The case for ‘market stewardship’ – a new role for procurement / Going the Extra Mile: The Effects of Paying the Living Wage in Supply Chains at Competitive Markets

Louise Knight

Title The case for ‘market stewardship’ – a new role for procurement

Market concentration can bring about important efficiencies and low prices, yet it is also a source of risk. As became evident in the scramble for scarce medical supplies during the Covid-19 pandemic, overreliance on a single supplier in a market dominated by one or few suppliers exposes purchasers to price gouging, shortages and poor quality. Media reports on government and corporate moves to secure raw material, manufacturing and distribution capacity highlight the need for a market perspective.  This recent experience underlines the need i) pay attention to B2B markets, as well as B2C ii) to look beyond price, to also take account of future market capacity and competitiveness, and broader societal interests, in sourcing decisions, iii) consider the agency of buyers in creating and addressing these problems, and not just the regulators and vendors. Drawing on past and planned research, this seminar makes the case for market stewardship, arguing that ‘big buyers’ – especially from the public and healthcare sectors – should foster market diversity and competitiveness, and discussing some implications.

Louise Knight joined UT at the beginning of 2020 as Full Professor in Public Sector and Healthcare Procurement. She has over 30 years experience in procurement practice and research, first at London Underground, then at CRiSPS (Centre for Research in Strategic Purchasing and Supply) at the University of Bath (UK) School of Management, and most recently in the Engineering Systems and Management Group in Aston University’s School of Engineering and Applied Science (UK).

Viewing procurement as the management of the organization’s external resources, her research and teaching address capacity building and capability development in various levels and across various types of organization, such as public hospitals, municipalities, government agencies and national government departments, always taking a policy and strategy perspective. Her research interests and priorities are aimed at strategic change and ‘business-not-as-usual’, which need to be informed by new thinking and novel methods.

Louise is Co-Editor in Chief of the Journal of Purchasing and Supply Management, an active member of the International Purchasing & Supply Education and Research Association (IPSERA), a Fellow of the Chartered Institute of Procurement and Supply and Senior Fellow of the Higher Education Association (UK).

Patricia Rogetzer

Title: Going the Extra Mile: The Effects of Paying the Living Wage in Supply Chains at Competitive Markets

Paying the living wage has recently become an important way to demonstrate companies’ involvement in corporate social responsibility. We examine the effects of living wage payment in supply chains at competitive markets. We build a game-theoretical model to analytically identify the threshold of the living wage to obtain benefits for supply chain members, consumers, and workers. Focusing on the textile industry, we find that in countries where the living wage standard is low, it is more likely to be paid, whilst in countries where the living standard is high, the living wage is less likely to be paid. In the latter case, it will be paid voluntarily if consumer awareness of the living wage is enhanced. Furthermore, worker welfare decreases if the living wage standard is set too high, because although workers receive the living wage, the piece-rate salary will decrease since the sales quantity is reduced. If the living wage standard is sufficiently low, supply chains, consumers, and workers can collectively benefit from the living wage (win-win situation). Moreover, we find that living wage accredited supply chains are more profitable at more competitive markets. Finally, we find that if supply chains are concerned about corporate social responsibility, voluntarily paying the living wage is possible even if the living wage standard is already high. Encouraging supply chain members to commit to corporate social responsibility activities could therefore induce a voluntary living wage payment.

Patricia Rogetzer finished her doctoral studies in Economics and Social Sciences at Vienna University of Economics and Business (WU) in September 2018, focusing on sustainable supply chains and the circular economy. In October 2018 she joined the chair of Logistics and Supply Chain Management at Technical University of Munich for two years as postdoctoral researcher. Since 1 October 2020, Patricia is Assistant Professor at the IEBIS department of the UT. Her research centers around sustainable supply chain management, dealing with trade-offs regarding economic, environmental and social issues as part of everyday decisions. She studies possibilities to make sustainability an integral part of business models and support companies towards more sustainable decision-making.