Global Sourcing
Impacts of changing global sourcing
for Reebok and Nike
Agenda
•
•
•
•
•
Benefits of Global Sourcing
Risks / Issues
Alternatives
Recommendation
Action Plans
Benefits
•
•
•
•
•
Distribution
Quality
Lower cost
Focus on core competencies
Diversity of suppliers
“…we are manufacturers without the burden of plant ownership”
Benefits
Domestic
Manufacturing
$31.00
$50.00
38%
Overseas
Manufacturing
Benefits
International Purchasing
Level I
Level II
Level III
Domestic
Purchasing
Only
International
Purchasing
Only as
Needed
International
Purchasing
as Part of
Sourcing
Strategy
Global Sourcing
Level IV
Global
Sourcing
Strategies
Integrated
Across
Worldwide
Locations
Level V
Global Sourcing
Strategies
Integrated
Across
Worldwide
Locations and
Functional
Groups
“Achieving Excellence in Global Sourcing”, Robert Trent and Robert Monczka
Risks
• Broader communication
• International economic conditions
– Currency fluctuation
• Exposure to global issues
– Human Rights
– Environmental
– Politics
Question…
“(H)ow (can) firms derive the full advantage
of low cost labor and the benefits of
flexible contractor relationships, while also
respecting the rights of workers in
developing countries?”
**”International Sourcing in Athletic Footwear: Nike and Reebok” Harvard Business School
Issues
• Shareholder vs. Social responsibilities
• Can a company afford ethics?
– Limits supplier options
– Increase cost
– Ability to “impose” compliance to
contractors/suppliers
Alternatives
• “Ignorance is bliss…”
– “it’s not within our scope to investigate [allegations of
labor violations,]”
-a Nike executive
– “I don’t know that I need to know”
-another Nike executive
Alternatives
Alternatives
• Memorandum of Understanding
– Created in 1992, adopted in 1993
– Required compliance with “all applicable local
laws”
– Adhere to Nike’s environmental practices
– Self reported
Alternatives
• Human Rights Policy
– Adopted in 1990
– More specific…
• Outlines Reeboks’ “position”
• Exemplifies company passion
– Regular on-site audits and inspections
Recommendation
• Plan for not only operational impacts, but
also for global issues.
– Balance between shareholder and ethical
priorities
• Define corporate position on issues and
responsiveness
– Specific for YOUR company
Determining Ethics
• Define company ethics
– Corporate culture
– Shareholder culture
– Customer base beliefs
Corporate
beliefs
Company
Ethics
Shareholder
Customer
beliefs
beliefs
• Cost analysis of impacts
– How much ethics can you afford?
Recommendation
International Purchasing
Level I
Level II
Level III
Domestic
Purchasing
Only
International
Purchasing
Only as
Needed
International
Purchasing
as Part of
Sourcing
Strategy
Global Sourcing
Level IV
Global
Sourcing
Strategies
Integrated
Across
Worldwide
Locations
Level V
Global Sourcing
Strategies
Integrated
Across
Worldwide
Locations and
Functional
Groups
“Achieving Excellence in Global Sourcing”, Robert Trent and Robert Monczka
Action Plan
• ACT NOW!
– Define and document corporate position.
• Evolve… Grow…
– Revise and revisit your ethics to remain in
parallel with your corporate, customer, and
shareholder beliefs.
Action Plan
• ”Workers in Contract Factories”
– More detailed
– Outlines compliance requirements
Action Plan
• “Human Rights Production Standards”
– Version 3
– Includes support services
– VERY detailed
• Manages overtime policies, work
participation within management, wages,
worker age, etc…
– Encourages improvements
Conclusion
Questions?