Diffusion of labor standards through supplier–subcontractor networks: An agent‐based model

Abstract

Subcontracting represents a popular business model in supply chains across industries. In the case of hidden subcontracting, subcontractors are beyond the visible horizon of the (focal) buying firm. Hence, buyers must rely on a cascading effect for diffusing practices such as compliance with labor standards through their supply networks. Motivated by the case of the Bangladeshi garment industry, we constructed an agent‐based model with buyers, first‐tier suppliers, and subcontractors as agents in a supply network in order to study the impact of network characteristics on the diffusion of labor standards. Our model followed a power‐based diffusion rule that emphasized the coercive power that buyers use to pressure their suppliers into adopting labor standards. This rule is a key underlying assumption of compliance‐based supplier management. Hypotheses regarding power asymmetries through centrality and density of specific network components, as well as structural elements of the network, such as complexity and distance, were tested for different industry scenarios. Our analysis demonstrated that network asymmetries have ample negative effects on the adoption of labor standards, whereas complexity plays a minor role. Moreover, the impact of the tested structural determinants for sustainability diffusion was found to be contingent on specific industry types in the garment industry. This paper discusses its findings in light of previous research on subcontracting and multitier supply chain management. Among others, we highlight how subcontracting increases horizontal complexity at each supply chain tier, and how intermediaries such as sustainability nexus suppliers may crucially affect the adoption of labor standards within industries.

The hidden side of sustainable operations and supply chain management: unanticipated outcomes, trade-offs and tensions

“…Modeling and simulation techniques based on empirical data, such as system dynamics or agent-based modeling, may help complementing findings from qualitative and quantitative empirical research through a distinct systems perspective that acknowledges for example a wide range of actors, temporal dynamics or nonlinear relationships between variables. Modeling techniques may thus facilitate refuting, corroborating, or refining findings or theory from empirical research through methodological triangulation (Gold et al, 2020). Simon (1962) defined limitations in knowledge that are imposed by complexity as bounded rationality, and as a result, decisions are often made, according to Knight (1921), on the bases of opinion and estimate instead of scientific knowledge (Quadrant-II).…”

Additive manufacturing in the apparel supply chain — impact on supply chain governance and social sustainability

“…The governance structures that define global supply chains largely influence the sustainability conditions therein (Formentini and Taticchi, 2016;Vurro et al, 2009). The prevalence of outsourcing within the mass apparel industry has significantly decreased the amount of control that retail firms possess over the production practices occurring in the supply chains of their goods (Gimenez and Tachizawa, 2012;Gold et al, 2020;Park-Poaps and Rees, 2010). Accordingly, unsupervised but "captive" suppliers who are subjected to strict demands for product cost, timeliness of delivery, and flexible production capacities often disregard health and safety standards in their factories in order to meet the customer requirements enforced on them (Huq et al, 2014;Vurro et al, 2009).…”

“…In cases where AM implementation by the primary apparel producers decreases throughput times, a greater share of these orders may be completed by the suppliers themselves, reducing subcontracting in the industry. Subcontracting has been established as one factor contributing to social-sustainability concerns in the global apparel industry (Gold et al, 2020;Huq et al, 2016). On the one hand reducing the need for apparel producers to subcontract parts of their orders is likely to result in job losses at the subcontractor factoryhence result in negative social sustainability consequences.…”

Recommending blue ocean technologies for subcontractors: A framework based on business reports of prime contractors and patents

“…However, subcontractors cannot readily engage in technology development because the prosperity and growth of their businesses directly depend on the bid opportunities provided by prime contractors [ 15 ]. In fact, subcontractors and their prime contractors are asymmetrical in power relations, and prime contractors do not have to pay close attention to the growth of their subcontractors [ 16 , 17 ]. Subcontractors typically take no initiative to learn new technologies and tend to depend permanently on their prime contractors, without deepening their technology base [ 18 ].…”