Apple unveils detailed supply chain report

on Thursday, January 19, 2012

Apple unveils detailed supply chain reportApple is renowned for deft supply chain management, but the company is also notoriously tightlipped about its procurement operations – until now.

The Cupertino, California-based technology giant recently revealed a list of its worldwide suppliers for the first time ever. Moreover, Apple officials affirmed they would strive to improve working conditions at companies with which it executes supplier contracts.

Apple's current chief executive Tim Cook is an experienced supply chain and logistics executive, having previously run the company's sweeping supplier operations. Under Cook, Apple streamlined its expansive supplier network, trimming inventory and implementing business cost reduction measures that have boosted efficiency.

Cook also took over the helm of supplier contract negotiations, orchestrating better terms for Apple that helped free up capital in the then-struggling company. While exceedingly successful, Apple's decision to shift a majority of its manufacturing to Asian countries drew – and continues to incite – the ire of critics.

They assert the firm's work to overhaul spend management and indirect spend has come at the expense of American jobs, and that it turns a blind eye to working conditions at its factories elsewhere in the world.

Such criticisms prompted Apple to release its report on the state of its global supply chain, Reuters reports. The move was particularly surprising given the company's obsession with secrecy, a characteristic cultivated by Apple co-founder Steve Jobs, who died in October.

Apple's report contained the names of 156 companies tasked with supplying approximately 97 percent of the firm's electronics components. The businesses with which Apple works range from well-known players such as Samsung to obscure companies with fewer than 100 employees. Perhaps not surprisingly, a large percentage of its suppliers are based in Asia.

Apple completed a sweeping review of its supply chain over the past four years. Cook, who analysts said seems to be lifting the veil of secrecy that shrouds the company, asserted Apple's review took years to complete. Procurement auditing helped identify potential issues at some of its suppliers, but Apple said it found few instances of gross negligence at any of its plants.

However, the company's report states that auditors found six active and 13 historical cases of underage workers at some of its component suppliers.

"With every year, we expand our program, we go deeper in our supply chain, we make it harder to comply," Cook said. "All of this means that workers will be treated better and better with each passing year. It's not something we feel like we have done what we can do, much remains to be done."

Inspectors also found a number of other violations at Apple's manufacturing and supplier facilities in Asia, including environmental ones. The company also asserted that it found some of its Chinese suppliers had failed to properly compensate workers for overtime hours, and that some had not properly trained employees to operate dangerous machinery.

"I would like to make a significant improvement in the overtime area. I would like to totally eliminate every case of underage employment," Cook said. "We have done that in all of our final assembly. As we go deeper into the supply chain, we found that age verification system isn't sophisticated enough. This is something we feel very strongly about and we want to eliminate totally."

Apple noted it conducted 229 audits in total in 2011, representing an 80 percent uptick from 2010. The Wall Street Journal reports that the U.S. government and advocacy groups have increasingly pressed the company to investigate its supply chain. Its decision to release the findings underscores managerial differences between Cook and Jobs, analysts contend.

 

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