Case Study on Ethical Dilemma in Business: Ethical Decision-Making in Supply Chain Management

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Case: ABC Manufacturing, a large manufacturing company based in a developed country, has a complex global supply chain. The company sources raw materials from suppliers in developing countries. One of their major suppliers, XYZ Suppliers, in a developing country, has been a reliable business partner for many years.

However, recently, media reports and NGO investigations revealed that XYZ Suppliers are involved in forced labor practices and child exploitation in their factories. The reports also mentioned human rights violations and poor working conditions for their employees. ABC Manufacturing was deeply shocked and concerned about these reports, as human rights violations and forced labor practices contradict the ethical values upheld by the company.

Ethical Dilemma:
ABC Manufacturing is faced with a serious ethical dilemma in dealing with the reports of forced labor practices and human rights violations by their supplier, XYZ Suppliers. The decisions taken by ABC Manufacturing have significant ethical and operational impacts:

1. Terminating Business Relationship with XYZ Suppliers:
 — This option involves taking direct action to disengage from a supplier proven to be violating human rights and engaging in forced labor practices.
 — However, terminating the business relationship with XYZ Suppliers can impact ABC Manufacturing’s supply chain, causing instability, production delays, and increased costs.

2. Implementing Rigorous Corrective Action and Extensive Auditing:
 — ABC Manufacturing may decide to give XYZ Suppliers an opportunity to rectify their labor practices by implementing strict corrective actions and conducting extensive auditing to ensure compliance with desired labor and human rights standards.
 — However, this action requires significant resources and does not guarantee sustainable improvements.

3. Seeking Alternative Suppliers:
 — ABC Manufacturing can seek alternative suppliers who align more closely with the company’s ethical values and have a positive track record in labor practices and human rights.
 — However, searching for and building relationships with new suppliers takes time and effort and may impact supply continuity and incur additional costs.

Ethical Decision Making:
ABC Manufacturing must consider various ethical, social, and operational factors in making the right decision:

1. Consider Company’s Ethical Values: The company must review its firmly held ethical values and ensure that the decision made aligns with these values.

2. Engage Stakeholders: The company should communicate with stakeholders such as employees, customers, investors, and the community to gather input and support in making ethical decisions.

3. Prioritize Human Rights and Decent Working Conditions: The company must prioritize the protection of human rights and create safe and decent working conditions for employees within its supply chain.

4. Assess Operational Impact: The company must consider the impact of each option on its supply chain, operations, and finances.

5. Act within the Law: The company must ensure that the actions taken fall within the boundaries of applicable laws and regulations.

Conclusion:
In this case study, ABC Manufacturing must make ethical decisions that align with the company’s values and prioritize human rights and the welfare of employees within its supply chain. Making the right decision will help the company maintain its ethical reputation and ensure the long-term sustainability of its operations.