John Denim vs Odak Tekstil
Odak Found Guilty of Committing Unethical Behavior
Council Member Breakdown
The Council for this case consisted of four individuals from various backgrounds and expertise. Represented were NGOs, Business Consulting, Communications, and a legal representative.
Case Background
This case involves a dispute brought forth by an unnamed denim mill (John Denim Mill) and Odak Tekstil, a denim importer, regarding the cancellation of orders for various fabrics. Despite initial agreements on price and quantities, the parties failed to reach a resolution when additional discounts were requested, leading to the termination of the partnership and 100,000 meters of unclaimed material.
Complaint:
John Denim Mill, the Supplier, claims they entered into an agreement with Odak Tekstil, the Buyer, to manufacture several hundred yards of fabric at specific prices. The prices included an initial discount to begin the business relationship with Odak. At Odak’s request they also gave further discounts at the supplier’s loss to continue it. However, Odak continuously insisted on lower and lower prices while delaying the shipment of goods.
After several rounds of communication, and attempts by the Supplier to maintain the relationship, Odak (the Buyer) ended communication and said they were no longer interested in doing business with John Denim Mill. While some of the initial order had been lifted by the Buyer, the Supplier claims that 100,000 meters of fabric were unclaimed and eventually had to be sold as deadstock to mitigate further losses.
Dispute:
Odak says they were asking the mill to help them out because they couldn’t move the goods due to changes in the market (lower cotton prices) after the initial agreement was in place. They also believe the mill should have come to them prior to selling the deadstock fabric at a greater loss.
Deliberation Process
The panel worked their way through each of the Eight Ethical Principles to determine if they believed each principle had been part of the business transactions between Odak and the mill.
Honesty and Transparency
Unanimous no. The Council did not feel the purchasing process was fully transparent since it only involved Performa Invoices and emails that sought to change the prices initially agreed upon. There was a high risk of things not being communicated clearly because of the multiple channels of communication and no contractual agreement with binding language.
Empathy
Majority no. No empathy was shown on the side of the Buyer. The Supplier attempted to accommodate the Buyer on multiple occasions.
Promise-Keeping & Trustworthiness
Unanimous no. Supplier kept promises. Buyer did not fully keep promises and placed the communication burden on the Supplier.
Loyalty
Unanimous no. Supplier tried to maintain relationship but no reciprocity from Buyer.
Fairness
50/50. Half felt that no power moves were used but the Supplier was not given the opportunity to negotiate in good faith. The other half felt the mentioning of other issues during the discount discussion and abruptly cutting oW communication was a power play.
Reputation & Morale
Unanimous no. Action was not taken to prevent or correct inappropriate behavior.
Accountability
Unanimous no. No accountability was taken by Buyer. Everything was blamed on market prices.
Respect
Majority no. The Council is aware of a possible language barrier but lack of negotiation and accommodation on the side of the Buyer indicated lack of respect.
Decision
Unanimous decision that Odak Tekstil, the Buyer, showed unethical behavior during the purchasing process.
Reasoning
The Council found many instances where the Eight Ethical Principles were not followed resulting in their decision to declare that unethical behavior was shown.
Their biggest concern was the lack of negotiation and accommodation on the side of the Buyer, Odak Tekstil. The Supplier, John Denim Mill, seemed to “bend over backwards” to accommodate the needs of the Buyer but no reciprocity was shown. The Council acknowledged that business inherently has some uncertainties but felt this was a situation where the problem was the result of external forces and not the fault of the mill. The Council didn’t feel that the sole burden of cost should’ve been placed on the mill. Had the Buyer shown any willingness to negotiate this might have had a diWerent outcome, but the communication was very “take it or leave it”.
The Council acknowledged Odak’s belief that the Supplier should’ve reached out before selling the remaining fabric but did not agree the burden for communication should’ve been place solely on the Supplier when communication had been cut oW by Odak months prior.
Ask
The mill is asking for Odak to pay $100,000 to reimburse them for the amount lost when selling the fabric.
Conclusion:
The buyer sees this situation as “just business” and doesn’t believe that they did anything wrong. At the Ethical Denim Council, we believe this is emblematic of the problem. The way business is currently conducted puts the cost burden solely on the supplier. They alone are asked to absorb the risks and losses of the changing market. In a true “partnership” respect, gains, and losses are shared equally by both sides.
