In 2013, the company implemented a new safety assessment tool (SAT) with a few of their key suppliers. This tool has the following functions:
Provides a way to measure the performance of an organizations safety management system,
highlights gaps in the system,
provides guidance on implementing improvement opportunities
Allow companies to benchmark against best practice.
Since 2013, many suppliers have begun to apply the SAT in their own operations.
It focuses mainly on safety management in the arrears of Safety systems and process, Safety awareness, Safety performance, Plant condition and Return to work.
CASE TWO: MC DONALDS
The McDonald's is one of largest chain of fast food restaurants in the world. In an effort to promote environmental best practices within its suppliers, the Company has partnered with the suppliers to develop tools that help them track their environmental performance, identify areas of strength and improve on the arrears of weakness.
They have a web based environmental score card that enables supplier to measure
Greenhouse gas emission,
Waste production and disposal
The company constantly updates their Environmental Scorecard to provide better look into the suppliers environmental performance and provide an opportunity to share with other suppliers.
They have a Suppliers Code of Conduct that sets clear guidelines on the companys expectations from their suppliers and how suppliers can meet these expectations.
The Code gives their expectations with regards to:
Every supplier is required to sign the Code. The environmental terms and conditions imposed on their suppliers are:
Maximize water use efficiencies and eliminate the release of wastes and by-products into the environment via water;
Minimize the release of harmful by-products into the atmosphere;
Maximize energy use efficiency and use ecologically sustainable renewable sources when feasible;
Minimize waste production, maximize recycling, and ensure proper handling and disposal of solid waste;
Maintain soil health by controlling erosion and improving the structure and fertility;
Preserve natural habitats for native species and protection of biodiversity; and
Minimize the use of chemical pest management inputs that impact human, animal, and environmental health.
They have an event named The McDonalds Best of Sustainable Supply this is one way we honour leadership among their r suppliers and share best practices.
Are there any environmental and social terms and conditions imposed on your two companies omitted? Discuss what these missing terms and conditions are and why you think it is of importance.
Mc Donalds, in their sustainability report (Suppliers agreement/ Terms and conditions) have exhaustively covered the environmental and social terms and conditions.
Toyota, on the other hand should have included -Responsible Material procurement as a condition to its suppliers.
Toyota Suppliers need to ensure that they obtain raw materials with care to avoid the purchase of materials which have been obtained unlawfully. E.g. Minerals originating from war torn countries that directly or indirectly contributes to the financing of armed groups. All materials used should be in line international treaties and protocols and local laws and regulations.
Given that the nature of the raw materials that their suppliers use are mainly from minerals, the current situation in the world is that most mineral rich countries are war torn. Purchase of the minerals without the necessary due diligence would mean that that are indirectly involved in financing crime.
By examining the two companys sustainability reports, identify and discuss social and environmental costs that are supplier related? In addition suggest some possible supplier related costs that are not reflected in the reports.
Common supplier cost for both companies are the costs of supplier selection and training to ensure that they comply with the set down rules and regulation.
The supplier related social and environmental cost in the case of Mac Donalds is mainly the cost of monitoring and evaluating the suppliers work environment in terms of Human and animal rights where applicable, Workplace environment, Environmental management , Business integrity. Supplier costs in this case includes the health aspect of the produce, this would include vaccination of the animals and pest management for the plants. McDonalds (MCD) is very sensitive to any changes in price levels, be it food, labor, or rents. McDonalds purchases food commodities such as beef, poultry, fish, potatoes, dairy products, and other items from thousands of suppliers. All this costs are eventually passed down by the supplier.
How do the two companies verify compliance is met by their suppliers? In answering this question discuss what action is taken by the companies if a supplier(s) fail to comply with terms and conditions.
Both companies, in their supplier selection use the environmental criteria, i.e., environmental management systems for preventing and controlling pollution (such as emissions, effluents, and waste), resource consumption (energy, water, and minerals), recycling, and animal rights. Macdonald uses the score card known as the Global Suppliers performance index. This measure supplier environmental performance for water, waste, energy and emissions related to the manufacture of McDonalds products. Reporting is conducted quarterly. Ninety-five percent of their suppliers have signed our Code of Conduct for Suppliers, Signing the Code also represents a commitment. To ensure compliance, they regularly track and assess performance with on-site audits conducted by third-party auditors, with frequency based on the sites level of risk.
All Toyota suppliers on the other hand are required to comply with the (Green Purchase Guidelines) GPG by signing documents that show their acceptance of the same. They also require suppliers to demonstrate certification to environmental management system ISO14001 in addition to following the GPG
Noncompliance with the terms and conditions results to termination of the suppliers contract. In the event that the supplier later meets the terms and conditions, then they will have to make a fresh application for consideration.
Langfield, S, Thorne, H., 1998. Management Accounting: Information for Creating and Managing Value.
Hutchins, M, & Sutherland, J 2008, An exploration of measures of social sustainability and their application to supply chain decisions, Journal of Cleaner Production, vol. 16, no. 15, pp. 16881698.
Harrington, H., 1997, Buying Better: Strategic Sourcing Can Improve Suppliers' Productivity, Component and Product Qualityand Improve the Bottom Line.
Enarsson, L 1998 Evaluation of suppliers: how to consider the environment, International Journal of Physical Distribution and Logistics Management, vol. 28, no. 1, pp. 517.
Elkington, J. 1994. Towards the sustainable corporation: Win-win-win business strategies for sustainable development, vol. 36, no.2, pp. 90100.
Edwards, H. 1987, World Commission on Environment and Development WCED: Our Common Future, New York.
Sustainability, viewed 25 may 2015,<HYPERLINK "http://www.aboutmcdonalds.com/mcd/sustainability.html"http://www.aboutmcdonalds.com/mcd/sustainability.html>
Sustainability, viewed 25 may 2015,< http://www.toyota.com.au/toyota/sustainability>..
Supplier Relations, viewed 25 May 2015, < http://www.referenceforbusiness.com/small/Sm-Z/Supplier-Relations.html#ixzz3b9mhJET2>
Major operations costs, viewed 25 may 2015, <http://marketrealist.com/2014/07/must-know-mcdonalds-major-operation-costs/>
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