Supply chain disruptions frequently result in a direct financial hit for businesses, but the damage a disruption can inflict on an organization's reputation can have much longer term consequences.
Global sourcing strategies such as just-in-time inventory, competitive wages and cheap raw materials also can pose hard-to-quantify risks from second- and third-tier suppliers that could subject businesses to Foreign Corrupt Practices Act penalties, environmental violations and regulatory actions as well as reputational damage, experts say.
A recent example is the November fire at a Bangladesh factory that killed more than 100 garment workers, many of whom reportedly were locked in the building. The factory was making clothing for Wal-Mart Stores Inc., Sears Holdings Corp. and The Walt Disney Co., among others.
In 2011, Wal-Mart audited more than 9,000 factories and the factory in Bangladesh was not authorized to produce merchandise for the Bentonville, Ark.-based retailer due to safety standards. However, a supplier reportedly continued to subcontract work with the Bangladesh factory.
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