Quality control: Doing the integrity test

In today's increasingly competitive business environment, success often depends on partnering with one's suppliers. Partnering has definite merits in ensuring that the supply chain is seamless. It means two people or companies entering into a relationship that is generally built on trust, mutual benefit and a willingness to share common business goals.

Developing such relationships with suppliers is good business. Supplier integration takes partnering a step further. It involves becoming bound up with the aims, philosophies and objectives of your suppliers, because any adverse effects on their business could reflect poorly on your own.

In recent times we have all read newspaper stories of major high street chains being associated with suppliers who exploit child labour or who exploit women workers against a commonly accepted moral code.

While such companies may not knowingly have bought trainers, cosmetics, clothing or whatever from such unscrupulous suppliers, the fact that they did buy the product, and didn't know the details of the source, seemed to compound the indictment of exploitation.

One of the corporate governance codes of practice — the Turnbull Report — deals with business risk. Business risk is anything that could adversely affect shareholder value, and being associated with 'sweatshop' products certainly can. So identifying the risks that suppliers could bring to your business is now critical to a comprehensive risk audit.

Also important is the consideration of subjects other than financial concerns, such as what would happen if your suppliers went bust.

Supplier integration is a matter for each individual business. But when facilities managers act on behalf of major organisations, a corporate approach to standards and expectations may be required.

The following issues could form the basis of considering your stance to supplier integration:

• health and safety issues
  
• environmental issues
  
• employment policies
  
• product origin
  
• suppliers' supplier audits
  
• emergency preparedness
  
• security and protection measures
  
• public relations procedures.

If the supply contract is a major contribution to your product or service offer then enquiring as to what your supplier does in certain situations could be quite revealing. Here are some steps you should consider taking and questions you should ask before you cement your partnerships.

Health and safety
While health and safety matters are the preserve of the employer (other than those parts which apply to persons in control of premises), the discovery of poor standards at a supplier's premises could be quite devastating to their clients. Remember headlines sell newspapers and people will read and associate a known name with an offence, even if that offence was actually committed by a supplier.

An awareness of your vulnerability to the health and safety standards of your suppliers could make for good business planning. Check out:

• the availability of each of your supplier's health and safety policies
  
• what risk assessments have been done
  
• what procedures are in place for health and safety management
  
• who are deemed to be the supplier's competent persons
  
• what provision the supplier has made for dealing with hazardous chemicals
  
• what emergency plans are in place
  
• what information, instruction and training for staff is in place
  
• the record on enforcement action by the local authority or Health & Safety Executive or fire authority
  
• whether the supplier has had formal statutory notices served or been prosecuted. If so, what lessons have they learned from such experiences and what procedures have they improved
  
• what the accident and incident rate in the factory/unit is and how the supplier minimises risk.

Any number of situations could cause an interruption to business at the supplier's premises, thus leading to interruption of your key supplies. Enforcement action for severe breaches of the law could result in prohibition notices under the Health and Safety at Work etc Act 1974 and this could close down processes, specific areas of the premises/production line or even entire premises for incidents such as release of toxic fumes.

Environmental issues
These are featuring increasingly on the business agenda, and major pollution incidents are often linked to the client for whom they were producing the product, for example paint manufacturers supplying major high street DIY stores.

Key issues to discuss with your suppliers will be their:

• commitment to an environmental policy statement
  
• adoption of an environmental management system
  
• compliance with international and/or European standards such as ISO 1400 or ISO 9000
  
• procedures for waste minimisation
  
• procedures for recycling
  
• pollution controls for, for example, noise or emissions into the atmosphere
  
• waste disposal systems
  
• energy management schemes
  
• water usage and recycling
  
• effluent discharge controls.

Again, any of the above could have adverse affects on the supplier's ability to trade, and this could affect your supply chain.

Employment policies
You might be wondering why a customer should check out their supplier's employment practices. But poor practices can cause adverse publicity, dilute management's time and attention when it comes to perfecting your product, or burden the supplier with costs which in turn will affect their reinvestment in their business.

A major theme park operator was recently prosecuted for employing child labour on shifts of up to eight hours. The newspaper headlines implied that these child labourers were as young as five or six. It was more likely to have been young people who were just below the statutory age because the stories commented that they should have been revising for exams rather than working. Whatever the truth, the damage has been done to the reputation of the theme park.

So, employment issues to check out would be your supplier's:

• employment procedures for young people
  
• equal opportunities policies
  
• racial discrimination policies
  
• disability discrimination policies
  
• sexual harassment policies
  
• policies on bullying in the workplace
  
• Investors in People awards
  
• continuous training programmes
  
• employee consultation and communication.

It is also worth checking product origins — where suppliers source their supplies and what checks they make — and doing supplier audits. Ascertain whether there is a culture of accepting things on face value or whether the supplier physically checks out their own suppliers? This is particularly critical in the food service and food manufacturing industry as poor product quality and safety of ingredients will affect the overall product quality and safety of the trial product.

Emergency preparedness
What will your supplier do if they have an emergency? How well prepared are they to deal with:

• fire/arson
  
• building explosion
  
• major power breakdowns
  
• flood
  
• toxic or harmful gas or substance release
  
• major accident or incident, for example, several fatalities due to building collapse or plant malfunction.

Security and protection measures are high on everyone's agenda at the moment due to the atrocities in America, but they are worthy of further investigation. What procedures does the supplier have for dealing with bomb threats, arson, malicious adulteration of products, sabotage or infectious agents such as anthrax? Some incidents will appear extremely far-fetched and procedures thought to be unnecessary but no-one had really considered the tragic events in New York and Washington, other than in fiction, until 11 September.

Public relations
The most catastrophic business disasters can be mitigated by good public relations. What procedures does the supplier have? Who speaks for the company in disasters? Who might leak the names of the key customers? A disaster recovery programme including PR should have been thought through in advance. Ask your supplier what they would do.

Many of these topics are equally important to both supplier and customer. Supplier integration is about knowing the risk and being prepared. It is about mitigating risk by requiring suppliers to improve critical business procedures.

Obviously not every precaution is necessary in every situation, but sharing a knowledge and understanding between equal partners can only help to ensure that partnerships and integration are a success.