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Supply Chain Sarbanes-Oxley Corporate Governance for Supply Chain Operations |
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CORE CONCEPTS Internal / External Supply Chain
SUPPLY CHAIN GOVERNANCE
SECURITY & CONTINUITY
LASTING THOUGHTS »» Supply Chain Code Of Conduct
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Supply Chain Code Of Conduct
As part of an organization's corporate governance it should establish a code of conduct which affirms that the organization honors the rules of fair play in regards to its dealings with its competitors, employees, customers, and suppliers. This component of the "tone at the top" as discussed in Control Environment - we are often the recipients of the actions we perpetuate. Thus, if an organization perpetuates fraudulent actions against its competitors, employees, customers, and suppliers, it is likely that the organization will be the recipient of fraudulent actions against it from any source, from the outside or the inside. Unfortunately many organizations fail to honor the rules of fair play in the treatment of suppliers with regard to the assessment of chargebacks - financial penalties for non-compliance with vendor compliance requirements which may require compliance with metrics that the organization could not themselves attain. If the organization cannot uniformly, fairly, and accurately judge, monitor, and enforce vendor compliance mandates across all suppliers, then chargebacks should not be assessed, except perhaps in the most obvious of instances. Many chargeback programs are in contradiction to various provisions of the Uniform Commercial Code, which exists at both the federal and state levels. Yet suppliers are unwilling to challenge their customers out of fear of losing business. Too many chargeback programs assume supplier guilt until proven innocent (sometimes several times over). This stance is a contradiction of a basic premise of United States justice system: innocent until proven guilty. All this forces excessive costs to be borne by both the supplier and the customer, forcing prices up, increasing operations overhead and decreasing shareholder value. The failure of chargeback programs to fairly, uniformly, and accurately assess reasonable financial penalties for non-compliance is, in our opinion, fraud. How is your organization's code of conduct applied to your supply chain? Vendor scorecards and metrics only work if calculated accurately. Are you guilty of misjudging your suppliers? What kind of reflection on your organization's integrity is your vendor compliance chargeback program? And why should you care? |
