explored through one lens, but rather a variety of many possible viewpoints to help to reveal and understand the concepts associated with the study. According to Baxter and Jack (2008), a common problem associated with case studies is the researchers’ tendency to attempt to answer too broad questions or topics with too many objectives. To avoid this problem, Yin (2003) and Stake (1995) suggested placing boundaries on a case. This case is bound by time and place and by definition and context; including only two companies, dealing with SCM integration/collaboration, and for the fiscal 2014.

3.2 Sample selection Personal interviews of upper-to-middle management, along with comments from convenient samples of employees, were used to gather perceptions concerning the accuracy of the firm’s strategic management processes within a customer service focus. Most of the information contained in this case study was obtained from management and/or the firm’s website.

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Case 1: AEO

4.1 Corporate overview Since the opening of its first store in Novi, Michigan in 1977, AEO has grown to include corporate offices in Pittsburgh and Hong Kong, and a design centre in New York City. The company currently operates more than 1,000 stores in the USA, Canada, and Mexico, as well as franchise stores in Hong Kong, mainland China, and Russia. AEO employs more than 30,000 associates worldwide, working with suppliers in more than 20 countries to produce clothing and accessories for a target market of 15 to 25 year olds. In 2011, the company posted net sales of approximately US$3.1 billion. The company operates AERIE, which is an intimate apparel brand also geared toward the 15 to 25 year old consumer market. AERIE consists of retail stores and an accompanying retail website. The firm also operates AE Outlet, which includes traditional stores and websites selling AEO brand merchandise. The company’s ‘AE Better World’ campaign focuses on its corporate social responsibility (CSR) programmes. Programmes cover a variety of issues, including vendor selection, environmental responsibility, employee betterment and wellness, and community involvement.

4.1.2 Vendor management process AEO, like many companies, has suppliers follow a code of conduct that outlines basic human rights of workers. Before the first order is placed with a new supplier, the company will conduct pre-order factory inspections. If a factory does not meet the minimum standards or does not pass the pre-order inspections, it will not be approved to conduct business with AEO. The AEOs Vendor Code of Conduct prohibits the use of child labour and forced and/or involuntary labour in the factories making its products. They prohibit using trafficked workers, prisoners, or indentured labour, and forced overtime for workers. Suppliers must formally agree to the terms of the vendor code and ensure their subcontractors follow the same standards. Once management has identified a prospective vendor, a team conducts an onsite visit to verify the supplier meets the code.

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Conducted periodically, the visits include third-party auditors and inspectors to oversee ongoing compliance inspections of the production facilities. If a problem is found, management works closely with the supplier to correct the situation through a written plan that could include education and manager training. If the problem is severe enough, AEO may terminate the business relationship. Management apparently understands the importance of the jobs created by their orders for goods, preferring to work with vendors to resolve problems. The goal of the vender code is not to simply cancel contracts or refuse to work with suppliers due to minor issues, as management prefers to collaborate with their suppliers to educate managers and owners in employee-friendly management techniques and improvements in working environment, as well as improved factory safety. New suppliers who fail to meet the minimum standards of the vender code are not approved for a continued business relationship with AEO. As shown in Table 1, a significant number of vendors will not meet the requirement and will not be chosen. The chart illustrates the percentage of factories, by region, inspected in FY2010 as part of management’s new factory approval process. Table 1

Factory approval statistics associated with AEO vendor code of ethics.

Region

New factories

Approved

Not approved

Pending

39

67%

23%

10%

Americas

7

86%

14%

0%

South Asia

19

69%

5%

26%

Southeast Asia

12

5%

17%

33%

Europe, Middle East and Africa

0

N/A

N/A

N/A

Total

77

66%

17%

17%

China and North Asia

The data display below average rate of non-approved factories in the South Asia region. AEO’s improvement team initiated a series of focused inspections in India, Bangladesh, and Pakistan to ensure factory compliance levels were assessed accurately.

