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OM in the News: Flawed Inspections of Factories Abroad

September 4, 2013
Factory inspection checklist audit form

Factory inspection checklist audit form

A major New York Times (Sept. 2, 2013) investigation reveals how the factory inspection system intended to protect workers abroad and ensure manufacturing quality is riddled with flaws. The inspections are often so superficial, writes The Times, that they omit the most fundamental workplace safeguards like fire escapes. And even when inspectors are tough, factory managers find ways to trick them and hide serious violations. There is little enforcement or follow-through to guarantee compliance.

Inspectors, for example, came and went from a Walmart-certified factory in China, approving its production of more than $2 million in specialty items. But unknown to the inspectors, none of the items had been manufactured at the factory. Instead, Chinese workers sewed the goods at a rogue factory that had not gone through the certification process set by Walmart for labor, worker safety or quality. A subcontractor just moved the items over to the approved factory. Soon after the merchandise reached Walmart stores, it began falling apart.

As Western companies use low-cost foreign labor for manufacturing, factory inspections have become a vital link in the overseas supply chain. One expert said little had improved in 20 years of factory monitoring, especially with increased use of the cheaper “check the box” inspections (click on attached graphic) at thousands of factories. “The auditors are put under greater pressure on speed, and they’re not able to keep up with what’s really going  on,” he said.

Monitoring companies have established a booming business in the 2 decades since Gap, Nike, Walmart and others were tarnished by disclosures that their overseas factories employed underage workers and engaged in other abusive workplace practices. Each year, these companies assess more than 50,000 factories that employ millions of workers. Walmart alone commissioned more than 11,500 inspections last year. But unauthorized subcontracting is very common, and audits can be very brief. A single inspector might visit a 1,000-employee factory for 6-8 hours.

Discussion questions:

1. If monitoring systems are failing, what is the next step?

2. Why have overseas manufacturers resisted major changes?

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