11-Supply-Chain Management

Boeing, flying high once again?

Posted on by Dom

After 15 months and millions of dollars spent, the Boeing 787 Dreamliner has resumed commercial flights. The groundbreaking jet, introduced in July 2003 was dubbed as the next generation airplane that would revolutionize the way air travel operated. Soon after preliminary flights, major aircraft corporations began to notice technical and mechanical issues that affected the reliability of the jet. These problems resulted in flights being delayed and cancelled. In January, two 787s owned by Japanese airlines experienced burning batteries that would later ground all 787s.

Prior to the grounding, delivered 787s logged a reliability rating of 97.7% (23 delays/cancellations out of 1000 flights). This result was comparable to the long tested and proven 777 that that 787 aims to replace. As technology expands, systems become more intricate and coincide with higher rates of failure. The 787 is an example of new age lithium-ion batteries, electrical systems, and computer systems that alter service requirements. This plane alone requires 10 times more power during startup than traditional Boeing planes, computer and electrical systems to be turned on three hours before each flight, and scheduled maintenance in between each flight.

During this downtime Boeing continuously has been mass producing these airplanes to fill the 800+ orders that have been filed from 50+ customers. By April 2013, 50 planes have been built and delivered to their respective companies. However, this plane does retain more positives than negatives, thus accounting for the 800+ orders. With this new technology, the planes will be able to be serviced in as little as 45 minutes. This will allow for companies to keep their planes in the air instead of on the ground. In addition, new light weight materials have been used and new fuel efficient engines fitted on the wings that allow for longer distance flights without using more fuel.

Aboard the new computer system, Boeing has also included a transmitter that will upload the airplane’s data to a world-wide network managed by Boeing’s facilities near Seattle. This system will track each jet’s information, making it easier for mechanics to fix any issues that may have occurred during a flight. This system will also allow for Boeing to monitor necessary maintenance updates as well as be able to ground any planes that it deems unsafe to fly.

Years behind schedule and plagued with problems, the Boeing 787 did not have a successful start. Boeing executives believe that in the future years to come, this plane will be more reliable than the 777 and project a reliability rating of 99+%. The 787 is a key example of problems during the operations strategy of a company and their ability to overcome difficult situations that result in millions of dollars of losses. At this point the 787 is operational, but if similar problems occur in the future, Boeing may lose potential orders.

With so many problems occurring with the 787, do you believe that its main competitor (Airbus) may be regarded as a safer investment?

What do you believe lies in the future for the 787? Will it continue to experience more problems or will it beat the projected 99+% reliability?

Works Cited
Ostrower, Jon, and Andy Pasztor. “Dreamliner’s Other Issues Draw Attention; Boeing and Airlines Try to Improve More Systems After Fixing Battery Flaws.” Wall Street Journal (Online): n/a. May 20 2013. ProQuest. Web. 22 May 2013.

Automation, Good or Bad?

Posted on by spr1322tkrolicki

Many of you have probably heard about a company called Foxconn, they do the manufacturing for various products, such as the Iphone and Xbox. They have been running into a problem recently, and that is achieving profitability for the company. In 2010 there was a huge outbreak of suicides at their Chinese plant, because of horrible working and living conditions.This prompted the company to give employees a raise increase to $325 per month from $195.It also spurred Foxconn to speed up its pursuit of automation. The company’s president, Terry Guo, said in 2010 that it would produce 1 million Foxbots, a mechanical arm researched and developed by Foxconn to perform dull and dangerous jobs. The robots would be implemented from 2012 to 2015 to increase the rate of automation and productivity. Foxconn had hoped that by replacing humans with robots, production would become much cheaper and make the company profitable again. However, they soon learned that automation might not be the answer.

