Apple Supplier Code of Conduct

It would be interesting to compare and contrast the Supplier Code of Conduct between Apple and Toyota. Feel free to view the Toyota Supplier Code of Conduct to see for yourself.

Apple recently released their Apple 2012 Supplier Responsibility Report, which highlights the audits conducted in 2011, violations that occurred with their outsourced manufacturing and supply chain, and corrective actions put in place. Apple was very transparent in the creation of this report and I applaud them for that. Part of the report is spent on discussing the need for a Management System within its supply chain and manufacturing partners. I predict that for Apple suppliers and manufacturers to remain compliant with the Management System requirement, more and more of them will adopt lean management as part of their business.

There’s much media hype on Apple and their decision to outsource their manufacturing and supply chain, such as the iPhone Supply Chain. The media hype has largely been focused on the human rights violations made by their outsourcing partners:

The Chinese city of Shenzhen is where most of our “crap” is made. 30 years ago, Shenzhen was a little village on a river. Now it’s a city of 13 million people ” bigger than New York.

Foxconn, one of the companies that builds iPhones and iPads (and products for many other electronics companies), has a factory in Shenzhen that employs 430,000 people.

There are 20 cafeterias at the Foxconn Shenzhen plant. They each serve 10,000 people.

One Foxconn worker Mike Daisey interviewed, outside factory gates manned by guards with guns, was a 13-year old girl. She polished the glass of thousands of new iPhones a day.

The 13-year old said Foxconn doesn’t really check ages. There are on-site inspections, from time to time, but Foxconn always knows when they’re happening. And before the inspectors arrive, Foxconn just replaces the young-looking workers with older ones.

In the first two hours outside the factory gates, Daisey meets workers who say they are 14, 13, and 12 years old (along with plenty of older ones). Daisey estimates that about 5% of the workers he talked to were underage.

Daisey visits other Shenzhen factories, posing as a potential customer. He discovers that most of the factory floors are vast rooms filled with 20,000-30,000 workers apiece. The rooms are quiet: There’s no machinery, and there’s no talking allowed. When labor costs so little, there’s no reason to build anything other than by hand.

A Chinese working “hour” is 60 minutes ” unlike an American “hour,” which generally includes breaks for Facebook, the bathroom, a phone call, and some conversation. The official work day in China is 8 hours long, but the standard shift is 12 hours. Generally, these shifts extend to 14-16 hours, especially when there’s a hot new gadget to build. While Daisey is in Shenzhen, a Foxconn worker dies after working a 34-hour shift.

Assembly lines can only move as fast as their slowest worker, so all the workers are watched (with cameras). Most people stand.

The workers stay in dormitories. In a 12-by-12 cement cube of a room, Daisey counts 15 beds, stacked like drawers up to the ceiling. Normal-sized Americans would not fit in them.

Unions are illegal in China. Anyone found trying to unionize is sent to prison.

Daisey interviews dozens of (former) workers who are secretly supporting a union. One group talked about using “hexane,” an iPhone screen cleaner. Hexane evaporates faster than other screen cleaners, which allows the production line to go faster. Hexane is also a neuro-toxin. The hands of the workers who tell him about it shake uncontrollably.

Some workers can no longer work because their hands have been destroyed by doing the same thing hundreds of thousands of times over many years (mega-carpal-tunnel). This could have been avoided if the workers had merely shifted jobs. Once the workers’ hands no longer work, obviously, they’re canned.

One former worker had asked her company to pay her overtime, and when her company refused, she went to the labor board. The labor board put her on a black list that was circulated to every company in the area. The workers on the black list are branded “troublemakers” and companies won’t hire them.

One man got his hand crushed in a metal press at Foxconn. Foxconn did not give him medical attention. When the man’s hand healed, it no longer worked. So they fired him. (Fortunately, the man was able to get a new job, at a wood-working plant. The hours are much better there, he says ” only 70 hours a week).

The man, by the way, made the metal casings of iPads at Foxconn. Daisey showed him his iPad. The man had never seen one before. He held it and played with it. He said it was “magic.”

The list of embarrassing violations go on and on, leading Henry Blodget to ask all Apple users:

The bottom line is that iPhones and iPads cost what they do because they are built using labor practices that would be illegal in this country ” because people in this country consider those practices grossly unfair.

That’s not a value judgment. It’s a fact.

So, next time you pick up your iPhone or iPad, ask yourself how you feel about that.

Need For a Management System

The Apple Supplier Code of Conduct has a requirement for all its suppliers to have a Management System in place. Specifically,

Apple requires that our suppliers establish management systems that ensure compliance with each section of its Code as well as applicable laws and regulations. Suppliers’ management systems must be capable of identifying and mitigating operational risks. They should also help suppliers make continuous improvements to their standards and practices. This section of the Code provides a foundation for its other elements: Enforcement of the standards we’ve defined in the Code’s other areas depends on suppliers setting up the right management systems.

Our audit programs examine both business practices and the management systems that can sustain those practices. There may be cases where our audit reveals compliance in actual practice, but the underlying management system may not be strong enough to assure ongoing compliance. For this reason, Apple audits include examination of the management systems”such as policies and procedures, roles and responsibilities, and training programs”underlying every category in our Code.

Training is an important tool we use to call attention to the need for our suppliers to strengthen management systems. Training also empowers workers, raising their awareness to their rights”an important part of our efforts to drive our suppliers to adopt socially responsible management systems and practices. As part of our audit programs, we follow up to see if training programs result in changes to the workplace. For example, last year, audit scores went up for management systems compliance in underage hiring prevention following the extensive training we delivered.

In sum, Apple is requiring suppliers and manufacturers to have in place:

Risk Assessment and Management: A process to identify environmental, health and safety, business ethics, labor, human rights, and legal compliance risks associated with their operations; determine the relative significance of each risk; and implement appropriate procedures and physical controls to ensure compliance and control the identified risks. Risk assessments for health and safety must include warehouse and storage facilities, plant and facility support equipment, laboratories and test areas, bathrooms, kitchens, cafeterias, and worker housing.
Performance Objectives with Implementation Plans and Measures: Written standards, performance objectives, targets, and implementation plans, including a periodic assessment of the Supplier’s performance against those objectives.
Audits and Assessments: Periodic self-evaluations to ensure that the Supplier, its subcontractors, and its next-tier Suppliers are complying with this Code and with applicable laws and regulations.

If some or most of them haven’t yet, I predict that several Apple outsource manufacturing and supply chain partners will begin to adopt lean management to remain in compliance with the Apple requirement for a management system. This can be good or bad: if the suppliers remain true to the spirit of Lean, then good things can come of it. If the outsource manufacturers and supply chain partners decide to adopt the “lean and mean” mantra, they can use Lean management as an excuse to continue to treat their people badly.

All in all, I applaud Apple for being transparent in their report. As far as Management Systems go, I anticipate hearing poor treatment of employees to be linked to “lean and mean” management, bringing all true lean advocates to an uproar.