Stop Auditing! It is Time for a Paradigm Shift in Measuring and Improving Supplier Sustainability
Tarkan Tan, School of Industrial Engineering, Eindhoven University of Technology
Traditional auditing has been common practice for multinational companies to monitor their suppliers against sustainability violations and enforce them to comply with their code-of-conduct. However, supplier assessments driven by third-party auditors are often biased due to conflict of interests between the auditors and suppliers. In this paper, we offer a paradigm shift from traditional monitoring-based auditing to a proactive improvement-based supplier assessment where collaborative relationships and supplier improvement is prioritized rather than merely policing and eliminating suppliers. We advocate for supplier self-assessments combined with on-site visits conducted by the buyer and propose a conceptual framework that unifies prediction of suppliers' future sustainability levels and improvement potentials based on suppliers' characteristics so that supplier specific sustainability improvement plans can then be generated by taking into account available resources of both the buyer and the supplier. We contribute to the data-driven research on sustainability practices in developing countries and demonstrate our framework with the results obtained from a case study at Philips. Supplier assessment data collected by Philips over the past years is analyzed by our generic framework making use of analytics techniques. In this case study, the buyer's assessment frequency, quality certification of suppliers, and the facilities existing at the supplier site turn out to be the most influential variables on suppliers' sustainability levels. The case is enriched by showing that the buyer's involvement in sustainability activities of the suppliers can be a game changer to escalate sustainability improvement. Our study paves the way to transform traditional auditing towards a self-assessment based supplier evaluation framework unifying sustainability measurement, prediction, and improvement in supply chains.
Tarkan Tan is an associate professor in the School of Industrial Engineering at Eindhoven University of Technology (TU/e). He received his Ph.D. from the Middle East Technical University, Ankara, Turkey (2002). He spent one year at Columbia University, New York, as a Fulbright scholar, and he has spent academic terms at the University of California, Los Angeles and the University of Sydney Business School as a visiting scholar. He has served as the director of the Operations Management and Logistics (OML) MSc program of TU/e between 2014-2020, as an executive board member of the European Supply Chain Forum, and is currently a board member of the BETA Research School for Operations Management and Logistics. Dr. Tan's research interests include inventory theory, capacity management, spare parts management, and supply chain management with a particular focus on sustainability. Dr. Tan has been collaborating intensively with the industry mainly through his students and postdoctoral research fellows, and has acquired funds for several projects with the industry. He has published articles in academic journals such as Manufacturing & Service Operations Management, Production and Operations Management, IISE Transactions, and Transportation Science, and co-edited a book entitled “Sustainable Supply Chains: A Research-based Textbook on Operations and Strategy”.
Friday, December 4, 2020, 4.00 pm - Zoom Meeting