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Monday, November 10, 2014

Strategic CSR - Supply chain

The article in the url below indicates opposite approaches to the same problem (tainted food ingredients in the supply chain) by different companies (McDonald's, KFC, and Yum Brands):
"The allegations came in a report from Dragon TV–continuing a pattern of Western companies facing critical scrutiny from Chinese TV stations–which said the Shanghai unit of OSI Group Inc. had been supplying meat that was beyond its sell-by date."
While KFC and Yum Brands promptly dropped the supplier (OSI), McDonald's in China has decided to stick with the firm (at least for now) to try and correct the situation. As commentators in the article note, this may be because it is simply more expedient to try and salvage a known supplier, rather than invest the cost and time to find a new partner firm. Whether by luck or design, however, McDonald's approach is also consistent with what I understand best CSR practice to be in situations like this:
"Anthony Johndrow of the Reputation Institute views McDonald's stance as a thoughtful approach to protecting its reputation. 'I think they're smart in trying to handle this strategically rather than just throwing the supplier under the bus,' he said. Both McDonald's and OSI have offered fulsome apologies and the next step is to take 'tangible, believeable steps' that will allow McDonald's to demonstrate its attention to its supply chain and to hygiene issues, Mr. Johndrow said. The crisis could turn out to be an object lesson, he said: 'There's a new story being told here.'"
For McDonald's, the greater long-term investment might be in re-training OSI to ensure the higher standards now in place are met. Doing so also sends a positive message to McDonald's other suppliers that the firm is more interested in developing meaningful relationships and will not cut-and-run at the first sign of trouble. In this case, continued vigilance will/should also involve regular audits. But, given OSI's apparent contrition, and keeping in mind the value of supporting firms and industries in developing economies by encouraging production capabilities (something that is in everyone's interests, especially  those of McDonald's), it seems to me that giving OSI the opportunity to correct its serious mistakes is the right response at this stage.
Take care
David Chandler & Bill Werther
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McDonald's Takes New Approach to China Food Scare
By Nicholas Elliott
July 28, 2014
The Wall Street Journal
Late Edition – Final