“The transformation from workers’ manual labor to using the robots means the models of production will be changed and the changes are complicated,” said Xu Fang, director of the Center Research Institute at high-tech company SIASUN Robot & Automation Co. Ltd. Since some jobs at Foxconn require workers to use their judgment and even though the tasks appear simple, robots cannot be used to perform them because they lack decision-making ability. Another interesting situation with Foxconn is that they dont design the products that they manufacture, the product is already designed when it is brought to them. As Yang Zhiqiang, editor in chief at automation website gkong.com, said. “After all, Foxconn is a manufacturer for other companies’ original equipment and its clients have already completed the product design, so if a company wants to use robots to make products, at the beginning the company needs to consider the robot design in order to fit the production line.” This whole scenario proves a couple things to me, number one although automation may seem like the route to go in the technology filled world we live in, it may not be the most sensible. The other thing this story showed me was that maybe if managers treated employees with a greater level of respect and compensation for their work, there would be no need for buying the expensive equipment involved with automation. If you employees are not happy, there is no way around it, your company will fail, and it is managements job to make sure this does not happen.

 

Work Cited

Xuena, Li. “Why Foxconn’s Automation Hasn’t Been Smooth.” Market Watch. N.p., 14 May 2013. Web. <http://www.marketwatch.com/story/why-foxconns-automation-hasnt-been-smooth-2013-05-14?pagenumber=2>.

 

A Thousand Lives: The Hidden Cost of Clothes

Posted on by spr1322mjamil

Three weeks ago the Rana Plaza factory building in Bangladesh collapsed, killing 1,127 people. A majority of these were workers producing garments for sale in the United States and Europe. The factory manufactured apparel for brands including Benetton and Walmart among others. An investigation revealed that the building was deemed unsafe just days before the collapse, but factory supervisors ordered their employees to continue working in these hazardous conditions.

jp-bangladesh1-articleLargeThe obvious question is why a tragedy like this would occur, even after there had been a forewarning. The answer is because factories like Rana Plaza and others in Bangladesh are under immense pressure to produce a high volume of low-cost garments for their biggest buyers, Walmart, H&M, Inditex (which owns Zara), and Gap to name a few. These companies pride themselves on their ability to get apparel into stores only weeks after designing them. However, this incredible efficiency requires a tremendous amount of manual labor, and no where are labor costs cheaper than in Bangladesh. The massive global supply chains of a majority of apparel manufacturers flow through the South Asian country which trails only China in terms of garments exported. Unfortunately, most of the large Western companies are unaware of the conditions that exist in the factories where their products are being produced.

The latest tragedy has finally caught the attention of European and American companies. This past week H&M, the largest buyer of garments from Bangladeshi factories, agreed to a plan to improve fire and building safety in Bangladesh’s apparel factories. The five-year plan calls for independent safety inspections and for companies to make the findings public. Joining H&M were Inditex, the world’s biggest clothing retailer, and several other European apparel companies. However, PVH, the owner of brands such as Tommy Hilfiger and Calvin Klein, is the only American company that has signed the pact. Companies including Gap, Walmart and JC Penney have considered the plan, but have not yet signed on, mostly due to the cost and how legal issues would be resolved.

130430150217-made-in-bangladesh-620xaI believe this safety pact is a step in the right direction on the road to abolishing subpar working conditions around the world. Therefore, from a management perspective, I think that companies that are not signing the pact, like Walmart and JC Penney, are making a mistake. Not signing sends a negative message to consumers and investors, if the companies are unwilling to spend money to protect human lives customers will question the ethics of the company’s management. Ethics is an important facet of operations management. The managers at American apparel companies need to recognize these issues, like their European counterparts have, and address the dangerous working conditions that exist in their supply chain. I think in the long run the benefits of ensuring safe conditions for all in the supply chain will outweigh the cost.

What is your opinion on the decision of many American companies to not sign the safety pact?

Do you think it is the duty of American companies to ensure the safety of workers in foreign countries?

