How Plant Disasters Will Change Resource Management
The April 2013 collapse of the Rana Plaza near Bangladesh’s capital that killed more than 1100 factory workers spurred outrage worldwide toward the many large retail brands that source products from the region. When labor rights groups came together in May to address the wrong, asking retailers to sign the Accord on Fire and Building Safety in Bangladesh, at least 14 major North American retailers said no.
But the story – and the outrage – didn’t go away. Many of those naysayers have since changed their tune, and have committed to increase safety investment in the region.
In the court of public opinion, consumers are increasingly intolerant of companies that are associated with harming people’s quality of life around the world. We can all think of examples. Apple continues to struggle against global outcry over worker suicides, violence, and accusations of child labor at the Foxconn and Pegatron facilities in Taipei that produce iPhones. Meanwhile, oil giant BP’s stock price remains far below where it was prior to the 2010 Gulf of Mexico disaster.
The Definition of Resource Management is Expanding
How a company manages its suppliers and processes responsibly around the globe is becoming a major determinant of brand value, especially as more manufacturing moves offshore. This isn’t just about getting the best price on screws anymore. In the research that my colleague Polly Traylor is doing so far, we’re finding that companies are looking at four new ways of managing their resources:
- Predictive business. One of the reasons that conditions for workers suffer in manufacturing plants is because plant managers often don’t know until the last minute about a late arrival of components. They compensate for that the old fashioned way: squeezing costs to cover for inefficient production. That leads to low-quality facilities, low pay, and longer hours. Front-line workers need to be able to continuously check on status of parts and deliverables. Companies need better data and analytics for predicting demand and measuring supplier performance. Online fashion retailer Gilt Groupe is getting there. It uses shopping and order data to make weekly predictions of customer preferences and shares that data with suppliers.
- Innovate through the chain. Instead of always focusing on costs, companies should be seeing how they can use their global networks of suppliers and partners to create something new. Innovation requires that product development teams work with supply chain teams on component selection, which in turn can avoid potential disruptions at product launch.
- Rethink sustainability. Sustainability used to be about doing good and then talking about it like it’s a marketing channel. Today, sustainability is much more important to strategy. For example, some companies are transforming their businesses to align with sustainable efforts. Interface offers its FLOR line carpet tile system as a full life cycle service, maintaining the carpet from implementation to replacing and recycling at the end of use. This innovative business model drives significant brand loyalty and thus follow-up sales.
- Develop the intangibles. Companies are exploring how to maximize intellectual capital, employee knowledge and partner relationships to improve supply chains and generate new ideas. This ultimately requires getting out of the day-to-day operations mindset and holding separate forums to discuss best practices and results, says Chris Trimble, adjunct professor at Dartmouth University and author of several books on innovation.
How are you rethinking how you manage resources?