The business and supply chain management community has had time to reflect on the recent announcement of labor violations discovered by the Fair Labor Association in audits of Apple’s massive Foxconn contract manufacturing facilities. As can be expected, the responses vary in perspectives. Labor rights advocates feel that Apple’s efforts demand constant scrutiny. Other business media have opined that this development is a sign of strategic shifts or an overblown reaction to the reality of low-cost manufacturing environments such as China.
We cite three articles of particular interest.
In a Washington Post blog entry, Jena McGregor noted that the stakes for Apple are far higher than that for Foxconn. By proactively responding to working condition findings, CEO Tim Cook could face the wrath of Apple shareholders for eventually increasing supply chain costs. McGregor astutely points to far bigger stakes, namely that Apple walks a fine line by not also pointing the finger of labor abuse to other high tech competitors such as Amazon, Dell and HP who also manufacture in similar facilities within China. Supply Chain Matters expressed similar opinion months ago when the Apple’s social responsibility efforts initially became very public.
The New York Times, who managed to provoke Apple with its superb in-depth article of Foxconn working conditions has been rumored to be attempting to gain positive favor with the company. That aside, an April 1 article penned by Nick Wingfield places a rather positive spin to this development, namely the new direction and sensitivity that CEO Tim Cook has steered for Apple. According to NYT sources, Steve Jobs never visited the factories in China where Apple products were made. Conversely, Cook, who has spent a lot of time in factories, is steering Apple toward higher levels of leadership and visibility to respond to greater scrutiny by media and consumer groups reflecting on how its products are manufactured and how serious the company is committed to labor rights.
We were somewhat surprised to read a posting from Supply Chain Digest which implied that Apple’s issues related to working conditions and pay were quite modest, with the implication that this was no big deal. With all due respect, that comment completely misses the mark.
When a company like Apple is deservedly ranked number one on nearly every researcher’s top supply chain listing, the ranking comes with a high bar of expectations. We all expect Apple to set world class benchmarks in many supply chain capabilities including supplier and social responsibility. Apple may be feeling the heat, but there are many other firms dealing with the same challenges. It is a rather, big deal, one that does not provide simple solutions, and one that should not be hidden.
Today, The Wall Street Journal is reporting that Hon Hai Precision Industry, the parent of Foxconn, announced plans to “significantly” raise wages for its employees located at its headquarters in Taiwan, which is expected to take effect in July. Readers may recall that last year, when Foxconn finally announced meaningful wage increases for its assembly workers in China, a ripple effect of other cascading labor rate increases incurred throughout China’s southern manufacturing regions.
In a Supply Chain Matters commentary posted in mid-March, we provided our point-of-view that many current signs point to the need for changing supply chain strategies for Apple, some of which may be conflicting. There are a number of strategic directions to which Apple’s supply chain can shift, but any will be dependent on the business and customer outcomes desired by the company. A socially responsible supply chain may be a component of that direction, and the fallout will not just be Apple alone.
The time is long overdue for high tech and other industries to find a balance point between supply chains driven by cost and those that may also be driven by innovation and social responsibility.