This is a follow-up posting to our prior Supply Chain Matters commentary in early April noting that continued labor unrest among China’s manufacturing sector has far-reaching implications. In that commentary we pointed to an ongoing labor strike involving one of the largest footwear manufacturers’s in China that was producing products for Adidas and Nike, among other footwear brands. Workers at certain facilities of shoe manufacturer Yue Yuen Industrial, located in southern China have walked off the job in a dispute over social insurance payments tied to overall wage rates, which are governed by labor law. Yue Yuen employs upwards of 40,000 employees at its facilities located in Dongguan. In our initial commentary, we observed that with labor unrest becoming more prevalent across China’s major manufacturer’s, and as disputes move beyond just wages to broader social responsibility issues, the fallout for supply to larger customers vs. the not as influential customers was an area for supply management teams to be aware of.
Yesterday, a published Reuters report indicates that while the bulk of the previously reported 10,000 striking workers at Yue Yuen Industrial have now returned to work, the CEO of Nike has weighed-in on the labor unrest involving his firm’s supply, and that Nike was considering shifting its production to other suppliers. Nike CEO Mark Parker indicated to Reuters that the company was in “close contact” with Yue Yuan officials and its workforce to determine if labor conditions violate Nike’s own workplace standards and that his company has yet to take a position. Nike’s supplier code of conduct includes a clause protecting both legally required compensation and benefits. He further indicated that Nike has a diverse supply base within China that makes it possible to easily shift production requirements.
Think for a moment on the significance of the CEO of your company articulating a position on supply management and supplier social responsibility strategies in two sentences.
The Financial Times additionally reported this week that Chinese police have charged a labor activist with creating a public disturbance by utilizing social media to publicize Yue Yuen worker grievances, but have since released the man. According to FT, following the 10 days of protests, the Dongguan provincial authorities began backing the protesting workers who had claimed that the Chinese footwear supplier had failed to pay pension contributions required by Chinese labor law.
There remain two shifting forces concerning production suppliers within China. One relates to a new wave of worker activism focused not only on wages, but on expected benefits. Another is one that has also existed among supply forces, when large and influential customers are impacted by significant supply disruptions. Larger customers have the influence to both enforce existing supply contracts as well as supplier social responsibility actions. The flip side of that is that other customers being serviced by particular China based suppliers will have to be responsive to the effects of these ongoing dynamics. Not every customer has the influence and clout of Adidas or Nike.