Providing strategic advice and market insights for optimizing manufacturing relationships and achieving profitable environmental strategies to clients in the Americas, EMEA, and Asia since 1987.By Kimberly Allen, Ph.D., TFI Environment Consultant
Worker in South India, where LaborVoices has pilot program
Electronics industry supply-chain executives are well aware of the challenges with supply-chain management. Fortunately, advances in communications technology combined with the techniques of social enterprise are enabling executives to access deeper and more accurate information about suppliers’ operations. The secret? Workers on the factory floor.
The challenges are clear. Companies that experience supply-chain disruptions show a 40% decline in shareholder value compared to their non-disrupted competitors. And regulations are getting more stringent: California now has a law requiring companies to report on their Tier 1 and 2 suppliers regarding slavery and human trafficking. The Dodd-Frank Act requires assurance that conflict minerals have not been used. The current system relies on self-reporting or various types of inspections, neither of which is satisfactorily reliable or accurate.
LaborVoices offers a new type of supply-chain intelligence. Rather than relying on experts such as factory managers or 3rd-party inspectors, it utilizes the crowd-sourced intelligence of many factory workers. Laborers can submit direct, real-time information about the working conditions and practices over their cell phone, supplying the critical “last mile” of data that has so far gone untapped.
Although LaborVoices’ reports can serve as social and environmental tools, they offer far more because they can also address real operational issues. For example, suppose it is revealed that workers are not being paid on time at a certain factory. This could indicate a cash flow issue that supply chain executives would want to know about. It is even possible that the factory manager was not aware of the payment delays and is hence alerted to some internal problems.
Here’s how it works: A company (such as an electronics or apparel vendor) presents LaborVoices (LV) with its thorniest issue, such as a particular factory or region that is of concern. Within about a month, LV ramps up its technology and creates a social infrastructure of partners in the region (NGOs, trade unions, etc.). Then LV starts collecting data from workers and, with the customer, co-creating a useful intelligence flow in the form of a dashboard. Data arrives in real time, is analyzed by LV, and presented to the customer in a report.
This creates benefits for all parties:
Pilot operations have been set up in South India, proving the effectiveness of the technology. LV is in discussions with potential customers in the electronics, apparel, and toy industries. It has also spoken with the EICC (Electronics Industry Citizenship Coalition) about possible coordination of data standards.
According to Dr. Kohl Gill, founder and CEO of LaborVoices, “We want to set ourselves up as the gold standard in intelligence. We are primarily concerned with supplying accurate and useful data about what is actually happening in factories.”
It is clear that this detailed level of data-gathering offers something radically new for the electronics supply chain. One can’t help but wonder whether it might have averted some difficult and tragic supply chain disruptions, such as those emerging from problems at Foxconn.
As you consider your own supply chain, how might this kind of “last mile” information be helpful to you? How would you engage a product like what LaborVoices offers, and what would you like to see it do? Post a comment and share your thoughts.
Tags: contract manufacturing, electronics manufacturing, global supply chain, LaborVoices, supply chain, supply chain disruption
The concept of employees being able to communicate without fear of retribution is a noble one. Currently, third-party companies that audit for Corporate Social Responsibility do incorporate anomymous surveying as part of their audit process…with limited success. Even if workers feel their identity is protected, most are not going to reveal anything that might hurt the companies bottom-line. Perhaps this a difficult concept for Westerners to accept. We embrace the “whistle-blower” as an individual of noble intent. That same distinction is not embraced globally.
The Foxconn debacle tells us some interesting things about social responsibility and consumerism e.g. it is not stopping or slowing the purchase of Apple products. Instead of fostering better working conditions and better compensation, it has merely prompted Foxconn CEO Terry Gou to look towards moving manufacturing farther inland…away from watchful eyes. Dr Allen tries to correlate the Foxconn troubles with supply-chain disruptions. With the exception of the explosion at one of their factories, there have been no disruptions–certainly non that can be attributed to worker abuse.
Since we’re the first in this field, we’re far from having it all figured out. We’re very interested in hearing how readers would use this kind of tool to gather operations-relevant intelligence from global supply chains. Keep the questions and comments coming!
@Willy Your comments are spot-on. What we’ve seen so far with our users in India is that they are willing to speak out about their employers, as long as they’re approached in the right way. We connect to users via organizations that already have workers’ trust—which requires a bit of time and relationship-building between LV and the local organizations that snapshot inspectors can’t typically afford.
Of course, another key in all of this is bringing leading brands and best-in-class suppliers along, as they are typically making investments in their conditions that are not currently rewarded by the market. We’re confident that last-mile transparency can help those leaders realize those returns, whether we’re talking about inland China, or St. Louis, MO (our own HQ).
The concept of the “Last Mile” is intriguing in that it can deliver a level of transparency that is not available today. One can only imagine that the stories we have heard with regards to sub-standard working conditions are only the tip of the ice-berg and there is a considerable replication in low cost manufacturing countries.
While some of the value of the low cost incentive has been eliminated and in fact there is a certain amount of migration of manufacturing back to corporations parent countries, how might the picture be different if the truth about working conditions was understood long before the horror stories came out. That is not to say that every factory in a low cost manufacturing country has worker issues, in fact I suspect most do not especially those that are managed/owned by the parent company that has a keen sensitivity to their brand equity. However, whenever a blind eye is turned purely for profitability instead of maintaining control and diligence on creating a sustainable environment, bad things can happen.
Besides the “Last Mile” social initiative being a hammer, I believe it has the potential to shine a light on those companies that are doing it right. A beneficial aspect can also help build great support for a concept that is prime for the time.
I think you’re on to something, @Daniel. We’re really interested in the reaction of workers, especially those that are migrating from villages, once they know what the actual conditions are at the end of the migration chain. We’re hoping that those workers will be able to choose migration routes that get them safely into jobs that meet their needs.
We’re also really interested in how workers unpack their needs. Not every worker is interested in the highest wage, for example, as some prefer better hours, child care, transportation to the site, and other amenities. As the best-in-class employers become known across an industry, we expect they will get rewarded for their investments by a steady source of skilled workers, lower turnover, and better operations.
As this “light” gets to the darkest corners of our global economy, we expect that our users will vote with their feet, and that buyers will vote with their contracts to support higher standards for both compliance and operational reasons.