Jumping the Chain: How Downstream Manufacturers Engage with Deep Suppliers of Conflict Minerals

Abstract

Global manufacturing firms are engaging distant suppliers of critical raw materials to participate in responsible sourcing. Downstream firms are concerned about risks in mineral supply chains of violent conflict, human rights violations, and poor governance, but they are limited in seeing their suppliers. Descriptive data on 323 smelters and refiners of tantalum, tin, tungsten, and gold (the "conflict minerals") were complemented by interviews with downstream firms in the electronics industry. Results provided a narrative of supplier engagement, describing tactics used to identify "deep suppliers" at chokepoints in metals supply and to persuade producers into joining due diligence programs. Top-tier firms collaborate through a standards program to overcame barriers of geography and cultural distance in supply chain management beyond the visible horizon. Curiously, manufacturers do not need line-of-sight transparency to lower-tier suppliers. Rather, top-tier firms are "jumping the chain" to engage directly with "deep suppliers" who may-or may not-be their own actual physical suppliers. The research contributes empirical evidence to understanding multi-tier supply chains, examines how power is exercised by top-tier firms managing suppliers, and provides insights on supply chain transparency. Responsible sourcing, based on due diligence guidance and standards, is becoming expected of companies that are involved in supply chains of raw materials.

Transparency for Multi-Tier Sustainable Supply Chain Management: A Case Study of a Multi-tier Transparency Approach for SSCM in the Automotive Industry

“…In other research [41], Sauer and Seuring focused on the specific SSCM issues in mineral SCs and added to previous approaches for conducting MT-SSCM [22,25,29,33] by proposing a further strategy: the cascaded approach, whereby FCs collaborate with mid-SC actors, who act as a sort of second FC to drive sustainability requirements into the upstream SC. Due to the enormous complexity (involving hundreds and thousands of mid-tier suppliers) downstream FCs have been found to "jump the chain" [51] to engage with key upstream sub-suppliers/chokepoints and extend beyond their "visibility boundary" [31].…”

Current trends in addressing environmental and social risks in mining and mineral supply chains by regulatory and voluntary approaches

“…The mining sector is variably affected by these crosssectoral guidance documents and laws, in particular in cases where downstream supply chain stakeholders formulate expectations in their supplier policies and pass these upwards along the supply chain. While there are generally multiple supply chain tiers placed between downstream OEM manufacturers and upstream actors in the mining sector, some manufacturers have begun to "jump the chain" by directly engaging at the smelter level (Young et al 2019) or by implementing local support projects in mineral-producing countries (e.g., GIZ 2018). These downstream initiatives further increase the mining sector's exposure to both crosssectoral and commodity-specific regulations.…”

Big data analyses for real-time tracking of risks in the mineral raw material markets: implications for improved supply chain risk management

“…It can furthermore help supply chain traceability and transparency and thus facilitate the supervision of responsible production and consumption (Hirata et al 2020 ; Burgwinkel 2016 , Kersten et al 2017 ). Large manufacturers may have 1000 first-tier suppliers, 8000 s-tier suppliers and 30,000 third-tier suppliers (Young et al 2019 , p. 4). BMW, the German car maker, alone has 12,000 suppliers spread out over 70 countries (BMW 2021 ).…”