Not Quite the Apple of My Eye

There’s been a lot in the news lately about Apple and the working conditions violationsfound at one of its Foxconn manufacturing facilities in China. The response to this news has been very interesting to follow, with fingers pointed in every which direction -- some blaming Apple, some blaming Foxconn, some blaming the Chinese government, some blaming the American government, some blaming consumers, and some even blaming the Chinese workers themselves.

To get a sense of how Apple’s other Chinese suppliers might feel about the Foxconn news, I reached out to a personal source (who we’ll call Mike, as he asked not to be named) who used to work for one of Apple’s other Taiwan-based suppliers and has inside knowledge of what it’s like to do business with Apple in China.

Mike’s take on the situation is that suppliers like Foxconn are often forced into workplace violations because buyers demand a lot but continue to operate on what, to him, are antiquated assumptions of cheap Chinese labor. According to Mike, Apple epitomizes such a model, demanding the cheapest, most efficient, and most accommodating suppliers that can crank out new products at a moment’s notice (see this article about Steve Jobs’s notorious last-minute overhaul of assembly lines in 2007). These expectations are impossible to meet without someone getting the short end of the stick—in this case, the laborer. For instance, Mike recounted several instances where Apple asked suppliers to work overtime during Chinese New Year, promising to pay triple wages, only to negotiate their way out of overtime payments later by promising more business (which ultimately never surfaced). The longest overdue payment he handled with Apple took more than three years, which he attributes to a lack of accountability among various buyers.

Mike’s comments shed light on the fact that in today’s complexly connected global economy, no one entity is entirely responsible for supply chain issues. However, his experiences do illustrate that global companies need to better manage on-the-ground decision-making when it comes to sourcing and suppliers. Despite stricter Fair Labor Association requirements on suppliers, Apple’s procurement culture will continue to demand partners that bend over backwards for their business—unless Apple itself becomes more responsible in their sourcing.

Steve Jobs was known for being a visionary leader, but was also known for propagating a culture of secrecy and exclusion in an age where most other businesses are increasing transparency and inclusion. Foxconn is one example of how Jobs might have turned a blind eye towards supply chain risks in the pursuit of the single bottom line. These decisions might have helped catapult Apple into a leadership position in the short-term, but the current Foxconn backlash illustrates that this relentless culture might not be so sustainable, especially for a company that’s in the spotlight like Apple.

Being a tough business is one thing. However, a business that is tough on others but not tough on itself is just asking for criticism. By operating in secrecy, Apple puts its brand in jeopardy because it is susceptible to becoming the scapegoat when something goes wrong. The Foxconn news is the perfect example—neither Foxconn nor Apple is probably the worst when it comes to working conditions in China, but Apple’s leadership position plus knack for secrecy makes them a target since they have little to fall back on.

The moment of reckoning has arrived for companies that rely on overseas manufacturing to look more closely at their business operations, procurement codes, and internal cultures to better manage risks to their reputations and supply chains. Apple has proved through its products that it can be nimble, innovative, and ahead-of-the-curve -- so they might be the best poised to jumpstart systematic change. Many other leading companies (e.g. Nike, GE) have faced similar PR challenges and have emerged with more sustainable business models and triggered industry-wide improvements. The question is, will Apple step up?

Image Source: Imaginechina/Corbi