This month, I’d like to study the global impact of some local practices. Recently, two examples lead me to this topic.
First, the especially strong article on the workers in American prisons (here). Several times, the article refers to unfair competitive advantage that prison labor creates. The supply chains using this labor source are indeed enjoying cheaper labor costs than for the free workers. We have to point out it is not a minor topic as one can think, as there are about 2 millions persons in the American’s prisons. Still, the prisoners haven’t a real choice on their employer, thus working conditions and wages can’t really be fairly negotiated. I don’t want to state if it is an unfair competition for the brands (as subcontracting in prisons is not reserved for some specific brands). But I want to point out the consequences on the global supply chain. Factories have to compete with “made in America” productions with cheaper labor costs. The obvious solutions for these factories is to try to lower their own labor costs too to remain competitive.
The second reason for me to choose this topic are two similar discussions I had on two consecutive days. Two importers reported me the same problem and their impossibility to understand their current business shift. A customer is buying some goods on regular basis to the importers. This customer has a responsible approach and has pushed its importers to improve their factories’ level. Indeed the supply chain level has improved over the years and is now usually over the local prevailing practices. But, since few months a newcomer is proposing prices lower by 15 to 20% to the production costs of the initial importers although the goods are produced in the same area. They have then stressed the impossibility of such situation and suspect either the product to be different or the labor costs to be much cheaper. Actually, they don’t really suspect the product to be much different, but they have to take this possibility into account. As a buyer it seems important to check where this cost difference is coming from and not only enjoying the bargain. The consequences on the supply chain are important and can already be seen. The dissimulation of the true situation of the factories is increasing and some are thinking of lying policies. Thus, here again the consequences on working conditions in the factories will be to bring the social level down.
Choosing a factory in a supply chain is then not only an individual choice, but it impacts the whole supply chain. As soon as the buyer is important. Thus the big players actually make the supply chain and its working conditions as much as they have to deal with it.