 

Sources

http://www.businessweek.com/articles/2013-05-13/h-and-m-pledges-to-make-bangladeshi-factories-safer 

http://www.ft.com/cms/s/0/79cedd4e-c000-11e2-b19c-00144feab7de.html#axzz2TmPslBBP

http://money.cnn.com/2013/05/13/news/companies/hm-bangladesh-safety/index.html

http://www.nytimes.com/2013/04/25/world/asia/bangladesh-building-collapse.html?pagewanted=1&_r=0&hp

http://www.bloomberg.com/news/2013-05-14/h-m-inditex-joining-bangladesh-pact-pressures-wal-mart-retail.html

For GE: old school is new school

Posted on by spr1311sabraham

 

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General Electric (Ticker “GE”) Fortune Magazine World’s Most Admired Companies at rank 11.  GE is the single surviving company from the 1896 Dow Jones Industrial Index and currently has  roughly 305,000 employees and over 140 billion dollars in revenue last year [GE 10-K for the year ending March 31, 2013].  I believe it is safe to say these guys know what they are doing.  They are in the business of designing and manufacturing appliances plus energy, health, aviation, and transportation equipment in addition to operating a financial services company.

Due to GE’s aggressive and hard pressed past, there are very few companies with the same or even similar brand recognition, especially as they have had such a long standing track record.

Though a mammoth company, GE too had troubles fighting down turns in 2008.  GE’s financial services wing, GE Capital, found itself holding just about half of GE’s profits.  GE Capital was having difficulties and thus GE had to cut its dividend which was a huge blow to its image.  All of this finance/business aspect of the company then affected how GE would then change its ways operationally.  GE realized it needed to simplify, and was most definitely a task involving and most reliant on its operations management team.

Most interesting for me was the refocus on a portfolio of the company to refocus on its traditional core industries.  That is, they are now going to focus and dominate at what they are good at.  For example, in 2012 GE began to make water heaters which was its first new product in 50 years.  The site that it was built on was named Appliance Park, KY (notice any connection?) though this site had been used less and less due to favorable overseas factories which were much cheaper.  Interestingly, in 2009 GE shifted toward moving those overseas jobs back into the domestic light.  This process is just being finalized and in full swing.

The result?  A cheaper and much more rapid production thanks to an efficient domestic supply chain perfected by the company.

Another interesting note about this company’s changes: GE is spending money on investments in the “industrial internet” in order to take hold of ‘big data’ to make more efficient machines.

Things to think about:

-How do you think GE asses’ its ‘utilization’ and ‘efficiency’ for its production facilities now that there is a fully implemented shift into domestic production for this large company.

-We discussed in our course lecture the concept of ‘planning over a time horizon’.  How do you think GE will have to change the way it plans its capacity or the upper limit or ceiling on the load that an operating unit can handle?

-We have seen virtually all large companies using automation and focusing on capacity.  We just discussed this in the course lecture last week.  How do you think GE’s focus on investing in the “industrial internet” will change the efficiency of their production machines?  Do you think this will be a drastic change? Something they won’t see for a long period of time?

Link to this CNN Money Article: http://money.cnn.com/2013/05/06/leadership/general-electric-industry.pr.fortune/index.html

American Security and the Supply Chain

Posted on by spr1324mszewc

A recent report for the Alliance for American Manufacturing claims that the U.S. is risking its national security with its growing reliance on raw materials, parts and finished products purchased from sometimes unreliable foreign sources.  It concludes that the Pentagon relies too heavily on imports to keep the armed forces equipped and ready.

Examples:

  • The U.S. solely relies on a single Chinese company for the chemical Butanetriol, needed to produce the solid rocket fuel used in HELLFIRE missiles.
  • The U.S. imports 91 percent of the rare earth element lanthanum, needed to make night-vision devices, from China.
  • Production of Neodymium-Iron-Boron magnets has migrated offshore, where China now fabricates 75 percent of these high-tech magnets.
  • The U.S. share of semiconductor fabrication has decreased from 50 percent to 15 percent in the last 30 years.

