An Analysis of Risk Associated with Sourcing Scandals

Open Access
Swank, Jesse Robins
Area of Honors:
Supply Chain and Information Systems
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Saurabh Bansal, Thesis Supervisor
  • John C Spychalski, Honors Advisor
  • Sourcing
  • Scandal
  • Supply Chain
Ethical sourcing scandals have created detrimental consequences and challenges for companies over the past decade. When these scandals arise, companies are exposed in varying degrees to supply disruption, brand detriment, and/or government intervention. Although great progress has been made in recent years regarding supplier auditing, to understand the true nature of the risk posed to supply chains one must understand what strategic factors lead to losses at the bottom line. Outlined in this paper are a series of four case studies, in which an industrial disaster is described, key buyers are identified, and the factors that did or did not lead to financial loss are inferred. As a result, this paper goes beyond confirming the negative public relations that accompany such events to identifying specific factors that lead to financial losses for impacted businesses. Additionally, there are several findings outlined in this thesis that include, but are not limited to, a higher comparative loss experienced by European companies over American companies, and greater fiscal damage from news generated by lawsuits. Overall, these sweatshop scandals rarely occur for companies are currently quite effective at auditing their suppliers and are continuously improving best practices for responsible sourcing programs.