FOXCONN IPHONE 5 WORKER DISPUTES SHINE A LIGHT ON UNSUSTAINABLE LOW COST LABOUR STRATEGIES

Foxconn and iPhone 5 dates and numbers

Some 3 weeks after the launch of Apple iPhone 5 the dust is settling, even as worker discontent is kicking up a storm. Tracking the story’s key dates throws up some huge numbers that reveal the scale of Apple manufacturing partner Foxconn’s operations:

• Friday 21 September – the global launch of iPhone 5, with 5 million units moved in 3 days
• Sunday 23 September, at around 11PM – a 4 hour riot at the Foxconn plant in Taiyuan by 2,000 out of the workforce of 78,000, which makes small quantities of iPhone 5 cases
• Friday 05 October – up to 4,000 out of 120,000 workers walked out on strike at the Zhengzhou Technology Park ‘factory city’, after uplifted iPhone 5 quality control standards provoked worker unrest which management ignored

These events had relatively little or no impact on iPhone 5 production. Foxconn’s China operations are truly resilient, spread over 13 plants and employing a total of around 1.2 million workers.

Upsurge of worker unrest in China

These events highlight an upsurge of labour disputes across China since May; without the launch of iPhone 5, this may have gone largely unnoticed by many in the developed world. The underlying issue is one of low-cost labour; ramping up for iPhone 5 production is alleged to have led to excessive demands to work overtime and students being used as ‘interns’. Around 5% of the retail price of electronics and other consumer goods produced in China are believed to be labour costs.

Reports at the FT.com say: “Analysts said the violence demonstrated that Apple and Foxconn’s reliance on low-cost labour was unsustainable, despite production changes made after a series of suicides in 2009.” Escalations in poor labour relations and the resulting disruptions to manufacturing schedules and targets may disrupt the supply chain; however, the commentary from those looking at the social and political significance for China believe it is a good thing – ultimately China’s workers will gain better pay and conditions.

Prepare and keep in step with change with NetSuite

Rising labour costs present problems for supply chain managers, as does disrupted manufacturing. Foxconn, which assembles around 40% of all consumer electronic products in the world, has operations in 9 countries on 3 continents. It has just announced a £300 million investment in Brazil, creating 10,000 jobs. Although this is dwarfed by its capacity in China, it shows that it is preparing for change by increasing capacity elsewhere, even if labour costs in Brazil are 7x higher.

Where ever the far end of your supply chain is anchored, worker unrest that puts upward pressure on labour costs inevitably impacts the TLC (Total Landed Cost) and lead times of wholesale goods. In order to keep in step with change, supply chain managers need access to real time information to make timely decisions. How quickly could your business assess the impact of a 7x increase in labour costs?

NetSuite cloud-based ERP enables you to assess the different variables that impact your profitability and optimise your wholesale distribution business. BlueBridge One is one of only two UK service providers to win a NetSuite 3 Star Award. Click here to see some of the source reportage for this blog from FT.com. Click here to register with us now for a 14 day FREE trial.

Click here to see some of the source reportage for this blog from FT.com.