When reputation risk issues lurk in the supply chain

What do smart phones, women’s makeup and footballs have in common? All three have been caught out recently in supply chain crises which seriously threaten production and corporate reputation.

The first to feel the heat of a supply chain threat at the start of September was Korean electronics manufacturer Samsung after revelations of under-age workers in one of its Chinese plants.  The company quickly announced it would check 250 supplier companies in China. 

Just days later US cosmetics and fragrance giant Estee Lauder launched legal action against Target Australia, claiming it was selling counterfeit M•A•C Cosmetics at its stores.  Target replied that the cosmetics it stocked were bought from an official M•A•C wholesaler and shipped into Australia via parallel importing. The case has still to be resolved through the legal process.

Then came news that some of Australia’s iconic Sherrin footballs were being hand-stitched by Indian girls as young as 10, for as little as 12 cents a ball. The children were being pulled out of school to stitch balls, for up to 10 hours a day, seven days a week. The story became even worse when it was pointed out that many of the synthetic footballs are used to promote Australia rules football to 5-12 year olds in the game’s national youth programme.  Sherrin said it knew nothing of the child labour, immediately sacked four Indian sub-contractors, and made a substantial payment to an Indian charity.  But their reputation was undoubtedly damaged.

Then they had to announce a recall of almost half a million Indian-made kids’ balls after two were found with needles sticking out. All this in the week before Sherrin official footballs were due to feature at the AFL Grand Final.

Such reputational crises are not unique, but these cases highlight the importance of risk issues in the supply chain. A recent White Paper from Mission Mode draws on case studies to emphasise the need for supply chain risk mitigation. And a Booz and Co global survey of sourcing and supply executives reported earlier this year that the supply management organization in many companies is increasingly recognised as a key contributor to overall corporate strategy. Yet they found the supply chain faces a growing array of risks, and almost half of those surveyed acknowledged they hadn’t fully evaluated the risks facing their business.  Risk and issue identification is critical to reputation protection and crisis prevention, and the supply chain is no exception.

Footnote:  Just days after Target cleared its shelves of suspect cosmetics, department store Myer, an official stockist, ran full page advertising on the subject.  Without mentioning M•A•C the ads featured a pair of false eyelashes and the message: “The only fake product in the Myer beauty hall. Don’t be the target of counterfeit cosmetics.”

It might have been cute marketing but it certainly wasn’t prudent issue management. Publicly revelling in the discomfort of a competitor is seldom very clever, especially when something similar could happen to you. Experienced issue managers know that what goes around comes around.

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About managingoutcomes

Issue and crisis management expert
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