Commentary on Human Rights and Sustainable Supply Chains at Apple
Today’s article in the New York Times on Apple’s outsourcing of its global supply chain to Asia provides yet more insights into what has been a very secretive supply chain organization, up until the last week. The NYT interviewed several former Apple employees and subcontractors, and obtained insights into the decision Apple made to outsource almost it’s entire supply chain to Asia, with the majority of the assembly work being done by FoxxCon.
The authors of the piece discuss the decision to outsource the Iphone to FoxCon, based on the last minute decisions by Steve Jobs to replace the screen on the iphone because it was scratched. They also describe the incredible flexibility offered by Chinese suppliers, their commitment to excellence, hard work, and resilience to changes in product requirements. No doubt, this world-class supply chain has allowed Apple to excel and provide disruptive innovations to the world, and starting up thousands of businesses around its products.
But at what price? The recent release by Apple’s supply chain organization clearly shows numerous ethical, environmental, and human rights violations throughout its supply chain. Although Steve Jobs was a Buddhist and preached harmony, putting people into dormitories, having them work 60 hours a week at less than a dollar an hour, isn’t really too “Zen-like”.
Don’t get me wrong. I love my MacBook (and my iPhone, my iPad, my nano, and my iTunes account!) I’m glad that they are economical. But would I be willing to pay $65 more for a iPhone that was built in the US? Would the general population?
This is where the economics comes into play. The issue isn’t so much about labor cost here. What President Obama didn’t understand when he asked Steve Jobs about why the jobs weren’t in America (as described in the article) is that the value driver in supply chains is upside and downside flexibility, flawless execution, and ability to deliver products with perfect quality. This is where the American workforce falls short. Several Apple executives pointed out that they considered all options before going with China – there was simply no comparison. Politicians in Washington, as well as economists calculating the numbers in the Fed, simply don’t take these components into account when they develop fiscal and economic policies.
Many organizations are moving operations to new locations with lower labor costs, but this also requires that they put in systems for monitoring and controlling working conditions, environmental compliance, and quality control. Corporate Sustainability is a topic of discussion for not just political action groups, but government, investors, and most importantly – customers. All companies, not just Apple are emphasizing sustainable supply chains, which means increasing monitoring, compliance, and assessment of suppliers. New rewards and penalties are being put into place by these firms to ensure their supply chains are responsible. Not all will fail – but the importance of being clear to shareholders and customers alike about the problems they are discovering in companies is critical. Although environmental infractions have generally received the bulk of attention from the international press, sustainability has also come to include the “labor and human rights factor” implicit in this definition. Humans are also part of the environment.
We discussed these issues at length in my MBA class yesterday on Supply Chain Sustainability. There are no clear answers, just lots of questions. These issues need to be studied using a clear framework and guidelines for assessing supply chain sustainability and its relationship to business outsources, that effectively mesasures economic value derived from outsourcing overseas relative to the impact on the brand name, the integrity and responsibility of the leadership team, and most importantly, the “right thing to do”. What that looks like remains open to debate, but it’s surely time to have that discussion.