The disappearance of a U.S. industry for many of these products has eroded U.S. leadership in patents and our ability to design new applications.  The reliance on foreign suppliers for critical defense materials undermines the ability to develop capabilities needed for the future.  The risk here is that a vulnerable supply chain will cause us to lose our technological advantage over time.

It also raises quality concerns as it puts commercial and military products at risk for counterfeiting and higher rates of defects.  These could very well be intentional depending on which suppliers we pick as well as the current and future conflicts we choose to involve ourselves in.  Suppliers in other countries may be unsympathetic the causes of the United States.  The U.S. must also be prepared for the future if there ever comes a time when we must rapidly equip our armies.  Foreign suppliers may not be ready or willing to provide for our increased needs.

We talked in class about the recent push to globalize in operations management.  There are many good reasons for globalizing.  The most important being reduced costs since foreign locations with lower wage rates can lower direct and indirect costs.  Globalization should also, in theory, improve the supply chain as facilities are closer to unique resources.  Because of objective characteristics of goods, we could also expect better quality goods.

The United States spends more on defense than any other country on the planet; about $690 Billion dollars per year.  U.S. defense spending accounts for 40% of the world, and is greater than the European Union, China, Russia, United Kingdom, Japan, India, and Saudi Arabia combined.

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It also needs to be noted that China and Chinese corporations are in fact our largest suppliers of raw materials, parts and finished products used in U.S. Defense.  Is there a reason for us to be concerned about China having so much power and influence in supplying for U.S. Defense?

Is it worth risking American Security to save a billion dollars?  How about 100 billion dollars?

Is it important that this report was prepared for the Alliance for American Manufacturing?

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Sources:

http://www.computerworld.com/s/article/9239030/The_U.S._military_s_supply_chain_risk_called_frightening_

http://blog.al.com/breaking/2013/05/rep_mo_brooks_among_critics_of.html

http://www.packagingdigest.com/article/523319-Report_identifies_risks_to_U_S_defense_supply_chain.php

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

CBS on the Go!

Posted on by spr1314mshah

With increasing number of people traveling for work and for pleasure with availability of faster Internet has increased the demand for live TV programs on Internet. Recognizing these consumers’ wants, CBS announced investing in Syncback. Syncback is a company, developing technology to stream local TV programs live to computers, tablets, and smartphones. This technology uses authentication system that checks that only authorize users, subscribed from local area, are watching streamed programs. Thus, it gives control over programming and viewer to TV channels.

This decision of making investment and becoming the part of the owner of Syncback has various operation management reasons. One of the main reasons is threat from Internet it self and companies like Aereo, Inc. It provides local over the air programs by streaming them to the customers by charging $8 to $12 a month. However, these programs suppose to be free and Aereo is doing this without TV channels’ permission. Therefore, channels like FOX, ABC, and CBS have sued Aereo, Inc. and trying to control over the air programming by streaming them by them selves using technology like Syncback.

Furthermore, there is no legal live streaming of the TV programs online, only alternatives are Netflix and Hulu.com, through which viewers can only access past aired episodes and for that they have to wait few days. CBS has seen potential in this opportunity and is trying to take it. If their research is successful, they can get more subscribers, as they will be one of few live streaming TV channels. At the same time, with Syncback’s Authentication technology, they will be able to control their programs and limit them to only locals. With other services, they do not have this control.

The third reason for investing in Syncback is related to supply-chain management. As the Coca-Cola Company produces their own bottles to reduce the cost; thus make more profit because they have resources to do that. Similarly, CBS had excess of fund, which they can invest and by investing in Syncback they can earn more money through subscribers by charging monthly fee, as they are part owner. Where as, if they had sold their rights to broadcast, they would have gotten only fraction of money as royalty, and also lose some control over programming as they sign off the rights. Thus, according to CBS, pairing with Syncback would add value to their company in long run.

