Deck 17: Business and Its Suppliers

Question 1

What were the interests and sources of power of Foxconn, Apple's supplier?

Answer 1

Case summary:
Company A manufactures electronic devices such as phones and laptops. It believed in customer satisfaction and produced quality products. Though the company focused on consumers, it was not successful in tackling its suppliers. Company A had formulated the code of conduct for its suppliers, but the suppliers gave less importance to the code. One of its suppliers was Company F.
Company A conducted the audit of Company F. It found that Company F had sweatshop conditions in its factories. Over the years, Company F experienced loss of lives of its workers. The negligence of Company F in following the code of conduct led to a tragic situation. This affected the reputation of Company A.
The following are the strengths of Company F that attracts many producers:
The following strengths have made Company F a powerful player in the electronic industry. This has attracted producers worldwide. The strengths of Company F are as follows:
• Company F has sophisticated infrastructure and can produce with great efficiency.
• It helps the producers to keep their technology safe and secure.
• Company F does not disclose any information to the third party.
• It has a huge production base that can produce hundreds of electronic devices.
• It has been successful in employing cheap labor.
Conclusion:
Company F is one of the suppliers of Company A. The above stated strengths have made Company F a powerful player in the electronic industry. Excellent infrastructure and production efficiency of Company F has attracted many producers.

Question 2

What social, ethical, and environmental risks were present in Apple's supply chain?

Answer 2

Case summary:
Company A manufactures electronic devices such as phones and laptops. It believed in customer satisfaction and produced quality products. Though the company focused on consumers, it was not successful in tackling its suppliers. Company A had formulated the code of conduct for its suppliers, but the suppliers gave less importance to the code. One of its suppliers was Company F.
Company A conducted the audit of Company F. It found that Company F had sweatshop conditions in its factories. Over the years, Company F experienced loss of lives of its workers. The negligence of Company F in following the code of conduct led to a tragic situation. This affected the reputation of Company A.
The following were the social risks in Company A's supply chain:
• The employees were paid very low wages.
• There were deaths because of the exposure to dangerous chemicals.
• The employees worked overtime.
The following were the ethical risks in Company A's supply chain:
• The employees had no proper recreation facilities.
• The company did not provide the employees with basic amenities.
• The surroundings were not friendly and the employees failed to interact with each other.
The following were the environmental risks in Company A's supply chain:
• The suppliers deal with hazardous chemicals that have an adverse impact on the environment.
• There were chances of explosions due to chemicals and breakdown of the machinery.
Conclusion:
Company A manufactures electronic devices such as phones and laptops. It faces social, environmental, and ethical risks in its supply chain. The employees work for a very low wage without any basic amenities. This has given rise to social and ethical issues. The chances of explosion because of the use of hazardous chemicals increase the environmental risks.

Question 3

What were the advantages and disadvantages to Apple of using its own company-specific supplier code of conduct, rather than an industrywide code?

Answer 3

Case summary:
Company A manufactures electronic devices such as phones and laptops. It believed in customer satisfaction and produced quality products. Though the company focused on consumers, it was not successful in tackling its suppliers. Company A had formulated the code of conduct for its suppliers, but the suppliers gave less importance to the code. One of its suppliers was Company F.
Company A conducted the audit of Company F. It found that Company F had sweatshop conditions in its factories. Over the years, Company F experienced loss of lives of its workers. The negligence of Company F in following the code of conduct led to a tragic situation. This affected the reputation of Company A.
The following are the advantages of using the code of conduct formulated by Company A, instead of using global code of conduct:
• Company A can adopt a code of conduct that is suitable to its business operations and producer-supplier relation.
• Company A can alter the code of conduct as per the requirements.
• Company A can set a code that will help in achieving its objectives.
• It can adopt different codes of conduct for different suppliers based on the agreement.
The following are the disadvantages of using the code of conduct formulated by Company A:
• It is a challenging task to formulate codes of conduct for different suppliers.
• The effect of a particular code of conduct on the suppliers is uncertain.
• The company has to commit financially to formulate and test the codes of conduct.
Conclusion:
Company A manufactures electronic devices such as phones and laptops. Having an intrinsic code of conduct is advantageous as well as disadvantageous to the company. Company A can adopt a code of conduct that is suitable to its business operations and producer-supplier relation.

Question 4

What are the advantages and disadvantages to Apple of relying on its own internal audits, as contrasted with using an independent auditor like the Fair Labor Association?

Question 5

What more, if anything, could Apple do now to reduce supply chain risk and create shared value?