Monitoring Global Supply Chains

Key Insights for Managers

Firms often rely on private-sector social auditors to assess the working conditions of their global suppliers. But how accurate are assessments of the auditors that conduct these audits? This paper from Jodi L. Short, Michael W. Toffel, and Andrea R. Hugill identifies several characteristics of audit programs and auditors that result in less comprehensive—and thus lower quality— audits. Based on those findings, managers of branded companies and audit firms can adopt practices that result in higher quality audits that more comprehensively identify working condition problems in global supply chain factories. These findings point to the benefits of avoiding financial conflicts of interest, to engaging in auditor rotation, and to paying attention to the characteristics of the particular auditors who are assigned to assess your factory. In particular, more comprehensive audits result when audits are paid for by the brand instead of the factory, when the audit team is new to the factory, when at least one woman is on the audit team, and when the auditors are more experienced and have more training. 

These results are based on regression analysis of nearly 17,000 factory audits of almost 6,000 global supply chain factories conducted by one major social auditing company during 2004-2009. The audited factories spanned a range of industries, but most produced garments, accessories, electronics, and toys. These results suggest that, in addition to carefully selecting audit firms, managers should also pay close attention to the assignment of individual auditors to factory audits to enhance the quality of their assessments.

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