Supply Chain Matters calls attention to what we would characterize as a rather disturbing account of the state of hiring practices in the lower tiers of high tech and consumer electronics supply chains. It is yet another reminder of the existing gaps in social responsibility practices in certain industry global supply chains.

The Bloomberg Businessweek article, An iPhone Tester Caught in Apple’s Supply Chain penned by Cam Simpson, paints a disturbing web of subagent migrant labor brokers who feed off the high-tech industry’s culture of excessive demands for high-volume production ramp-up by locating large numbers of workers and charging these workers excessive broker fees. A quote from the article states: “Companies tap an informal, largely unregulated and transnational network of thousands of recruiters. They fan out, often hiring subrecruiters, into the farm fields and impoverished cities of Indonesia, Cambodia, Myanmar, Vietnam and even into the Himalayas in Nepal. The positions they’re trying to fill are so coveted that they’re not merely offered, they’re sold.”

The article itself tells the story of a migrant farmer in Nepal who was recruited to work at a Flextronics contract manufacturing factory south of Kuala Lumpur in Malaysia. According to the article this worker was compelled to pay $1000 in broker retention fees just for the opportunity to interview and work at a contract manufacturing facility.  A recruited worker’s passport is retained by the employer to insure the worker does not flee and brokers tell recruited workers never to reveal the arrangements in the fear of being charged and punished.

The article reports that in 2008, Apple discovered in its factory audits that worker passport were being confiscated, and that this practice smacks of bonded labor or a modern day form of indentured servitude. According to Bloomberg, last year, Apple’s own audits uncovered up to $6.4 million in fees paid by workers beyond prescribed limits, compared with $6.7 million paid in the previous combined four years.  That obviously points to a growing and disturbing pattern, one that can no longer be swept under the rug as an unspoken or tolerated state of affairs.

Bloomberg further reports that in response to its reporting, Flextronics has indicated that it has commissioned an outside group to conduct forensic audits on labor fees paid by temporary workers. The company further states that it will reimburse those employees that have been charged excessive fees by labor agencies.

In the article, a spokesperson for Apple is quoted as indicating that they were the first in the industry in uncovering and preventing abuse of migrant workers, dating back to at least 2008, and that Apple continues to aggressively investigate any claims of bonded labor. The article also states that the subject Flextronics facility is no longer in Apple’s supply chain.

In September of 2012, this author penned a guest blog commentary, Time to Factor the New realities for Low Cost Manufacturing and Supplier Social Responsibility. In that commentary, we opined that social responsibility change and reform is long overdue.  The industry and our community can no longer turn a blind eye to labor practices occurring in the contracted supply chain. The notion that an OEM, in the midst of the latest new product launch, preparing for a peak consumer buying period or extraordinary market opportunity can continually dictate unplanned changes, insist that virtual capacity exists without ramifications to social responsibility practices no longer suffices.  While this Bloomberg article specifically addresses Apple and the consumer electronics supply chain, challenges also exist in the apparel and other industries.

As noted, when dominants such as Apple, with the sheer buying buyer and dominance that this OEM possesses, continues with actions in resolving these unacceptable business practices, than the industry and our community needs to acknowledge that practices need to change.

Bob Ferrari