Investigating the Ethics of Outsourcing

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In order to keep up with a booming business, some business owners might start to look in to the practice of outsourcing. While outsourcing indeed can be a great way to reduce costs, there are many ethical concerns which any business owner considering the method should consider. This article covers some key ethical concerns involved with outsourcing and provides tips on how to navigate them and ensure best practices accordingly.

What are the Ethical Concerns of Outsourcing?

The number one danger of outsourcing today is that it can quickly become unethical. As businesses grow and expand internationally, there is often the temptation to seek out the cheapest option without considering fully the ethical implications of doing so.

For example, there is a disturbing yet increasingly commonplace trend, where outsourcers pay a very low salary to a team of providers who do the bulk of their work for them, and then the business pockets the difference.

This is what we have seen in the case of sweat shops – large production factories which powerful companies have been known to use for cheap and often illegal labour. For example, Nike famously had to overcome image issues in the late 1990s when it first detached itself from “sweat shop” criticism, but then advocated higher standards when massive public boycotts hurt the company.

It is extremely important that if you decide to outsource as a company that you avoid joining the “race to the bottom.” Below, we provide a few tips on how to ensure your outsourcing considers ethical concerns and how your business can resolve the dilemmas.

How to Avoid Ethical Dilemmas

If you decide to outsource, whether internationally or even domestically, there are a few ways you can find the balance between quality processes and affordability.

One way is to hire representatives in each of the outsourcing location. By doing so, you can have your representative check up on the ethical standards like the working conditions of the employees in each location regularly. Have your representatives conduct monthly reports on everything from the working conditions to employee wages, and that way you can make any adjustments necessary if things aren’t up to scratch.

Ensure that your approach to these reports is thorough – go beyond formal scheduled, clipboard-based site visits. Instil an acceptance from your key suppliers that you may audit their business (physically or remotely) unannounced and without warning. This will encourage those who run the facilities to maintain ethical standards at all times.

Consider also using social media to communicate directly with staff employed by your tier one and sub-tier suppliers. For example, Adidas is encouraging workers at certain Asian suppliers to anonymously share possible grievances directly with Adidas via text.

Lastly, a great method for avoiding ethical dilemmas when outsourcing is to make sure you do your research before you begin the process. Learn from industry case studies in applying proactive, dynamic supplier vetting and auditing of your suppliers and your suppliers’ vendors.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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