Part A

Question 1

a) Explain how the purchasing manager assists the suppliers to upgrade the labour, health and safety standards. (20 marks)

b) Apart from the dimensions of labour and health & safety stated in this case study, suggest another dimension of purchasing social responsibility. (5 marks)

Question 2

Justify three reasons for the procurement manager's active involvement in purchasing social responsibility. (15 marks)

Read the following case study and answer ALL the following questions: Purchasing Social Responsibility in Penang Daniel Ng has been working 6 years as a procurement manager of an American electronics contract manufacturer located in Bayan Lepas, Penang. The company is a member of Electronic Industry Citizen Coalition (EICC), the world's largest industry coalition dedicated to electronics supply chain responsibility. Due to the company's membership in EICC and customer requirements, Daniel has been involved in purchasing social responsibility since five years ago. In fact, the supplier code of conduct published in the corporate website was adapted from EICC code. Daniel is actively involved in purchasing social responsibility by saying that: 'We own supplier base and thus we are responsible for their compliance in social responsibility. My company is very up to date on EICC compliance'. Pertaining to programmes related to purchasing social responsibility, Daniel audits suppliers' labour and health & safety with standard template of 23 questions. He conducts supplier audits on minimum wage, working hours, child labour, forced labour, non discrimination, migrant workers dormitories, occupational safety, occupational injury & illness, industrial hygiene, physically demanding work, protective equipment and emergency preparedness. He keeps audit records to ensure that he does not miss out any suppliers in his yearly audits. Besides supplier audits, he incorporates labour and health & safety in his supplier selection. He would not select suppliers with non-compliance on labour and health & safety. As an incentive, he awards "preferred supplier' to suppliers with high compliance on labour and health & safety. Daniel has yet to conduct official supplier training but suppliers are expected to study the labour requirement from his company's website. While implementing purchasing social responsibility, Daniel encountered suppliers' labour violations of chemical spill, disposal of chemical in non-approved methods and workers not wearing goggles while doing welding. He is cautious on supplier violations but he manages them by issuing either minor non-compliance reports or major non-compliance reports. Suppliers are given deadlines to come out with their corrective actions. However, he does not terminate suppliers due to labour violations. It is because not many suppliers in Malaysia are capable of meeting his labour requirement. He does not encounter major barriers while implementing PSR activities. The reason being his company manufactures high technology products for well established original equipment manufacturers (OEM). Hence, most of Daniel's suppliers are established companies or small medium enterprises (SMEs), which have received many SME awards. In addition, a lot of his suppliers are selected based on his customers' supplier list. Thus, a lot of suppliers are familiar with the requirements of labour and health & safety. Daniel reports directly to the chief procurement officer at corporate headquarters in Texas, the United States but dotted line reporting to the local managing director in Penang. Due to this, the local managing director does not play an important role in purchasing social responsibility. However, the chief procurement officer supports Daniel with the directions, guidelines, manpower and budget to perform purchasing social responsibility. End of Case study