Can Apple Become as Innovative in Supply Chain Regulation as They Have in Product Development?

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Everyone’s familiar with the news that Steve Jobs has recently stepped away from Apple again (possibly for good this time) due to health concerns. Whether this is permanent or not, the future is not far off when Apple will have to continue without Jobs. I have little doubt in mind that they will not find someone as visionary or as incredible at creating products people didn’t know they needed, but perhaps a new CEO will be able to spend more time addressing the supply chain issues that seem to plague the company.

Apple’s 2011 Supplier Responsibility Report came out last week and not a minute too soon. I’ll be honest, I am a pretty big Apple supporter but that doesn’t mean I’m not nagged by the reports that trickle out of China regarding the condition of workers in their supply chain. Recently two issues have been afloat. First, there have been a rash of suicides (about a dozen) in the past year at the Foxconn factory near Shenzen. While the factory mainly produces Apple products, Dell and HP outsource some production as well. What was the immediate response to this news? Let’s hang nets outside. This strikes me as an absurdly reactive policy at best and a cruel joke at worst. To the company’s credit, they have taken the issue more seriously even sending now acting CEO (former COO) Tim Cook to China to address this problem. They now employ counseling around the clock, which still sounds like a Band-Aid to me, but a step in the right direction nonetheless. In an effort to address the problem more aggressively professionals conducted a 1,000-worker survey and evaluated the factory’s response. We’ll see what happens.

The second problem has been worker exposure to a chemical called n-hexane at the Wintek factory in Eastern China. The chemical, which was used between 2008 and 2009, was utilized in the production of touch screens because it dried up faster than alcohol both increasing profits and making workers sick. Although no deaths were reported, the poisoning resulted in 137 hospitalizations over the period and not surprisingly, those sick could not afford much in the way of healthcare. According to Apple’s Supplier Responsibility Report the workers were adequately compensated and a number have returned to work.

I’ve said it before and I’ll say it again, whether it’s “conflict minerals”, worker treatment, environmental degradation etc, it is difficult for companies like those in the tech or apparel sectors with long supply chains in multiple countries to have absolute control over their product. But that doesn’t mean they can’t try harder. The two overarching problems regarding here are clear. Apple does not directly own these factories (the work is subcontracted), which lessens their control and the lack of enforcement by the Chinese government of worker treatment laws that are already weak to non-existent is troublesome.

Apple, like any other company in this situation has leverage. They can shut down factories, which does little good for workers or for the company or they can encourage factories to operate in a responsible manner, by valuing sustainability concerns on the same level as cost, time to market and quality.

In some ways as awful as these stories are, it seems as though we are moving in the right direction. Sustainability reports are being produced and therefore large corporations are no longer sweeping issues under the rug. But more importantly, shareholders are becoming aware of what’s going on and ultimately they have a significant influence on how these companies are run. I’m pretty confident that Apple will be around for a while, with or without Steve Jobs so it would be nice if their company policies can be as innovative as their products have been.

Image Credit by micgadget via Flickr under a CC license

2 thoughts on “Can Apple Become as Innovative in Supply Chain Regulation as They Have in Product Development?”

  1. While I applaud Apple for its transparency in auditing its supply chain, it merely underscores how much the company has let its potential influence get undermined by its key contractors. They should do better. I explore the Apple conundrum that they are facing with a comparative story of redemption. You can read more about it here.

    1. Dave, thanks for the note. I will be sure to take a look at your article. And I agree, as one of the world’s biggest and best known tech companies (with a rabid consumer-base mind you) I think Apple has a great opportunity to set the pace and has had a difficult relationship with it’s contractors, like many companies of its ilk.

      Of course, the increased transparency is somewhat of a catch-22 for these companies. The more you report, the more is expected of you (not that that is a bad thing), however I have done a fair amount of work on Polo Ralph Lauren, which is a company that has no discernible CSR policy and does not publish a Sustainability Report. Not coincidently I believe, we don’t hear much about them in the supply chain/contracting discussion.

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