Apple & Foxconn: Financialization across the Pacific
It is always inspirational to find articles that, at first glance, fall out of our discipline, but, at second glance, change the way we think about supply chain phenomena. One of these articles is Froud et al. (2014): Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. This article argues “that thirty years ago favourable cost conditions helped build productive power in Asia, whereas now US financial power drives and benefits from low labour costs in China, using the very different supply chain positions of Apple Inc. and Foxconn International Holdings (FIH) as examples”. The article concludes by “observing that the rise of the post-national corporate player changes the alignment between large corporate interests and the US economy where Apple hoards its cash surplus and the success for the stockholders does not align with the broader needs of the US economy and society”. The perspective taken by the authors could be a very interesting complement to contemporary SCM courses.
Froud, J., Johal, S., Leaver, A., & William, K. (2014). Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. Critical Perspectives on Accounting, 25 (1), 46-57 https://doi.org/10.1016/j.cpa.2012.07.007
Are Apple’s Promises to Protect Workers Routinely Broken?
“Poor treatment of workers in Chinese factories which make Apple products has been discovered”, as BBC Panorama reports in an article. Is this just another example of the underside of global supply chains? Watch the video from the article.
Angora Wool
Last week, a shocking video, created by People for the Ethical Treatment of Animals (PETA), was published. The images cast a dark shadow over global garment supply chains. In response, brands like H&M and C&A halted manufacturing of items containing Angora wool. This case, again, demonstrates the importance of ethical aspects in supply chain management.
Horsemeat Supply Chains
Food supply chains are affected by supply chain trends such as globalization, consolidation, and commoditization. Supply chain managers have eagerly sought to apply textbook knowledge to these supply chains. Consequently, companies have concentrated on core competencies like processing or marketing to meet customer requirements. However, the horsemeat scandal is just another example to reveal that food supply chains got out of control. The more complex supply chain systems become, the less controllable they seem to be. Based on a series of incidents in food supply chains, Roth and her co-authors (2008) have developed a conceptual framework for quality management in food supply chains. The framework contains six Ts, which are identified as critical factors associated with food (or more generally: product) quality: (1) traceability, (2) transparency, (3) testability, (4) time, (5) trust, and (6) training. I believe that this framework can help improving food supply chains, but customers should also stop focusing solely on food price rather than food quality.
Roth, A., Tsay, A., Pullman, M., & Gray, J. (2008). Unraveling the food supply chain: Strategic insights from China and the 2007 recalls The Journal of Supply Chain Management, 44 (1), 22-39 DOI: 10.1111/j.1745-493X.2008.00043.x
The End of SCM in China?
Previous studies about SCM in China have highlighted that uncertainty in the supply chain can be reduced by process flexibility, information sharing, and process integration. However, a new study by Roland Berger Strategy Consultants, titled The end of the China cycle?, warns that “the value proposition for many firms in China is disappearing as the competitive cost advantage is beginning to erode relative to other countries” and that “government policy and social issues are further compounding the complexity of doing business in China”. The authors argue that some industries in China have already passed the tipping point. As China is in transition towards high-value add manufacturing, firms need to rethink the strategy of their manufacturing footprints. Supply chain managers will continue to face volatility and uncertainty, also in China, but the new study demonstrates that managers can seize the opportunity right now. However, the Chinese window is closing quickly.
Supply Chain Management in China
China has become a major player in the world economy and is one of the most attractive markets for foreign market entry. However, only a few studies have examined the success or failure of these entries. The study Operating Successfully in China by the TU Berlin in cooperation with WHU – Otto Beisheim School of Management highlights two strategies to cope with a dynamic and complex market environment: Process flexibility of companies as well as the level of collaboration with supply chain partners. The results are based on the responses of 248 decision-makers of German manufacturing facilities located in China. On the one side, it is recommended that companies should strengthen process flexibility in order to respond to high dynamics and local-specific requirements. On the other side, the findings imply that a higher level of information sharing and process integration with suppliers, customers, and logistics service providers reduces uncertainty and leads to better performance results.
