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Supplier Audits: Lessons From Apple.

RiskGlobal sourcingSupplier relationship managementCorporate social responsibilityEthicsCSR PoliciesLow Cost Country SourcingRisk MitigationSupplier AuditsSupplier PerformanceBlog+-
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If one company should know a thing or two about auditing its supply chain, it should be consumer electronics giant Apple. After being on the rough end of so many investigations into ’happenings’ within in its supply chain it has spent the last few years promising to step-up its auditing efforts and has gone a step further by detailing these efforts in its annual Supplier Responsibility reports.

 

In fact, Apple released its latest iteration of its Supplier Responsibility Report yesterday and what we found out about the audits it carries out may raise a few eyebrows.

 

First, suppliers must agree to the company’s Supplier Code of Conduct and Supplier Responsibility Standards, which set out requirements around labour and human rights, health and safety, environment, management systems and ethics. So far, so familiar. 

 

Any supplier being taken on is risk-assessed in the first instance. If they have been audited then those scores are taken into consideration when a decision is make to being that company into the supply chain.  

 

Before any major product launch, which requires suppliers to hire a lot more staff, an Apple team is sent to factories to "provide hands-on guidance" on labour and human rights issues.

 

Outside of this we also learnt that Apple uses on-site inspections. A team, led by an Apple auditor and supported by people from a third-party, is sent to a supplier and the company is graded on over 100 different areas. Surprise visits are also used, but more sparingly. Thus, in total Apple carried out 633 supplier audits during 2014 and 40 of these were un-announced, on-the-spot audits.

 

Any violations found during the audit, which for Apple might include underage workers being used, document falsification, intimidation of or retaliation against workers participating in audits and significant environmental concerns, are raised with senior managers both at Apple and the supplier itself. That supplier is then placed on probation until they successfully pass another audit. During probation that supplier is monitored closely and if no commitment has been shown to then the relationship is ended.

 

Apple claims that its approach is working, with more suppliers meeting its standards every year. In 2014, facilities audited two times scored 25% higher than those facilities with first-time audits, the company claims. Facilities audited three times or more scored 31% higher than facilities audited for the first time.

 

Having come under so much fire it is no surprise that Apple is keen to put this information out in the public domain, even for a company as with the kind of secretive tendencies Apple exhibits when it comes to its operations and supply chain.

 

While such an audit process would be overkill for many companies, it may be fairly standard practice for others. Of course, then, there are definite lessons to take away from this unfolding ’supply chain practices’ agenda. If you want to keep your company out of the headlines then you need to take a pro-active approach here and communicate that far and wide. 

 

Negative headlines are sure to come Apple’s way in the future but it can point to the fact that it is working hard to try and tackle such issues from occurring. Failure to show what you are doing and how will only increase the potential of you and your business coming under fire.  

 

Image courtesy of mama_mia / Shutterstock.com

 

This article is a piece of independent writing by a member of Procurement Leaders’ content team.

Tim Burt
Posted by Tim Burt