Supply Chain Conversation #3: Supply chain labour governance and certification.

conversation-3-_22119259_5e71cc57f3ba272e61ac1c66d01c5d2482cb9abcRCSA’s CEO, Charles Cameron, has been posing a number of questions about supply chains for me, lately. In this series of Supply Chain Conversations, we explore the involvement of recruitment and workforce services firms in supply chain operations.

Our third conversation reveals how certification of workforce services providers, who exercise good stewardship over their service value networks, can contribute to better supply chain labour governance and trigger a collaborative “race to the top” that harnesses the power to convert a supply chain, one link at a time.

CHARLES: RCSA is currently developing a certification program to make it easier to make clean and ethical workforce services buying decisions which, in turn, will force change in the market by ensuring unethical and non-compliant providers don’t win work.  This program incorporates the concept of a ‘service network’, where workforce services providers are part of a ‘service network’ and have to use their control or influence to enhance supply chain labour governance.  Can you explain how this would work?

ANDREW: Certainly. We’ve spoken already about the difference between a supply chain and a service network.

We saw that we can speak of a supply chain as a network for producing, handling and distributing commodities – processed chickens for example.

And we also saw that a service value network is the set of roles and interactions that generate a specific kind of business or economic outcome – for example, getting done what needs to be done at each node in our processed chicken supply chain.

CHARLES: What do you mean by a “node”?

ANDREW: A node is simply a point at which work is performed to complete one link in the chain.

To go back to our processed chicken supply chain, it might be the farm, where the chickens are raised. That’s going to require work. Some of it might be highly skilled veterinary or animal husbandry work; some of it might be farm labour. Then there’s the processing plant, where the animals are slaughtered, processed and packed. That will require work, too. CHICKEN ON HIGHWAYThere might be transport or storage nodes in that supply chain before the chicken reaches its point of sale, which could be a full-service supermarket or a take-away store. We could go on … But you get the idea.

At any one of those points (or nodes) we’re going to find a network of roles that are necessary to get the job done at that point in the chain. And that work will often involve an auxiliary workforce that is assembled and deployed with the assistance of workforce services providers – sourcing agencies, labour-hire firms, contract management companies, workforce contractors and so on.

So, these workforce service value networks are the enablers of supply chain operations, if you like to think of them that way.

CHARLES: How does that understanding help to enhance supply chain labour governance?

ANDREW: Well, whilst it might be impractical for a firm to assure governance of labour practices over the entire length of a commodity supply chain, workforce services providers can, at least, assure good stewardship of their own service networks; because those networks consist of the suppliers with whom they choose to do business.

They exercise that stewardship through having suitable controls in place to assure that workers are not at risk of exploitation within their service networks.

CHARLES: What is meant by a “control” in this context.

ANDREW: Controls are the means by which an organisation assures that its intent to meet certain standards or achieve certain outcomes is being implemented and achieved in order to modify risk.

A workforce services provider’s controls would include its planning and strategies put in place to support those standards. They would include its policies, procedures and practices.  Transparency and probity are also part of the control environment;[i] so too, would the procedures that a workforce services provider uses when deciding whether to do business with a particular supplier in its service network – as well as the measures that it puts in its terms of business to support its intent to meet the standards that it has adopted and the outcomes it is seeking.

CHARLES: And where are these standards found?

ANDREW: So far as the RCSA Certification Program is concerned, they’re found in the RCSA Employment Services Provider Standard, which has been designed specifically for the Program. And they’re supported by independent audit questions and audit processes that can lead to certification against the Standard.

CHARLES: So, it would be possible to certify those workforce services providers, who are exercising good stewardship of their service value networks – in accordance with the Standard?

ANDREW: Yes.

CHARLES: But how does that “good stewardship” permeate down through the layers of a tiered supply or sub-contracting arrangement? For example, we saw from the findings in the Fair Work Ombudsman’s inquiry into the chicken processing supply chains that there were often as many as four and even six layers; and that the contracts between those layers were often only oral.

ANDREW: Well, we start with the view that each certified agency must exercise stewardship over its immediately adjacent suppliers – its first layer, if you like.

If an agency is acquiring workforce services from a supplier, who is not certified and the agency has no adequate controls in place to ensure that the workers, who have come to it via that supplier are not exploited within its service network, then it is unlikely to get certified. That’s because there’s a weakness in the immediately adjacent control environment. An auditor would recognise it as a critical non-conformance.

So then, if you’re a potential client of that network, and you’re only going to acquire workforce services from a certified agency, you’re not going to deal with that agency. The critically weak agency is rejected from the pool of eligible suppliers – and all its sub-contractors and suppliers (or its service networks) are rejected with it.

CHARLES: So, in order to get certified, a supplier in a layered supply arrangement will need to have adequate controls in place that meet the Standard?

ANDREW: Yes. And one way of doing that is to deal with another certified supplier. In this way, the control or influence of certification begins to filter down through the layers.

The basic principle is that supply chain governance starts with good stewardship over the service networks in which agencies participate. The simplicity of that principle allows an agency to remain focussed on exercising stewardship of its own service value network of immediately adjacent suppliers and the workers within that network. That, basically, is the agency’s effective sphere of influence.

So certification can trigger a collaborative “race to the top” by harnessing the power to convert the chain, one link at a time. And, that’s how the RCSA Certification Program works.

Recreation  069

Andrew C. Wood Hon FRCSA (Life)

[i] See HB 254, 3 ed 2005 Governance, Risk Management & Control Assurance. See also ISO Guide 73, 2009 Risk Management Vocabulary.

One thought on “Supply Chain Conversation #3: Supply chain labour governance and certification.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s