Hidden Costs Associated with Stakeholders in Supply Management

Wright, Christine M.; Smith, Michael E.; Wright, Brian G.
August 2007
Academy of Management Perspectives;Aug2007, Vol. 21 Issue 3, p64
Academic Journal
Many businesses fail to recognize the strategic importance of sourcing decisions. Companies often focus on the price and quality of goods provided to them, but it is easy to overlook the social and environmental standards of suppliers. Those who do may find themselves on the receiving end of aggressive attacks from a range of stakeholders, from customers and shareholders to the news media. Indeed, the business practices of Georgia Pacific, a hardwood plywood supplier, were at the heart of actions by the Rainforest Action Network aimed at disrupting operations at Home Depot; the practices of tomato growers that supplied Taco Bell restaurants were behind boycotts of the fast food giant; and fishing practices that endangered dolphins were the source of discontent with the tuna industry. Clearly the business practices of key suppliers can readily tarnish a corporate reputation, and the strategic impact—potentially including business disruption, business interruption, and even business failure—of neglecting these perceptions needs to be recognized by present and future business leaders. In order to examine the dynamics of change brought about as a result of negative stakeholder perceptions of supply management practices, we looked at the college and university athletic apparel industry, which between 1996 and 2001 came under scrutiny for dealing with suppliers and supply chains that produced goods in foreign factories with poor working conditions. When negative reactions escalated, the universities became the focus of activities aimed at changing the practices of their suppliers. This conflict was played out in the media, providing a solid approach—through discourse analysis—to investigating the events and reactions on both sides of the conflict. Our findings show that inattention to the practices of an organization's suppliers should serve to caution business leadership. Conversely, we show that a proactive stance toward managing supplier practices can serve to provide for successful resolution of stakeholder concerns regarding an organization's outsourcing.


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