4.2 Case 2: H.J. Heinz (Heinz) 4.2.1 Corporate overview The H.J. Heinz Company was founded in 1869 near Pittsburgh, PA. Pittsburgh currently serves as the world headquarters of Heinz, which sells many of their long list of products in more than 200 countries worldwide. Heinz iconic ketchup produces annual sales of more than 650 million bottles. Though ketchup may be the company’s most iconic and popular product, Heinz also sells other core products such as sauces, meals, snacks, frozen entrees, and infant food. Additionally, Heinz owns many key brands in the food industry. Some of the bigger brands in North America are Ore-Ida, Bagel Bites, TGI Friday’s, Weight Watcher’s Smart Ones, and Classico. In 2011, the company posted record sales of US$10.7 billion, largely due to a 12% increase in sales from emerging markets. This increase in sales resulted in a 14% increase in net income, which totalled a record US$990 million dollars.


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4.2.2 Vendor management process At Heinz, management takes care to ensure all potential suppliers are screened and selected through the company’s vendor management process. All suppliers engaged in a contractual relationship with Heinz and any of its business units worldwide, including contractors, suppliers of good and services, co-packers, and joint venture partners, must adhere to the firm’s Supplier Guiding Principles. The principles require all suppliers to conduct business using ethical workplace policies in compliance with not only local labour laws, but also with environmental laws. If the firm’s formal review process reveals a supplier is not adhering to these guidelines, the supplier must take immediate corrective action or Heinz will discontinue the relationship. Table 2

Heinz’s guiding principles

Legal requirements: comply with all applicable laws and regulations in providing goods and services to Heinz. Employment practices: Minimum age for employment – Suppliers will not employ anyone under the legal working age as defined by local law. Forced labour – no use of forced or involuntary prison labour. Abuse and harassment – no use of corporal punishment or other forms of physical, sexual harassment, and/or abuse of their employees. Discrimination – no discrimination on the basis of condition or characteristic which is protected by applicable law or regulation. Freedom of association – recognise and respect each employee’s right to associate with any legally sanctioned organisation, including the rights of labour unions. Work hours, work week and payment of wages – comply with all applicable local laws. Health and safety – provide employees with working conditions that are in compliance with all applicable laws and regulations regarding worker health and safety. Environmental practices: expected to meet applicable environmental laws and regulations in their operations and to develop and implement plans and programmes to correct any noncompliant practices. Communications: suppliers to take appropriate steps to communicate these principles to their employees. Monitoring and compliance: principles will be incorporated into all new or renewed commercial agreements between suppliers and Heinz and its business units. Suppliers will be expected to certify their compliance with these principles through monitoring activities, including on-site inspections based upon reasonable notice. Source: Partially derived from Supplier Guiding Principles (2015)

Through its Supplier Guiding Principles, Heinz prohibits suppliers from violating labour laws in the particular country where the supplier is located. The firm strictly prohibits the use of child labour and forced or involuntary labour in factories producing its products. Suppliers also are required to follow practices concerning abuse and harassment, discrimination, health and safety, work hours, payment of wages, and freedom of association. Additionally, the principles require supplier compliance with very specific

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environmental practices. Suppliers must meet any applicable environmental laws and regulations within their operations. Due to very strict sanitary requirements and ingredients traditionally associated with the food producers industry, Heinz has an extensive vendor selection process. The food industry has very detailed and explicit global requirements that are universally accepted among its supplier base in order to help ensure that their products are safe for consumers. Table 2 is a basic listing of Heinz’s Supplier Guiding Principles. Since 2000, Heinz introduced an online global database to track and trace every raw material and ingredient used in their products. The database is continuously updated, and allows management to document important information on the qualifications of all suppliers. The database tracks food safety requirements, records required data reported by its suppliers, and enables Heinz to monitor the quality and safety performance of their factories and ingredients.

