A recent report describes an audit conducted by Apple Computer of its suppliers that uncovered 17 core violations pertaining to Corporate Social Responsibility at 60 facilities. These violations included excessive recruitment fees, use of non-certified vendors for hazardous waste disposal and falsified records. At least one supplier was terminated as the audit found the same problem had been uncovered the year before.
We wonder if Apple added the cost to audit, apply corrective action and then terminate unrepentent suppliers to its total cost of outsourcing in these ‘low cost regions.’
One of the most common discussions we have with our OEM clients is related to how much they spend internally in support of their outsourcing
initiatives. This is never an easy number to pin down, as the methodology used to support and manage these types of initiatives varies considerably from company to company and each situation needs to be carefully reviewed.
initiatives. This is never an easy number to pin down, as the methodology used to support and manage these types of initiatives varies considerably from company to company and each situation needs to be carefully reviewed.
But in the case of the situation described in the report cited above, I’d be very skeptical of any analysis that found the time, money, and potential brand compromise of having to perform this level of diligence (and corrective action!) as being justified by the purchase price advantage achieved from these geographically remote, so-called lower labor-cost solutions?
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Wow. You may have good reasons for your opinions, but the financials certainly don’t support your position. With nearly $25B in cash, revenues of nearly $50B and profit margin over 20%, this is one of the most successful commercial enterprises in history.
From Charlie:
Thanks for your comment. Just one thing to add:
“It takes 20 years to build a reputation and five minutes to ruin it.” – Warren Buffet.
Ron Wilson expands the concerns to design outsourcing on EDN’s blog: http://www.edn.com/blog/1690000169/post/1320052932.html
As opposed to the above people – I take your article as a stepping stone to the principle of calculating your out-sourcing costs accurately. These should include the oversight & support costs – that a customer gives to their contract manufacturer.
As a contract manufacturer based in China (but owned and hands-on managed by expats) we are well aware of this. Often we are compared to the local suppliers. Their prices might be lower (sometimes) but they require much more oversight and support…when a customer doesn’t take this into account – the local supplier can look more cost effective.