Creating the Supplier Code of Conduct
On this episode of Unspun, Arjen Laan the CEO and one of three partners of Pactics sits down with Catherine, Danielle, and Lauren to discuss the manufacturer’s approach to partnerships and the shortcomings of traditional supplier-buyer relationships.
Originally from Amsterdam, Arjen was trained as a nurse and spent most of his career working for various NGOs (including Doctors without Borders) and nonprofits in sectors unrelated to manufacturing. He first moved to Siem Reap, Cambodia less than a decade ago for a job with a Dutch NGO before becoming the CBO of Angkor Hospital for Children. It was only about five years ago that the founder and President of Pactics Piet Holten approached him with the opportunity to join the team. As a newcomer to the space, Arjen’s take on ‘business as usual’ in supply chain management is a refreshing perspective for the social compliance industry to take into consideration.
Collaborative and Values-Aligned Partnerships
Pactics is a manufacturer based in Siem Reap, Cambodia. They formerly produced cleaning cloths and pouches for the eyewear industry, and have recently diversified their portfolio into the bags and luggage industry. Pactics emphasizes the importance of collaborative partnerships in finding brands to work with, specifically ones that see suppliers as an extension of their brand. They work with brands to provide additional services and solutions that benefit all parties involved.
“WHY ARE SUPPLIERS SQUEEZED? BECAUSE THE PAYMENTS AND RISK ARE COMPLETELY ON THE SUPPLIER SIDE.”
Arjen has seen two main factors dictate supplier-brand relationships: size and ownership. These relationships already tend to favor brands, and the larger the brand the more buying power they have. Arjen also notes that family-owned or private brands often take a long-term approach, whereas listed companies have different obligations that might force them to focus on the short-term. Companies with shareholders to answer to typically seek ways to save costs for the immediate quarter.
Shortcomings of Audits
“HOW DO [YOU] KNOW WHEN YOU’RE IN AN OFFICE IN [...] HONG KONG, MICHIGAN, NEW YORK OR LONDON, IT DOESN’T MATTER. HOW THE HELL CAN YOU KNOW WHAT IS GOOD FOR THE PEOPLE HERE IN SIEM REAP, IN CAMBODIA? THEY HAVE NO CLUE – SORRY. I’VE SEEN TOO MUCH OF THE WORLD TO BELIEVE IN THAT.”
Pactics spends substantial time and money on audits and like for many manufacturers today audit fatigue is a pertinent issue – which can be the result of duplicative monitoring from multiple brands with unnecessarily disparate remediation pathways. Arjen acknowledges that there is a purpose behind audits and the potential for them to act as a checkpoint in a supplier’s operations. However, the way the system currently operates is prescriptive, functions more as box-ticking and risk mitigation, and does not address the ways in which brands contribute to supply chain dysfunction (specifically as it relates to financial risk and payment terms).
Arjen is flipping the narrative and starting to integrate financial requirements for his clients into contracts – a long overdue and crucial part of the equation for equitable partnerships in the supplier-buyer relationship. These contracts include financial commitments from brands like committing to pay for at least the material requirements of their forecast, sharing the costs of unforeseeable supply chain disruptions, and better payment terms. For Arjen, true partnership means sharing the burden of financial risk and this is a step in that direction.
To learn more about Arjen’s experiences at Pactics and what he hopes for the future of supplier-buyer relationships, tune in to the latest episode of Unspun.
*Special Note from our Team: A cherished intern from Population will be headed to Cambodia to work with Arjen and Pactics on their Supplier Code of Conduct in early 2022. Stay tuned for more updates!