When Chinese Suppliers Abuse Workers: What You Don’t Read in the Headlines (Part 8)

Please click here for Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, and Part 7 in this series. This analysis references the following report: Tragedies of Globalization: The Truth Behind Electronics Sweatshops No Contracts, Excessive Overtime and Discrimination: A Report on Abuses in Ten Multinational Electronics Factories.

As we conclude our coverage of the somewhat amateurishly presented China Labor Watch report that profiles working conditions in large Chinese production facilities, it's worth noting that the methodology and primary research model used in the report is more than sound -- and comprehensive. However, just as one of my colleagues once described China as "not quite ready for Prime Western time," nor is the final production report in question for putting on the final spit shine to make sure executives read the analysis for the great data it contains, rather than dismissing it for an unnecessary emotional side and amateurish layout and formatting. Clearly this report stands on its own, and we recommend to procurement and supplier management professionals to view it as a primary research source rather than a rigorous qualitative or quantitative analysis. Just on its own, the examples it contains are useful enough for our purposes -- and damning of large-scale manufacturing production practices in China, even for those specifically aimed at export markets which are supposed to care about how workers are treated.

The authors clearly don't understand the world of global supply chains lest they would make better arguments than this: "The multinational companies that contract production to these Chinese factories claim that the factories bear the sole responsibility for these abuses. However, in this report, CLW posits that many of these abuses are firmly entrenched in the global supply chain system. Because most production costs, including distribution and physical materials are to a great extent inelastic, the only way factories are able to offer a competitive advantage is to lower the manufacturing costs, which often translates directly into lowering labor costs. This burden is eventually passed down to workers, who are forced to work long hours at a high intensity."

Actually, the failure that has occurred which China Labor Watch should point out is a failure of supplier development and joint cost take out through programs that cold aim at reduce supplier inventory, working capital, production costs (e.g., through reducing electrical bills by changing equipment, lighting). Here at Spend Matters, we agree that buying organizations are to blame, at least in part. But we should be blaming a combination of parties, including organizations that fail to give their procurement and supply chain professionals enough of a supplier development leash to figure out ways of reasons total landed supply chain costs -- rather than allowing these facilities to take advantage of low cost labor.

But perhaps most important, the key takeaway I'm left with from the study is the precise one I shared at the beginning. That namely, the Chinese government, at best, tacitly encourages the behavior of these facilities to maximize employment and overall exports as a result, and at worst, actively promotes such activity for the same reasons. Indeed, rather than blame Apple, HP, Dell, IBM, Lenovo and countless other high tech companies whose suppliers are profiled in the report, we should instead pressure our government to ensure that imported goods are subject to similar labor standards in other parts of the world as they are here and with our other trading partners. When suppliers take advantage of labor and the Chinese government condones such activity, we might as well consider such behavior as similar to manipulating currencies, changing VAT rebate schemes and other nefarious tools to artificially keep Chinese export prices low.

When the Chinese government cheats the global economic system, it's ultimately their own workers who pay the price. A real harmonious society, eh?

Jason Busch

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