The concern that bothers the stakeholder of CBS is that is it good idea to invest in company that is still in introduction cycle with trial and error, while there are other alternatives that people already use to access TV shows online for free. Because of that reason, the stocks of the CBS have not had any positive effects on them. Personally, I think that investing in Syncback was a smart move and will definitely bring profit to CBS.

Do you think investment in Syncback was right move? Or they should have just sold the rights for streaming? Do you think that the online service should be free to current subscribers?

 

http://online.wsj.com/article/SB10001424127887323735604578438801962307318.html

http://www.bloomberg.com/news/2013-04-22/cbs-invests-in-startup-that-lets-local-tv-stations-stream-online.html

 

adidas Closes Communication Gap Between Supply Chain Workers & Factory Management

Posted on by spr1324lvancrey

Recently, adidas Group has made changes in managing its supply chain that allows for better communication between factory management and supply chain workers. During 2012, adidas Group conducted a mobile phone communication pilot project at one of its major footwear suppliers in Indonesia. The project emphasizes the fact that many workers in Indonesia use mobile phones regularly and that this form of communication can improve relations between factory management and supply chain workers.

The use of mobile phones to communicate between factory management and supply chain workers allows workers to send an SMS text message anonymously to a hotline when there are issues in which they are concerned about. The factory Human Resources or compliance staff manages this hotline. Workers’ concerns can be investigated quickly and workers can easily communicate issues directly to factory management. This allows these issues to be detected and addressed early. Not only does this system allow workers to communicate their concerns to management anonymously, it also allows management to have a better understanding of the supply chain workers, which in turn helps them better manage the supply chain. This system is also useful in empowering employees because they have direct contact with factory management. Supply chain workers have a chance to voice their concerns regarding their working environment and their concerns will be heard directly by management.

During the beginning of this project, workers began to communicate matters related to Human Resources, like staff reductions, working hours, and insurance. Some workers went the extra step and asked questions, as well as made suggestions to management. The pilot thus far has shown positive results from both the workers and factory management. In order to gain worker feedback, surveys were administered, and a majority of the respondents enjoyed the new system and saw it as a valuable communication channel with factory management. The success of this project pilot in Indonesia has led adidas Group to implement the project to four other Indonesian factories and one Vietnam factory. adidas Group intends to further extend this service to other adidas Group suppliers in future years. They feel that this is an effective form of communication and that it closes the communication gap that can exist between workers and factory management.

adidas Group Board member Glenn Bennett, who is responsible for Global Operations, explained that, “Protecting the interests of global workers involved in manufacturing our products is an on-going priority for the adidas Group as we constantly strive to improve workers’ conditions in our suppliers’ factories.”

With mobile phone usage on the rise around the globe, how could this form of communication change supply chain management? Are there any negative effects that could result from this form of mobile phone communication between management and workers?

 

Sources:

http://finance.yahoo.com/news/adidas-group-shows-leadership-supply-120504917.html

http://blog.adidas-group.com/2013/05/marking-a-new-milestone-in-the-management-of-our-supply-chain-–-the-sms-worker-hotline-project/

Image: http://upload.wikimedia.org/wikipedia/commons/thumb/2/20/Adidas_Logo.svg/200px-Adidas_Logo.svg.png

 

 

Does Apple Have A Supply Chain Flaw?

Posted on by spr1313emeador

Apple, a company that holds power, and diligence in the business world, is considered to have a top line supply chain management system. The success of this powerhouse company is mainly due to the innovative thinking and approach when it comes to supply chain management. However, why is their stock falling like a sack of bricks, and how come sales have slowed down?

