Global supply chains refer to the movement of products and services across various destinations for processing and marketing. The flow of raw materials, the inventory management system, such as storage systems, and the distribution to the point of consumption are processes involved in the worldwide operational systems. The management of these activities takes a complex approach with companies developing cost-cutting strategies in their operations. (2016) aver that effective application of outsourcing processes reduces the operational costs of companies. The competitive environment occasioned by players in the technology sector, including Apple, Samsung, and Huawei among others, has influenced the exploration of competitive labor markets across various offshore destinations aimed at reducing their operating expenditures. Although organizations have the right to operationalize cost-cutting measures, the models used in the process are exploitative and do not observe occupational and safety standards of employees.
Inexpensive sources of material influence global outsourcing systems. Thus, the majority of companies are implementing globalized approaches to labor, supply chain, and distribution systems. Large companies such as Apple and Samsung operating within and outside the United States are outsourcing their services in developing nations like Taiwan, China, Czech Republic, and other countries with relatively competitive labor markets (Lee, Mol, & Mellahi, 2016). For example, material suppliers for the Apple Company are based in Japan, Ireland, and Korea, an approach that creates a stronger business partnership (Lee, Mol, & Mellahi, 2016). According to Beckert (2015), companies endeavor to justify the application of competitive supply chain systems by negotiating for cheaper markets through material and labor outsourcing. Firstly, companies advance preferences to process and import finished products from offshore corporations instead of importing raw materials for processing to avoid the import duty. Secondly, organizations form partnerships with local firms in developing countries for warehousing, inventory, and logistics, which are relatively cheap, compared to the rate in their head offices. Thirdly, the availability of highly qualified labor at competitive rates informs the preference of multinational corporations for offshore operations. To ensure companies manage their operations effectively and attain their projected milestones in regards to growth and profitability, the choice for a cheaper solution, such as labor, material acquisitions, warehousing, and inventory management system, has gained approval in many organizations.
Therefore, as companies endeavor to seek cheaper operational frameworks and attain competitive advantage, employees have been the greatest victims. Several companies operate in countries with weaker regulatory frameworks to take advantage of cost-cutting measures. For instance, according to Merchant (2017), the transition of Apple from Foxconn Company to Pegatron was influenced by the ability of the latter to produce cheaper versions of the iPhones 5 series. Notably, Foxconn was demanding a 1.7% markup on its entire operations while Pegatron demanded a meagre margin of 0.8%, but still projected to gain profitability (Lee, Mol, & Mellahi, 2016). Therefore, the focus of companies is in cost-cutting and achieving better business incentives compared to the interest of employees.
In addition, employee protection has been inadequate on the agenda of global outsourcing systems. The strategies adopted by the companies empirically focused on growth and profitability. The case of British manufacturers from Indian competition explains how they are protected from stiffer competition in the market (Beckert, 2015). Likewise, the struggles to cushion the U.S. market by opening up access in Latin America illustrates the synergies that are employed to protect the manufacturers’ interest compared to the employees. The primary concern of the workers is the effectiveness of the labor and occupational safety standards implemented through recognizable regulations. Employees continue suffering from poor working conditions and low motivational levels as companies continue with the models to reduce their operational costs.
Furthermore, the circumstance surrounding the death of Foxconn’s employees is a significant example that elucidates the levels of frustrations faced by workers in the business-to-business outsourcing arrangements. The reports by the Guardian newspaper where more than 18 personnel under a contract between the Apple Company and Foxconn are reported to have committed suicide due to job-related frustrations portray the failure to manage workers’ interest (Merchant, 2017). Similar incidences of mishandling employees demonstrate how China attracts overseas companies, which outsource from the country due to better tax and tariffs as well as improved supply chain systems (Barboza, 2016), who. Therefore, China’s primary objective is to develop a giant technological system that improves GDP and supports outsourcing with little regards to labor relations.
As it is evident from the discussion, the technology sector is being adopted in manufacturing and production departments. Firms are targeting swift and cost-effective measures in their material acquisitions, logistics, and distribution systems to realize growth. Hence, to ensure the attainment of operational indicators, companies are focusing on destinations with highly skilled and relatively cheap labor. As a result, product quality has been achieved for those companies but with ethical concerns and labor abuse. Therefore, it is incumbent upon the global consumers and stakeholders, including governments and media, to investigate such abuses and take action such as boycotting those goods.
Beckert, S. (2015). Empire of cotton: A global history. New York, NY: Vintage.
Merchant, B. (2017, June 18). Life and death in Apple’s forbidden city, The Guardian. Retrieved from https://www.theguardian.com/technology/2017/jun/18/foxconn-lifedeath-forbidden-city-longhua-suicide-apple-iphone-brian-merchant-one-deviceextract
Barboza, D. (2016, December 29). How China built ‘iPhone city’ with billions in perks for Apple’s partner. The New York Times. Retrieved from https://www.nytimes.com/2016/12/29/technology/apple-iphone-china-foxconn.html
Lee S. H., Mol M. J., & Mellahi, K. (2016). Apple and its suppliers: Corporate social responsibility. London, UK: Ivey Publishng.