Tuesday, August 17, 2010

Ethics, Integrity and the Supply Chain

Apple is probably one of the most admired technology companies on the planet. They continue to deliver eye-popping financial results with the introduction of the highly innovative products that define new market segments. When a company such as this occasionally falters, it is always interesting (and fun) to study and learn from their mistakes.

Recently, one of Apple's former Supply Chain Managers, Paul Shin Devine, was arrested for accepting bribes and kickbacks totaling $1M USD from Apple suppliers. He allegedly provided confidential information that enabled them to win business from Apple. Many in the media have already ostracized Mr. Devine. Given that the system of law presumes innocence until guilt is proven, I will not speculate on the guilt of his alleged crime.

However, this incident should serve to remind us of the importance of ethics in the Supply Chain. When a company, such as Apple, with a near fanatic obsession to protect its trade secrets is susceptible to this type of breach, we should all wonder how our company is doing in managing the ethical integrity of its Supply Chain.

Separation of duties has always been one way to deal with this tricky issue. However, during the current recession, many firms have had to slim employee ranks to reduce cost and stay completive. The expense of monitoring and preventing employee dishonesty has been prioritized over the potential risk. This case reminds us that the cost of having a bad apple (pun intended) in the organization can be very expensive. Not only does it lead to higher costs, but the damage to the company's reputation will have a negative impact to those suppliers that compete honestly and act as good corporate partners.

Apple should be applauded for bringing the issue to the forefront. Many companies sweep the problem under the rug and those employees go on to commit the same crimes in other organizations. Apple did not do that. It is unlikely Mr. Devine will find professional employment any time soon.

Supply Chain organizations should learn from Apple's experience. At the very least, increasing the organizations awareness of unusual activity may help prevent similar activities in your company. Stay vigilant!

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