Apple has created a “closed ecosystem” where they control every aspect of the supply chain, and in turn this enables Apple to launch large product lines avoiding high costs. For example, when designing the green light that lets you know the camera is on in all their laptops, they designed special tools to create this “at the time impossible idea.” They concluded that they needed to create lazar beams to cut a perfect whole in to the aluminum, which saved money and shows how they have total control over their product supply. Another example of innovative thinking that complements Apple’s productivity in their supply chain is when they bought 50 million dollars worth of holiday airfreight space. This in turn limited competitors to get their product to retailers, and also gave a huge supply of Apple products in stores limiting consumer options. “They have a very unified strategy, and every part of their business is aligned around that strategy,” says Matthew Davis, a supply-chain analyst with Gartner. He has ranked Apple as the world’s best supply chain for the last four years.

Clearly they are doing something right, right? Well with the decline of the stock a lot of question has been raised. For example, if Tim Cook is such a supply chain specialist, then why does he only have one supplier for all it displays? Even worse, why is that sole supplier Samsung, one of Apple’s biggest competitors? Because of business related tension between the two, and lawsuits, Samsung is not supplying displays to Apple for the new iPad Mini which is a problem. Tim Cook is clearly forced with a rough decision, and now basically has to choose between two Suppliers, LGD, and AUO, who is a very new inexperienced supplier. AUO cannot meet the volume demands for Apple so that really only leaves one supplier, LGD.

Overall, if there is such a fantastic supply chain in the company, and Tim Cook, who was COO under Steve Jobs, is considered to be the specialist in that, why would he but sole supplying responsibility on Samsung, one of their biggest competitor? It seems to be a huge gamble, and almost idiotic. Do you think that this sole supplier Apple uses is their flaw? Do you think this is going to hurt them in the long run? Could Apple be giving away their “closed eco system” by doing this? Could it be the small size of the supplier market that is hurting Apple? How can they avoid this problem?

Sources:   http://www.businessweek.com/magazine/apples-supplychain-secret-hoard-lasers-11032011.html

http://www.forbes.com/sites/petercohan/2012/10/26/apple-cant-innovate-or-manage-supply-chain/

Apple Lacking Innovation? Or Master Plan…

Posted on by spr1313jmusolino

In the recent months, Apple has been the hot topic of debate for almost every media source. This can be derived partially due to its 25% stock price decrease in the past year, but also because of an increase in competition from companies such as Samsung. Despite record profits, critics argue that Apple is “lacking innovation,” which is vital for its continued growth. Does apple not understand what consumer’s want/desire? Or could their upcoming innovations be so groundbreaking that it just takes longer to unveil?

Despite popular belief, Apple produces almost none of the components that are in its products. What makes Apple products both beautiful and efficient is their ability to integrate the hardware and the software so seamlessly. This is done through their remarkably efficient and streamlined supply chain.

In my opinion, Apple tends to innovate backwards. Apples innovation can be described like this; Apple solves the puzzle first, and then finds the pieces they need to make their vision a reality. Apple’s size, power, and money give them the ability to do this, but the actual timeline for a finished product may not be so clear and defined. This is why an efficient and communicative supply chain is so important to Apple.

Most analysts would agree that the biggest upcoming feature on the iPhone 5S is its fingerprint sensor. This is not a new concept, but the way Apple will use it will be remarkable. The mobile payment system is the way of the future, yet is has failed to take off. This is not due less to lack of technology, but more because of security concerns. By having someone’s phone password, one could gain access to every credit card they own. A fingerprint sensor would basically eliminate this problem, and would allow the mobile payment system to grow exponentially.

Keep-Calm-And-Slide-to-Unlock-iPhone-Fingerprint.jpg

Apple sold over 50 million iPhone 5s, so a small glitch in hardware or software can be detrimental. First, Apple needs to make sure the hardware is functioning properly. Last week Reuters reported this, “A supply chain source in Taiwan said Apple was trying to find a coating material that did not interfere with the fingerprint sensor, and this may be causing a delay.” Second, Apple needs to make sure its manufacturers can produce the product that keeps up with demand. Third, the software needs to be 100% accurate to prevent possible fraud. Last, Apple needs to beta test the product until they know it is absolutely perfect.

