From SCDigest's On-Target E-Magazine
Jan. 25, 2012
Supply Chain News: Apple's Groundbreaking Moves to Audit its Extended Supply Chain for Compliance to its Supplier Code of Conduct
Apple takes its Practices to Next Level, becomes First to Open Supplier Factories to Fair Labor Association
SCDigest Editorial Staff
In a move that may set a precedent for other global manufacturers, Apple last week released details of an internal audit on working conditions at its contract manufacturing facilities, research that came in large part under after pressure from various interest groups after a string of suicides at one of its CMs brought into question how well its contractors were treating workers making iPhones and iPads.
As part of its 2012 Supplier Progress Report, Apple says that it is "committed to driving the highest standards for social responsibility throughout our supply base," and that its suppliers must "provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made."
SCDigest Says: |
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There is a lot more in the full report, including environmental reviews, but this seems to us a seminal sort of shift in how offshored suppliers may need to be managed in the future.
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What Do You Say?
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That includes adhering to Apple’s Supplier Code of Conduct as a condition of doing business with the company.
To ensure compliance, Apple says it conducts "rigorous audits," with the help of independent experts, of both end assemblers and component manufacturers, and that if it finds any of these suppliers do not meet Apple's standards, "we stop working with them."
Apple said "We continue to expand our program to reach deeper into our supply base, and this year we also added more detailed and specialized audits to address safety and environmental concerns."
Interestingly, Apple says its programs include training workings at its suppliers about its standards and local laws and regulations, and that "there are more than one million people who know their rights because they went to work for an Apple supplier." How well the suppliers react to that education is not clear.
Apple also says it recently became the first technology company accepted by the Fair Labor Association (FLA), and that it will open its supply chain to the FLA’s independent auditing team, who will measure Apple's suppliers’ performance against the FLA’s Workplace Code of Conduct. The results of those audits will appear on the FLA website. Under the program, FLA auditors will conduct surprise inspections at 5% of the factories producing Apple products.
Apple is also listing 156 of its suppliers, which combined to account for 97% of its supplier spend, on its web site. That is a bit surprising, because Apple has traditionally been very secretive about who its suppliers were.
Audit Details
Apple says it conducted 229 supplier audits in 2011, an 80% increase over 2010. More than 100 audits were at factories Apple had not audited in the past.
The company notes that it expanded its environmental audits in 2011, including "specialized" environmental audits at 14 suppliers based on specific concerns. Apple says it "brought in third-party environmental engineering experts who discovered a number of violations. We have been working with our suppliers to correct these issues, and we will continue to build on this program of specialized environmental audits in the coming year."
Apple says it is also spending money to provide free training to employees of its contracted final assembly operations. The Supplier Employee Education and Development (SEED) program offers free classes on a range of subjects including finance, computer skills, and English. Apple says that "More than 60,000 workers have taken one or more of these professional development courses. The curriculum continues to expand, and we have partnered with local universities to offer courses that employees can apply toward an associate degree."
This one really surprised us: Apple says it monitors the process of workers who move from their home country to work in its suppliers’ factories in another country, saying there are often abuses in this process, especially around fees charged to these workers to get the jobs. Stepping up efforts in this area in Singapore and Malaysia, it forced suppliers there to reimbursed $3.3 million in excess foreign contract worker fees last year, bringing the total that has been repaid to workers since 2008 to $6.7 million.
Apple's Approach
Apple says each audit is led by an Apple auditor, supported by local third party auditors. It is not clear if that means these lead auditors are actual full-time Apple employees, or contracted staff.
The process includes a review of hundreds of records, physical inspections of manufacturing facilities as well as factory-managed dormitories and dining areas. It also conduct interviews with workers and managers in relevant functional areas.
In the end, the auditors grade the facility’s level of compliance with every line item in the Apple's Code— more than 100 specific areas. In addition, Apple says it evaluates "the strength of the underlying management systems and identify areas for improvement. Management systems include policies and procedures, clear roles and responsibilities, and training programs for workers, line supervisors, and managers."
All contract manufacturers providing final assembly services are audited each year. In addition, Apple says it is increasing the number of audits of component manufacturers as well, selecting which ones to audit based a number of factors including the country in which the facility is located, past audit performance, and the type of work performed at the facility.
(Manufacturing article continued below)
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