Manage the Suppliers That Could Harm Your Brand: Know When to Avoid, Engage, or Drop Them

Key Insights for Managers

As brands conduct audits of factory working conditions in their global supply chains, their goals are twofold: accurate, comprehensive audit results, and an understanding of their factories’ potential to improve. After a decade of scholarship on the topic, authors Jodi Short and Mike Toffel have identified the traits most likely to determine success in these goals. Comprehensive assessments of working conditions have six key audit design elements in common, and six factors predict which factories are most likely to improve their working conditions.

Successful, comprehensive audits share a consistent framework of design elements. To convey a full picture of supplier working conditions, the most precise audits are (1) unannounced, (2) conducted by auditors who are new to the factory, (3) conducted by audit teams which include at least one female auditor, (4) conducted by more highly trained auditors, (5) chosen and paid for by the brands themselves, and (6) conducted on behalf of brands that have aligned the activities of their purchasing and social responsibility teams.

Another set of six factors predict which factories are mostly likely to improve their working conditions between subsequent audits. Most likely to improve are factories that (1) are unionized, (2) have implemented lean management, (3) have adopted quality and environmental management system standards, (4) have avoided piece-rate pay, (5) serve once-tarnished buyers, and (6) have experienced pre-announced audits conducted by more highly trained auditors are.