High Profit And “Fear Factory”

Last week we talked about inventory management and supply chain management which play very important roles in business management. Under the influence of globalization, many large international companies are involved in the global supply chain management and inventory management. A classical example is Boeing’s supply chain. To produce one airplane need more than 20 international suppliers in 12 countries. Since each country has its own areas of expertise, these international suppliers use their best technology to produce the aircraft parts which reduce the cost and improve the quality. So I think Boeing is one of the perfect products of global supply chain management. However, each coin has two sides. Although global supply chain has many advantages, it still has some drawbacks such as high risk, transportation problem, and political issue. To be successful, global supply chain has to be able to deal with unexpected issues and find a good way to solve the problems. And it is also important for a company to choose an appropriate supplier and manage it.

There has an article from Wall Street Journal indicated that a phenomenon of the exploitation of workers exists in Apple’s factory in China. This report definitely has a negative influence on Apple Inc.’s reputation. Apple Inc. has released a list of its suppliers couple weeks ago. This list included 156 suppliers and a report about those suppliers’ working environment and welfare issues. According to the report, 62% of Apple’s suppliers allow their workers work more than 60 hours per week and five factories hire minor workers. Hon Hai precision Industry Co. located in Taiwan is one of the main suppliers of Apple. It was called “fear factory” since a series of staff suicide occurred in 2010. Last week, Apple Inc. released their annual financial report. Since the demand of iphone and ipad has dramatically increased during the vacation, apple earned a huge profit with 131 billion dollars. I think Apple, as a high profit and high influence international company should pay more attention on their suppliers instead of just pursuing high profit.

What do you think Apple can do to improve their supply management?



High-Tech Companies move to China

From the last week we learned about globalization and forecast. With the development of economics and business, the world is becoming flat. Globalization can rational allocate resources and production facts in the world. It can promote the economic development of developing areas; reduce cost, conduct to the expansion of science and technology. However, globalization is not only an opportunity but also a challenge for every country. For those developing countries that have backward science and technology and low level of economics, the risks and challenges they faced will be even more severe. The deeply development of economic globalization and multinational companies brought significant force to the world trade and at the same time, brought many uncertainties and new features and conflicts.


The China’s entry into WTO has a huge influence in the global business. A decade ago, China had the lowest labor cost all over the world, companies from different areas rushed into China and built up their industries there to cut down the cost. As a result, majority of the products in the U.S.A are made in China now. That’s why when talking about China, many people think about words like cheap, low-labor-cost. Nevertheless, with the rapid economic growth and increasing cost of the row material, Chinese product is not the cheapest anymore and many high-tech companies move into China.


According to the article from the Wall Street Journal, in the past few years, Chinese labor cost has been increased continuously. John Menzer, CEO of Michaels Stores Inc. said the labor cost of the company has increased 15% to 20% last year. And the main problem this year is to find methods to cut down the cost such as decreasing the transportation cost. Even though, they still have to increase the price of some products. And many other companies forecasted that the increasing of the cost would not stop next year. I think under this circumstance, those companies will shift their industry to other countries which have a lower cost like Vietnam.


Although Chinese lost jobs since some companies withdrawing from China, many American companies set up their research-and-development labs in China. George Buckley, the CEO of 3M Co. said that since most of Americans are not interested in science, they expected to have more high-tech human recourses from Asia countries so that their products can meet the requirements of different consumers and governments.


China is not only providing low-cost and low-tech products but also attracts more and more high-tech companies. Americans are now losing high-tech jobs now. What do you think about American companies move their lab to China and elsewhere in Asia?