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Discussion

Although AEO and Heinz are quite different in their histories and product lines, they are very active in recruiting and collaborating with quality suppliers. Compared to Heinz, which boasts more than 140 years in business, AEO is a relatively new company and brand. During the past 36 years, revenue, number of stores and brand recognition for AEO has increased steadily. Management at AEO, Heinz, and many other domestic companies have taken great strides in social responsibility and ethics, carefully choosing vendors and the behaviours in which they engage. Both companies have instituted several initiatives to evaluate and to provide ongoing inspections for new and existing manufacturing operations worldwide. AEO’s Vendor Code of Conduct and Heinz Supplier Guiding Principles serve as the ethical underpinning for how vendors are chosen to represent the respective brands. Heinz, much like AEO, has seen extremely rapid growth over the years, especially in their global businesses. With their global brand recognition, additional measures are necessary for ensuring vendor selection is both beneficial and ethical. Heinz has been able to at least partially accomplish this through the creation of formal supply principles and monitoring procedures. Like AEO, Heinz also has instituted several systems to monitor and evaluate vendors and the overall performance of their operations. Both AEO and Heinz maintain strict policies forbidding use of child labour and forced or involuntary labour in the factories producing their products. The companies will discontinue business with suppliers using these types of labour. To ensure compliance, the firms engage in periodic factory checks. Some of these checks are completed by company employees and others are conducted by third parties. Both companies will work with suppliers to educate and correct deficiencies found during an inspection. If a severe violation or repeat minor violations are found, management at both companies will discontinue the relationship with that vendor until the violations are corrected to the satisfaction of the companies. One of Heinz’s supplier principles, for example, formally states no one will be employed under the legal working age as defined by local law. Many countries have a minimum age standard that require workers to be at least 13 years old or older before they can work, per the International Labor Organization (ILO). AEOs Vendor Code of


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Conduct prohibits such use of child labour, which can be applied differently since there is no age requirement listed. Unfortunately, the definition of what is considered a child worker is still a highly volatile subject and can change based on the legal age of adulthood in a particular country, if not formally stated in easily understandable ethical and socially responsible terms. Both companies’ policies include provisions requiring suppliers’ subcontractors to follow the rules set forth in their companies’ codes of conduct. These policies help AEO and Heinz achieve their goals by making their supplier part of the solution.

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Conclusions

Increasingly, consumers want to purchase products from companies that treat their workers fairly and ethically. Over the years, vast improvements to technology has enabled competitors to more easily gain access to business strategies, making it more difficult for a firm to maintain a competitive advantage. Resources which are rare and valuable can yield a competitive advantage, and when they are not imitable they can lead to a sustainable competitive advantage (Michalisin et al., 1997, 2000). Intangible resources, such as knowledge, are influential to the success of a firm since they cannot be duplicated. The behavioural decisions that mangers have to make for both of these are highly important. For goods, SCM-related decisions are critical to the timely completion of the final product so that the customer. In a services industry, these decisions are extremely important, as well. Poor decisions can lead to unhappy customers, which results in lost productivity and profitability. Collaboration and SCM are synonymous because they both include communication and teamwork to reach an end goal; namely an ethical and socially responsible organisation build on mutual respect and trust among an organisations’ vendors. A firm’s collaborations with suppliers, customers, and their own staff can often improve quality and business practices that fuel growth, especially through knowledge sharing activities. Knowledge is the asset most directly linked to the overall performance of a firm. A firm’s ability to manifest and absorb knowledge can help reduce environmental threats, while the ability to manage such knowledge can lead to even greater benefits, such as the creation of new knowledge and transforming the knowledge into capabilities. Whether it is a store in Pittsburgh, a distribution centre in Kansas City, or a manufacturing facility in Korea, companies need to be more responsive to all internal and external customers’ wants, and to ensure they are doing all they can to make products in a way that puts employee safety and working conditions first. Ethical dealings and sound CSR-based practices are increasingly becoming a requirement of any business.

Acknowledgements The authors wish to thank most heartedly for the valuable contributions by the reviewers for their input into the final paper. Peer reviewing and editing are commonly tedious and thankless tasks.

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