Apple’s Supply Chain Transgressions: A Self-Directed Confessional

While we've been critical of Apple in the past for not giving enough focus to the actions of its suppliers that violate Western cultural norms and laws (see stories here and here, just as a start), it's refreshing to see Apple come clean in its latest report and list of supply chain violation disclosures, including publishing its list of suppliers, an action which will give watch groups the upper hand in closer monitoring for future violations. In a recent wire story, Reuters did a solid job covering the basics, including noting the broader disclosure of 156 suppliers which "represent 97 percent of the company's supply chain."

The story suggests, "Apple's list is the culmination of internal probes into its supply chain, spanning hundreds of audits over years and high-profile firms from Foxconn or Hon Hai Precision Industry Co Ltd to Samsung." In its coverage, Reuters sums up the some of Apples own findings from supply chain monitoring, noting that published audits "found a number of violations, among them breaches in pay, benefits and environmental practices in plants in China, which figured prominently throughout the 500-page report...Other violations unearthed included dumping wastewater onto a neighboring farm, using machines without safeguards, testing workers for pregnancy and falsifying pay records."

Some other highlights Reuters surfaced included both an increasing percentage of audits in 2011 (80% from 2010) and an increasing focus on lower tier suppliers and contract manufacturers. Spend Matters plans to dig into the report in its entirety in the coming weeks and share some of the more salient and topical points from an industry perspective. But our quick analysis based on different coverage we've read suggests the following:

• Apple has finally stepped up to the CSR disclosure plate
• Its actions, along with local regulations, are likely to prompt others (not just in high tech) to disclose more from their own supply chain audit findings
• Multi-tier traceability and CSR practices are starting to become more important in supplier auditing
• It will become increasingly important for OEMs to take leadership roles in policing practices at all levels of the supply chain (i.e., you can't rely on higher-tier suppliers to do it for you)
• Getting out in front of problems and being honest about challenges and the breadth of transgressions is always better in the long-term than waiting for others to surface problems for you

Stay tuned as we look at Apple's findings in more detail and what they mean for procurement and supply chain organizations across industries.

- Jason Busch