Supply Risk Confessional: Learning From Apple’s Admitted Supply Chain Transgressions (Part 1)

Earlier this month, Spend Matters had the chance to talk to D&B's Jim Lawton about his views on Apple's recent supply chain transgressions based in part on some of the disclosures in their latest sustainability report (see previous Spend Matters coverage here, here, here, and here). Jim was a supply chain executive with HP before he went over to the provider side, and he put on his previous operational hat in discussing his views on where Apple must go next. According to Jim, the fundamental issues that any high-tech manufacturer with global operations faces are difficult given the distributed nature of the supply chain, and we're not just dealing with widgets. "No one wants to hear that real people are being hurt at all, from chemical poisoning or underage labor," he suggests. Yet the knee-jerk reaction to simply "fixing things" is not always enough. Nor is it to admit that a single individual in the organization made mistakes. In almost all cases in the high-tech supply chain, the symptoms are suggestive of underlying maladies that must be remedied at the core.

The key for Apple -- not to mention others -- in dealing with supply chain transgressions at supplier facilities is to "effectively put in place focused, resourceful on the ground processes and activities to come up with a program that can prevent future occurrences while also being able to quickly identify events before they spiral out of control." Indeed, the earlier you can take action when it comes to supplier violations, the fewer lives you impact -- and the fewer negative headlines you face in the global news. Jim suggests that companies with a strong CPG/retail/product brand are especially vulnerable and sensitive because "they're expected to have done the right thing." But how can organizations prioritize what to do first when it comes to supplier CSR compliance and general supplier development?

It's important, Jim cautions, to take a systematic approach to prioritizing and rank ordering risk areas to figure out where to apply resources and prioritize specific initiatives. For example, certain categories of problems may be isolated to one supplier and aren't "life threatening" or overly "life impacting" for supplier employees or others, at least not initially. Yet others may be "just plain unacceptable" and potentially harmful in a very short time frame, and "require immediate attention." As part of this identification and initiative development effort, Jim suggests that it's critical to develop an auditing strategy that should always begin by creating continually updated priority lists of which suppliers to audit -- this is not a one-time or annual strategy event, but rather a continual process. Then, it's essential to figure out which engagements to work on with partners versus which to do on your own.

Stay tuned as we continue our discussion with D&B's Jim Lawton.

Jason Busch