Today, there is rather significant supply chain related news involving one of the most highly recognized supply chains, that of Apple.  The Wall Street Journal conducted an unprecedented interview (paid subscription or free metered view) with Apple CEO Tim Cook, who for the first time in probably anyone’s memory, disclosed much more intimate information regarding Apple’s suppliers as well as Apple’s current efforts in the area of supplier responsibility and working environments. Cook indicated that his company “has long aimed to be more transparent and believes the steps it is taking- including nearly doubling the number of supplier audits it does- are “raising the bar” for the industry.”

Supply Chain Matters reviewed Apple’s latest 2012 Progress Report on Supplier Responsibility and we were positively impressed. We urge our readers to read the report themselves at the following web link. The report notes that the company recently became the first technology provider accepted by the Fair Labor Association (FLA), and that Apple will open its supply chain to the FLA’s independent auditing team who will measure performance against the FLA’s Workplace Code of Conduct, with results appearing for public view.

During 2011, Apple’s Supplier Responsibility teams conducted 229 audits, an 80 percent increase over 2010. More than 100 involved factories that had not been audited before. Each year, Apple audits all final assembly manufacturers (contract manufacturers).  The report notes that audits are targeted to suppliers with the highest risk factors where findings and corrective actions can make the biggest difference.  Apple considers the most serious breach of compliance to be a core violation which would include underage or involuntary labor, falsification of audit materials, worker endangerment or intimidation or retaliation, along with threats to the environment. The report identifies many of the core violations including 2 facilities terminated because of involuntary labor practices and 5 facilities with unintentional use of underage labor because of insufficient verification methods. We were also positively impressed to note core violations involving the 2 incidents of combustible dust explosions that occurred in 2011. An explosion at Foxconn’s Chengdu factory took the lives of four workers and an explosion at a Pegatron component supplier facility in Shanghai injured 59 workers.  As we speculated, Apple immediately investigated the circumstances, cited the suppliers for core violations, and later established new process requirements for the handling of combustible dust including aluminum and plastics.

Supply Chain Matters has featured multiple commentaries related to Apple’s social and worker responsibility policies.  Unlike certain other blogger commentaries, we did not elect to blast Apple for lack of responsiveness to certain work practices among its supplier base or for benefitting from enormous financial success for the sake of unsafe or unspeakable supplier practices.  Our commentary in September of 2010 reflected on a Bloomberg BusinessWeek article where reporters were granted unprecedented access and interviews focused on remediation practices that would address the level of unacceptable worker suicides at contract manufacturer Foxconn.  Our commentary in May of 2011 opined that being rated as the foremost supply chain comes with immense social and business responsibility, and while Apple is not without certain faults, it was doing more than a lot of other manufacturers. Apple purposely sources manufacturing in low cost regions even though it continues to benefit from higher pricing and fatter margins.  Thus, it has little alternative but to be serious about being an active advocate for labor and environmental standards.

We believe that this latest transparency initiative is a clear sign that Apple is raising the stakes for supplier compliance.  How many CEO’s can you think of who can articulate their company’s supplier responsibility programs?

In publishing a full listing of suppliers, and providing unprecedented detail related to supplier compliance, Apple has sent a clear message that if you want to continue to be a member of Apple’s value-chain, you will need to conform to these standards of performance.  Being an Apple supplier comes with certain rewards for production volume and potential financial gain but it increasingly comes with accountability standards.

Apple’s cause for social responsibility practices could also benefit from increased sourcing in countries that take labor standards conformance rather seriously.  Perhaps now is the time for Apple to also consider more sourcing among U.S. and European supplier locations since that would also add more emphasis on its commitment to trade profits for consistency in worker safety and environmental practices.

We all know how challenging standards within low-cost manufacturing regions can be, and as a community, we should thank Apple for taking an active leadership role.  Now it is time for other technology providers and manufacturers to re-double their efforts as well, since change comes from the power of many. In the end, the global workforce benefits.

What’s your view?  Should Apple be praised for its proactive outreach and auditing standards?

Bob Ferrari

©2012, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.