Feb 19, 2010

A new kind of Supply Chain Risk

I just read a very disturbing piece of news about Apple. Apple is a company that is widely praised for its successful software and hardware and even more for the way it manages its supply chain. AMR Research recently ranked Apple as having the most robust supply chain. In 2009, the company was at the top of “AMR’s Supply Chain Top 25”, having been part of the top two for the past 3 years in a row. The company has brought out many game-changing produapple logocts like the iPod, the iPhone and more recently, the iPad.

 

It is well known that Apple makes secrecy a vital cog in their strategy for launching new products. CNN went to the lengths of telling you why not to trust Steve Jobs. Apple is headquartered in the US. It makes most of its money in the US. But its manufacturing is completely outsourced to China – to Foxconn. And Foxconn has been in the news for all the wrong reasons.

 

FOXCONN: If you’re not aware of the Foxconn employee’s iPhone leak suicide case, you probably need to get reading right away. The company (Foxconn) doesn’t seem to treat their employees well either. Apple of course is not directly responsible for any of these events but their secretive policies are. More recently, a reporter was roughed up in China for taking pictures of a Foxconn plant – that too from across the road. It was a Reuters reporter too – and guess what he did… wrote an article of course.

Tipped by a worker outside the Longhua complex that a nearby Foxconn plant was manufacturing parts for Apple too, our correspondent hopped in a taxi for a visit to the facility in Guanlan, which makes products for a range of companies. As he stood on the public road taking photos of the front gate and security checkpoint, a guard shouted. The reporter continued snapping photos before jumping into a waiting taxi. The guard blocked the vehicle and ordered the driver to stop, threatening to strip him of his taxi license. The correspondent got out and insisted he was within his rights as he was on the main road. The guard grabbed his arm. A second guard ran over, and with a crowd of Foxconn workers watching, they tried dragging him into the factory.

The reporter asked to be let go. When that didn't happen, he jerked himself free and started walking off. The older guard kicked him in the leg, while the second threatened to hit him again if he moved. A few minutes later, a Foxconn security car came along but the reporter refused to boamilitaryrd it. He called the police instead. After the authorities arrived and mediated, the guards apologized and the matter was settled. The reporter left without filing a complaint, though the police gave him the option of doing so. "You're free to do what you want," the policeman explained, "But this is Foxconn and they have a special status here. Please understand."

Although no finger can directly point to Apple, the notorious reputation of the company just got a shot in the arm.

 

SUPPLY CHAIN OF THE PEOPLE: At the end of the day, it is the people that make any supply chain great. The amount of respect and training a supply chain gives to its people is directly proportional to the output it can get out of them. All this, irrespective of the amount of automation and processes you’ve put in place. Secrecy is a great marketing tool. But when lives are at stake, marketing takes a back seat. Truly consumer focused companies seldom lose focus of their employees and the effect of policies on their suppliers. I just hope and pray it doesn’t get to the point where these incidents repeat themselves. If it does, we’ll have to deal with a new kind of Supply Chain Risk.

Feb 19, 2010

A new kind of Supply Chain Risk

I just read a very disturbing piece of news about Apple. Apple is a company that is widely praised for its successful software and hardware and even more for the way it manages its supply chain. AMR Research recently ranked Apple as having the most robust supply chain. In 2009, the company was at the top of “AMR’s Supply Chain Top 25”, having been part of the top two for the past 3 years in a row. The company has brought out many game-changing produapple logocts like the iPod, the iPhone and more recently, the iPad.

 

It is well known that Apple makes secrecy a vital cog in their strategy for launching new products. CNN went to the lengths of telling you why not to trust Steve Jobs. Apple is headquartered in the US. It makes most of its money in the US. But its manufacturing is completely outsourced to China – to Foxconn. And Foxconn has been in the news for all the wrong reasons.

 

FOXCONN: If you’re not aware of the Foxconn employee’s iPhone leak suicide case, you probably need to get reading right away. The company (Foxconn) doesn’t seem to treat their employees well either. Apple of course is not directly responsible for any of these events but their secretive policies are. More recently, a reporter was roughed up in China for taking pictures of a Foxconn plant – that too from across the road. It was a Reuters reporter too – and guess what he did… wrote an article of course.

Tipped by a worker outside the Longhua complex that a nearby Foxconn plant was manufacturing parts for Apple too, our correspondent hopped in a taxi for a visit to the facility in Guanlan, which makes products for a range of companies. As he stood on the public road taking photos of the front gate and security checkpoint, a guard shouted. The reporter continued snapping photos before jumping into a waiting taxi. The guard blocked the vehicle and ordered the driver to stop, threatening to strip him of his taxi license. The correspondent got out and insisted he was within his rights as he was on the main road. The guard grabbed his arm. A second guard ran over, and with a crowd of Foxconn workers watching, they tried dragging him into the factory.

The reporter asked to be let go. When that didn't happen, he jerked himself free and started walking off. The older guard kicked him in the leg, while the second threatened to hit him again if he moved. A few minutes later, a Foxconn security car came along but the reporter refused to boamilitaryrd it. He called the police instead. After the authorities arrived and mediated, the guards apologized and the matter was settled. The reporter left without filing a complaint, though the police gave him the option of doing so. "You're free to do what you want," the policeman explained, "But this is Foxconn and they have a special status here. Please understand."

Although no finger can directly point to Apple, the notorious reputation of the company just got a shot in the arm.

 

SUPPLY CHAIN OF THE PEOPLE: At the end of the day, it is the people that make any supply chain great. The amount of respect and training a supply chain gives to its people is directly proportional to the output it can get out of them. All this, irrespective of the amount of automation and processes you’ve put in place. Secrecy is a great marketing tool. But when lives are at stake, marketing takes a back seat. Truly consumer focused companies seldom lose focus of their employees and the effect of policies on their suppliers. I just hope and pray it doesn’t get to the point where these incidents repeat themselves. If it does, we’ll have to deal with a new kind of Supply Chain Risk.

2 comments:

Jan Husdal said...

The question at hand is "How far should corporate social responsibility go?" and can Apple really control everything that goes on in all corners of its supply chain? Obviously no. Should they? Yes.

Ayush said...

Thanks for the comment. I completely agree with the fact that Apple can't control all of its supply chain. No company can. This is further accentuated by the fact that Apple recently found 'illegal child workers' in their supply chain. I've written about this here.
What measures do you suggest to bring about an increased level of control?