OM in the News: The “Conflict Minerals” Supply Chain Dilemma
“Hundreds of U.S. companies are coming up short as they face a deadline to reveal whether their supply chains contain even trace amounts of minerals linked to violence in Africa”, writes The Wall Street Journal (Aug. 4, 2015). The finding illustrates the challenges companies face in keeping tabs on all of the players and materials in their global supply chains. In all, companies shelled out roughly $709 million and 6 million staff hours last year to comply with rules to disclose “conflict minerals” in their supply chains. And next year, they will need to hire auditors to evaluate their results.
“Conflict minerals” include tin, tantalum, tungsten and gold originating from the Democratic Republic of the Congo. That country holds vast reserves of these 4 minerals, which are widely used in a flurry of products, from electronic devices to engagement rings to auto parts.
But tracking materials from more than 2 million miners in the Eastern Congo that smelt small amounts of metals—and determining their links to guerrilla operations—is like trying to “apply modern supply-chain logistics to the 1849 California gold rush,” said one consultant. To track the origin of tantalum, companies often have to dig 4 or 5 layers deep into their supply chains, as the material travels across the globe to various parts manufacturers.
Only 314 companies, or fewer than 24% of the total, reached full compliance with the law. The U.S. Commerce Department was supposed to publish a world-wide list of refiners and smelters that are being used to fund militia groups, but it said in September that the task was impossible.
Classroom discussion questions:
- Why are “conflict minerals”, sometimes also called “rare earths”, so important to manufacturers?
- What is the supply chain issue being faced by managers?