OM in the News: Apple’s Transparent Supply Chain
Apple has reached what it’s calling a milestone in supply-chain transparency, saying it’s now auditing 100% of its suppliers for the use of conflict minerals linked to violent militia groups in the Democratic Republic of the Congo, reports Businessweek (March 28-April 3, 2016). The iPhone maker has been working since 2010 to remove minerals connected to these groups from its supply chain, and while it isn’t yet declaring its products totally conflict-free, the company said all of its 242 smelters and refiners of tin, tantalum, tungsten and gold are now subject to third-party audits. That figure is up from about 88% at the end of 2014 and 44% in 2013.
“We could have very easily chosen a path of re-routing our supply and declared ourselves conflict-free long ago, but that would have done nothing to help the people on the ground,” Apple’s COO stated.
Apple, which uses the minerals in its mobile-phone processors, motherboards and screen displays, is required to investigate its supply chain for the presence of the minerals under the 2010 Dodd-Frank Act. The law is meant to choke off revenue to violent militia groups in African nations. More than 1,300 companies file annual conflict minerals reports, but few have been able to fully audit their supply chains and determine if their products are free of the minerals. Only a handful, such as Intel, have been able to say they sell conflict-free products.
To reach a fully audited supply chain, Apple spent 5 years “cajoling, persuading, and even embarrassing suppliers by publishing their names.” Apple has spent hundreds of hours in the region and also kicked out 35 smelters from its supply chain because they wouldn’t participate in the audits. The company started saying in 2014 that it would end supply contracts with companies that didn’t take part in the audits.
Classroom discussion questions:
- Why is it so hard to validate Apple’s supply chain in Africa?
- Why is supply chain transparency a major OM issue?