Global Sourcing

1
Global Sourcing

• Impacts of changing global sourcing for Reebok
  and Nike

2
Agenda

• Benefits of Global Sourcing
• Risks / Issues
• Alternatives
• Recommendation
• Action Plans

3
Benefits

• Distribution
• Quality
• Lower cost
• Focus on core competencies
• Diversity of suppliers
• we are manufacturers without the burden of
  plant ownership

4
Benefits

• Overseas
• Manufacturing

• Domestic
• Manufacturing

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5
Benefits

• Achieving Excellence in Global Sourcing, Robert
  Trent and Robert Monczka

6
Risks

• Broader communication
• International economic conditions
• Currency fluctuation
• Exposure to global issues
• Human Rights
• Environmental
• Politics

7
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

8
Issues

• Shareholder vs. Social responsibilities
• Can a company afford ethics?
• Limits supplier options
• Increase cost
• Ability to impose compliance to
  contractors/suppliers

9
Alternatives

• Ignorance is bliss
• its not within our scope to investigate
  allegations of labor violations,
• -a Nike executive
• I dont know that I need to know
• -another Nike executive

10
Alternatives
11
Alternatives

• Memorandum of Understanding
• Created in 1992, adopted in 1993
• Required compliance with all applicable local
  laws
• Adhere to Nikes environmental practices
• Self reported

12
Alternatives

• Human Rights Policy
• Adopted in 1990
• More specific
• Outlines Reeboks position
• Exemplifies company passion
• Regular on-site audits and inspections

13
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

14
Determining Ethics

• Define company ethics
• Corporate culture
• Shareholder culture
• Customer base beliefs
• Cost analysis of impacts
• How much ethics can you afford?

Corporate beliefs
Company Ethics
Shareholder beliefs
Customer beliefs
15
Recommendation

• Achieving Excellence in Global Sourcing, Robert
  Trent and Robert Monczka

16
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.

17
Action Plan

• Workers in Contract Factories
• More detailed
• Outlines compliance requirements

18
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

19
Conclusion
20
Questions?