Personally, I believe that Apple’s master plan is much smarter and more innovative then any analyst can predict. Critics thought the first iPhone would fail because it didn’t have a keyboard. They thought the iPad was just a “big iPhone,” and no one would buy it. Currently, these are two of the most successful and profitable consumer devices on the market. Apple’s master plan is bigger than we think. Supply chain issues may slow its product cycle down now, but I think it will only be a minor speed bump in Apple’s continued dominance.

What is your current view on Apple? Are you continuing to buy Apple products? Will a fingerprint sensor on the iPhone 5S be the deciding factor on whether you will upgrade or not?

http://www.forbes.com/sites/anthonykosner/2013/04/28/is-the-iphone-5s-fingerprint-reader-worth-the-wait/

https://www.google.com/finance?cid=22144

Can We Afford to Raise Wages to 29 Cents per Hour!?

Posted on by spr1313pnolan

After several major accidents in textile factories in Bangladesh over the past couple months, in which hundreds of workers died, Walmart sent a warning of its new “Zero Tolerance” policy to suppliers. At least two of these factories had what Walmart called “unauthorized” contracts with its suppliers. Walmart has reacted by informing its suppliers that it will no longer tolerate unsafe working conditions or unethical practices in the factories that make goods destined for Walmart stores. In a letter sent to suppliers outlining the company’s new policy, Walmart states that suppliers who fail to meet Walmart’s new guidelines could risk being permanently barred from doing business with the retailing giant. Is this move by Walmart just PR damage control or do you think the company will truly follow through on this new policy? If the company does follow through, is this new stance based purely on calculated analysis that will save money in the long run, or does Walmart truly care about human rights?

On April 24th a Bangladeshi garment factory complex collapsed killing 362 people, although the building housed nearly 6,000 employees and many are still unaccounted for (Link #1). This disaster is at least the third of its kind to occur in the south-Asian nation since 112 workers died in a factory fire in November 2012.

With wages and inflation increasing in China, Bangladesh has seen many garment manufactures move to the impoverished nation. China’s average hourly wage is now $1.34, while Bangladeshi wages are on average between 18 and 26 cents per hour, the lowest in the world. Spurred by cheap labor, the garment manufacturing industry in Bangladesh has grown to about $19 billion as of 2013 (Link #2). This quick growth, coupled with a low-cost focus, has led to unsafe conditions in which many factories have been converted from residential buildings, thus not meeting fire safety or maximum occupancy regulations. According to the executive director of the Bangladesh Center for Worker Solidarity, about half of the factories in Bangladesh do not meet legally required work safety standards, standards that are much lower than other emerging nations to begin with.

To combat this problem, Walmart has released a document spelling out its “zero tolerance policy” pertaining to working and safety conditions in factories suppliers subcontract with (Link #3). Within this document, Walmart states it “would like to improve the safety of [its] global supply chains”, and that it “is committed to value chains that empower people who work in them.” To oversee this goal, all factories in Bangladesh are to be audited by Walmart to ensure they are abiding by acceptable safety standard regulations and “Ethical Sourcing” requirements. Factories that fail to meet these requirements will be added to a “red card” list on Walmart’s corporate website, which will bar them from being included in the company’s massive supply chain. Further, according to the “Zero Tolerance” document, Walmart has been meeting with government officials and other companies who outsource manufacturing to Bangladesh in order to create a united front against subpar labor standards.

If the “Zero Tolerance” measures don’t work in Bangladesh, Walmart’s suppliers may have to move contracts to countries like Cambodia or Vietnam where average hourly wages are 29 cents and 55 cents, respectively. This move will undoubtedly raise costs associated with Walmart’s supply chain, as will implementing the auditing process of Bangladeshi factories.

As a reader of this blog, what do you think Walmart’s motives are for implementing these strategies? From a profit and loss standpoint, do you think this will help or hurt Walmart’s shareholders?