Platt Perspective on Business and Technology

Moving past early stage and the challenge of scalability 35: reconsidering and rethinking the supply chain 4

Posted in book recommendations, in the News, startups by Timothy Platt on June 27, 2013

This is my thirty fifth installment in a series on building a business for scalability and long-term success (see Startups and Early Stage Businesses, postings 96 and scattered following for Parts 1-34.)

I have written repeatedly in this blog about lean and agile supply chains, and about dynamic on-the-fly assembled supply chain systems that would be organized quickly to capture and develop short-term and newly emerging opportunity. In that regard, I cite postings such as:

Reexamining Business School Fundamentals – strategy and strategic vision in the interconnected, interdependent marketplace,
Fine Tuning and Adjusting a Business in the Face of Change 7: tapping into supply chain partnerships and collaborations and
Moving Past Early Stage and the Challenge of Scalability 9: supply chain-ready business models from this series.

Then in the most recent installments to this series I have leavened that discussion with consideration of how:

• Shortsightedness and a failure to either appreciate a business’ workers and their safety,
• And the potential for long-term risk that that approach can take,
• Can lead to disaster, abrogating any potential positive value for all partner businesses involved in those supply chain systems.

I began discussing the Rana Plaza factory collapse in Part 32 and continued that in Part 33 and Part 34. My goal for this posting is not to repeat or to further add to the details of that discussion of this event as touched upon in those three postings. I simply note that every business involved in the supply chain systems that sought profits from the Rana Plaza building and its sweatshop business practices will suffer damaged reputations and loss from this catastrophe, and of a type that will take time and effort and expense if nothing else, to repair. The marketplaces and the consumers who comprise them, that these businesses rely upon, will demand that and more.

I find myself thinking of several particularly pertinent books on globalization and its impact as I write this, including:

• Friedman, T.L. (2007 edition) The World Is Flat. Picador/Farrar, Straus and Giroux. New York, and

And I could just as easily add a series of books and articles by others that this work in particular has spawned, to the effect that the world is still and certainly as of this writing, not a flat and level playing field yet and for all nations and all peoples. The world is flattening, but it still has its disparities and even vast ones. And the fact that the average monthly wage for a full time garments factory worker can be as low as the local currency equivalent of $37 – as is the case in Bangladesh, proves that. The corner cutting, big brand name clothing manufacturers who entered into contractual agreements with the factory operations that resided in that building were leveraging these disparities to maximize their profits.

But that approach overlooks one of the defining drivers behind the flattening that Friedman writes of – the development of a basic and even automatically assumed real-time or at least very near real-time anywhere-to-anywhere, and anywhere-to-everywhere communications capability. When that factory building went down people saw that and the consequences of that on real individual people, and they saw this everywhere. The global market that would buy brand name clothing saw and heard the images and voices of injured survivors and saw the effort to recover crushed bodies of those who did not survive – and the faces of their families. They saw the poverty and they saw stark and undeniable signs of the local governmental corruption that made this event possible, and with time inevitable.

• The phenomenon that I write of here is well established from the advent of real-time, in your home and in your face news reports coming out of war zones, and how a public that sees war’s carnage loses faith in the rhetoric that would support it.
• When cause and effect are immediately and forcefully visible, and even all but impossible to overlook, that fact drives change in public perception and in publically held goals and priorities.
• The cost of social irresponsibility and of social and socioeconomic injustice, and of being perceived as condoning and even benefiting from them has to be considered as a possible adverse outcome in any risk management or due diligence driven decision making process, when weighing the costs and benefits of entering into international supply chain systems. And this certainly holds when cutting corners by leveraging those not so globally flat disparities, is being considered as a possible route to increased profitability.

Buyers demand low-cost clothing. This puts tremendous pressures on manufacturers and on all of the businesses in their supply chain systems, to cut costs – and at any risk or potential price due. But those same communities of buyers have families and watch the news and go online and see the consequences as they develop – and they also see fairness as a necessary goal and even with its costs too.

• Is there an easy answer to this for the brand name garment manufacturers that see what has happened here and that look forward to its possible repercussions? No.
• They face a conflict of needs and pressures and of demands placed upon them that do not hold to any easy answers. Wages will have to go up, and working conditions will have to be made safer for workers in places like Dhaka, Bangladesh. And factory sites like the Rana Plaza will have to be closed down or upgraded and corrected so as to be safe places to work. And it is inevitable that the costs of that will carry through the supply chain process and end up increasing final end product production costs and costs to end-user consumers. And those consumers, while reacting strongly against what happened at the Rana Plaza will still demand low cost clothing. And as a mature, highly competitive industry, profit margins will remain slight and even razor thin anyway.

I stated at the end of Part 34 of this series that I would discuss “some of the issues and some of the basic parameters” that would have to be addressed in developing remediative and preventative approaches to resolving challenges like this, and I have. But in that I have only raised new issues and questions in doing so. There are, as stated above, no easy or quick fixes to any of this. I am going to end this series, again, here at this point at least for now. I will, however, come back to discuss issues I have raised here again in future postings.

Meanwhile, you can find this and related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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