Thursday, April 12, 2012 by Tara Gallagher

We all know it’s difficult to influence ethical labor conditions in the supply chain. But a recent article in The Economist on March 31^st discusses just how hard it is. This follows up on our recent post on Chinese supply chain issues.

The article “When the jobs inspector calls: Do campaigns for “ethical supply chains” help workers?” reports the results of a study by MIT’s Richard Locke who examined six years of factory audit data from four global firms. The results will be published this year as a book entitled “Promoting Labour Rights in a Global Economy.” His conclusions should be required reading for all supply chain managers concerned with worker conditions.

• Codes of Conduct, compliance programs and audits do not deliver sustained improvements. They highlight problems without fixing them and many factories drift in and out of compliance. At HP, only seven of the 276 factories in its supply chain fully complied with its code of conduct at the last audit.

• Investing time and money in helping factories improve managerial and technical capabilities is somewhat effective.

• Real, sustained change requires a collaborative approach between a company and its suppliers. “In particular, gains from changes in the production process need to be shared.”

• A firm’s own business model may be part of the problem. When maintaining a competitive edge requires last-minute design changes and increased production, suppliers have little wiggle room. Ramping production way up one month and cutting back the next, an approach tailor-made for worker overtime, creates problems for suppliers. Timberland has noted that developing a huge number of new styles while launching many new products has made it “difficult for factories to control working hours.”

Nike overcame a spate of bad press in the 1990’s to become a leader on supply chain issues by developing a code of conduct, publicizing results, and most recently trying to incorporate the need to protect workers into the design of its production processes and the schedule for new product launches.

Let’s hope that Apple’s recent issues at its Chinese factories will spur it to similar achievements.  That means sharing profits and being better partners with suppliers. 

Apple has the cash to do so, but does it have the will?