Ethics of Value Chain Management Techniques

Ethics of Value Chain Management Techniques
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  • 0:00 Ethics & Danger Areas
  • 2:03 Just-In-Time Inventory
  • 3:11 Process Reengineering
  • 4:14 Self-Managed Teams
  • 4:53 Key Ethical Motivators
  • 6:27 Lesson Summary
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Lesson Transcript
Instructor: James Kuhn

Jim has taught adults for more than 20 years and has a Masters Degree in Christian Leadership.

Today's global economy provides opportunities for value chain optimization, but many techniques may also present an ethical dilemma. This lesson provides an overview of the ethical dilemmas and highlights the key danger areas managers may confront.

Ethics & Danger Areas

The globalization of today's economic marketplace provides significant opportunities for optimizing your company's value chain and accompanying processes. However, managers must also be aware that many techniques for improving organizational logistics may also present an ethical dilemma. For example:

  • What if an outsourcing vendor offers to take over your inventory and run it at lower cost than you have today? Sounds great, right? But this move will also require that your company terminate all of the employees who are now working in your warehouse operation, many of whom are your long-term friends or family.
  • What if you could reduce the cost of manufacturing by cutting the number of steps in your quality control process? However, this would result in increased harmful emissions into the environment in your community.
  • What if you can move production of your product to a lower cost country or region, but know that your costs are being reduced because you will be paying wages below a subsistence level?

What do you do now? Such are the real-life issues facing managers today as they seek to stay competitive in an ever-changing marketplace.

Conversely, not all the value chain improvement techniques have such clear ethical implications. An ethical implication is a potential moral or ethical conflict that can result from your actions. This lesson will discuss danger areas present in today's common value chain optimization techniques, and also provide several motivators to encourage positive behavior in value chain teams.

Many value chain optimization techniques may seem straightforward in their approach to efficiency and productivity gains. However, these same programs contain significant ethical implications that must be considered during the exploration and implementation processes. Let's take a look at three common value chain improvements - just-in-time inventory, process reengineering, and self-managed teams - and understand some of the key ethical dangers that might be present.

Just-in-Time Inventory

Just-in-time inventory improvements have existed in various forms for decades. In this technique, companies receive critical parts and supplies right when they are needed for production, rather than storing mass amounts of inventory. The ethical implications to keep in mind when considering this technique include:

  • Shifting of costs of goods to vendors - Often, smaller vendors are not able to bear the load of maintaining inventory for your organization, and this puts pressure on their entire operations, frequently leading to job losses and business failures throughout all of your supply partners.
  • Reduced headcount - Without a large warehouse and accompanying logistics, your organization will require fewer personnel to produce your goods. While this is often the main reason a company makes this shift, ethical leaders will need to balance the cost of efficiency against human needs.
  • Stress/burnout/safety issues - Your organization will see gains in productivity and efficiency through reduced downtime. But keep in mind that this also means fewer breaks, greater demands for increased productivity from fewer employees, and potentially longer hours for remaining staff.

Process Reengineering

Process reengineering involves the redesign of certain production procedures to improve efficiency. These could be as simple as changes to job roles or as radical as an entire manufacturing redesign. However, there is one big ethical implication that is commonly associated with process reengineering: staff impact.

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