Monday, January 30, 2012

Creating A Better World through Supply Chains

imageCould the smudges on your shining ipad be the tears of a child forced into labor? Or may be the tears of a husband, a wife, a child who lost their spouse, parent or a sibling to a suicide under hopeless desperation? As always, Apple is taking the lead so you won’t have to worry about that. Apple released a Supplier Responsibility Progress Report in 2012 detailing its efforts to monitor its suppliers and improve worker protections and factory conditions.

Not everything in the report is rosy as reported by Reuters. But the fact that Apple is taking the responsibility and pushing for a social agenda to make workers lives better says a lot for their corporate philosophy. This may also have been a reaction to the events at Foxconn in 2010, one of the largest suppliers to Apple, where several young workers took their own life. Or this may have been a reaction to the California Transparency in Supply Chains Act. This act becomes effective from this month and requires that companies disclose their policies and actions to fight forced/child labor and human trafficking in their supply chains. It is applicable to all manufacturing and retail companies doing business in California with a revenue of $100 million or more. Whatever might have been Apple’s motivations, this is an industry first that needs to be lauded. Since Apple just happens to be the biggest (and most visible) company in the field, their lead is likely to be followed by others in the industry – and that is a good thing.

How will it affect your supply chain? For starters, do the following:

  • Review you supplier on-boarding processes. Make sure that the requirements of the law are built into the supplier selection process. If possible, verify or engage a local audit company to verify the supplier’s manufacturing facilities, labor practices, pay and overtime rules, and other general policies regarding hiring, working hours, bonus, overtime, and working conditions. Keep records.
  • Establish an active supplier audit policy to institutionalize the process and to ensure that audits are scheduled at acceptable intervals. Engage a third party audit company if possible. Schedule unannounced audit, which in some cases may mean modifying contracts with the suppliers to allow such unannounced audits.
  • Make sure that there are training programs in place to teach the employees about the legal obligations. The law requires such training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products for all employees with direct responsibility for supply chain management.
  • Finally, review your supplier relationship management systems. No matter how well your processes are, remember that detailed supporting records of all related activities will be what will eventually satisfy an auditor!

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Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon.

© Vivek Sehgal, 2012, All Rights Reserved.

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