This afternoon, I'd like to welcome back a regular guest columnist to Spend Matters. Brian Sommer is a Senior Fellow at Azul Partners, founder of Tech Ventive, and is author of the blog Services Safari..
If you're sourcing product from contract/offshore manufacturers, you really need to read the BusinessWeek article Secrets, Lies, and Sweatshops.
I don't see what occurs in the story as surprising as people will find ways to avoid compliance and monitoring no matter where they live and work. The article describes an emerging consulting service where advisors coach plant managers/owners on what to expect in a compliance check. Their knowledge of what will be examined and how to make problems disappear before the auditors arrive is why they get hired.
What these consultants do is despicable. They advise managers to spirit away potential whistle-blowers. They counsel them on how to prepare a second set of books. They provide scripted responses for employees to recite when questioned by compliance personnel. And, much, much more.
How bad is the problem? The article quotes some sobering statistics:
- Only 20% of Chinese suppliers comply with wage rules
- Only 5% honor hour limitations
- The percentage of Chinese suppliers caught submitting bogus payroll records has grown from 46% to 75% in four years
This is a long, well-researched piece and it should scare the daylights out of any firm using non-owned resources in certain markets. The PR damage to your company could be significant if you are not smarter than your supplier and fail to prevent abuses from occurring.
With capitalism creeping into China, it's a shame that a cottage industry of disreputable consultants are creeping in with it. Remember: Caveat Emptor when it comes to contract manufacturing.
Brian Sommer authors the blog: Services Safari