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How HP Assesses Offshore Labor Conditions

Apple Inc. has been under scrutiny for its self-audit of labor conditions within the factories of its foreign manufacturing partners.(See: What Did Apple’s Supply Chain Audit Uncover? Part 1 and How Will Apple Fix Its Supply Chain Problems? Part 2.) Other major OEMs, such as Hewlett-Packard, Dell, and NEC have also been cited by third-party watchdogs for employee rights violations (See: Dell, HP & NEC Partner Flagged for Labor Practices.)

In the next few blogs, I'm going to take a look at the policies these companies have established; how they are measured and audited; and what measures or corrective action they've taken.

I randomly started with {complink 2376|Hewlett-Packard Co.}. Like Apple, HP established its own labor and environmental standards, but it also uses guidelines from industry consortia. HP itself has audited the conditions within foreign factories and posted its audit results on its Website. In addition to brief summaries, HP's findings are highlighted on several charts that are too extensive to reproduce here.

Here are some of the highlights from HP's latest report:

Greater China

    In 2009, we conducted seven initial and 44 follow-up audits at 52 sites in Greater China. The major issues identified during the most recent audits included working hours, emergency preparedness, wages and benefits, industrial hygiene, labor management systems, and hazardous substances handling, although this last provision was also among the most improved. We also found improvements in dormitory and canteen provisions, Electronic Industry Code of Conduct awareness, and supplier management program.
    Working hours continue to be the most common social and environmental responsibility challenge among suppliers in China. Several sites began 2009 with reduced working hours. However, the economic recovery throughout the year meant many suppliers were short of staff as their business began to rapidly increase. In 2009, HP piloted key performance indicators for 11 sites that had major nonconformance against the working hours provision. The pilot aims to better track, understand and address the problem.

Eastern Europe

    In 2008, we conducted two initial and nine follow-up audits at 11 sites in the Czech Republic, Hungary, the Netherlands and Poland. The major issues identified during the most recent audits included emergency preparedness, which also showed the most improvement from prior audits, and occupational safety. We also found substantial improvements relating to physically demanding work, for which there were no major nonconformance.

Latin America

    In 2009, we conducted seven initial and 13 follow-up audits at 20 sites in Mexico and Brazil. The major issues identified during the most recent audits included labor management systems, emergency preparedness, working hours and hazardous substances handling. We found the biggest improvements in occupational safety, physically demanding work, supplier management program, and occupational injury and illness.
    In 2010, we will expand our working hours key performance indicators pilot to this region and work with suppliers that have a nonconformance to better track, understand and address the problem.

Setting guidelines, performing audits, and taking corrective actions are all steps in the right direction, and we credit HP for its efforts. But examination of Apple's and HP's processes raises a bigger question: Shouldn't there be an international, third-party organization to audit workplace safety and labor conditions (such as the US's OSHA)? If there is no such global entity, is there an international non-governmental organization that can take this on? And lacking that, should companies be required to hire private auditors to conduct their assessments?

I'd like to hear from global companies on what processes they use and ideas for improvements. You can reach me at .

17 comments on “How HP Assesses Offshore Labor Conditions

  1. SunitaT
    February 23, 2011

    Barbara,

      I totally agree with you that we should have third party organization to audit the workplace safety. This would bring more credibility and transparency into the audit process.

  2. saranyatil
    February 23, 2011

    Off late there is a lot of buzz on audits. This will create a trend amoung all the companies who are outsourcing their jobs and also will help in understanding the working patterns of different companies and will enhance the understanding on what kind of jobs can be outsourced to different regions, it can also vary according to weather conditions. for the next 2 years this will become an important activity on the supply chain to-do list.

  3. mfbertozzi
    February 23, 2011

    Barbara, thanks for publishing the contribution; as reported inside, audit results have depicted a “jeopardized” scenario in terms of gap to fill region-by-region and it is the risks when offshore, coming from big companies, is distributed abroad. Just to avoid mentioned scenario, I can report recently, especially for manufacturing, in europe, the attitude is to start the offshore within only one location, monitor the results (including periodical assessment), tune or fill possible gaps to improve and then start (if needed) in a different location a second offshore process. This method is in consolidation also in other market (automotive, cars,…). Chrysler and Fiat sounds as example.

  4. Barbara Jorgensen
    February 23, 2011

    That is really helpful to know. I really do think companies are trying to do the right thing, but with outsourcing it's very difficult. A methodical approach such as the one you outline makes a lot of sense and anything learned can be passed on to the next location. That's one of the fundamentals behind almost all quality practices I can think of and why compnaies might greenfield an operation rather than acquire or outsource.

  5. AnalyzeThis
    February 23, 2011

    First of all, I do think Apple has been subject to additional scrutiny when it comes to offshore labor due to the fact that, A) Apple is such a huge company, but B) not to stereotype, but your typical Apple's customer is probably more likely to be interested and concerned about human rights issues than, say, a furniture maker or something like that.

    I agree with you that a third-party organization to audit workplace safety and labor conditions is a great idea, but I think we are all very skeptical about how such an entity would function in practice, especially in countries such as China.

    Auditors are a potential solution, but we all know how auditors didn't exactly fix accounting issues even within our own country, huh?

    I do applaud what companies like HP are doing in making this type of information public. That's a step in the right direction.

  6. jbond
    February 23, 2011

    This is a good article and brings up a very interesting point. Who should be responsible for ensuring global worker safety? An international group that could develop rules and guidelines and also enforce them would be a great thing. One of the main concerns is going to be who funds this organization? And how is this governing body going to run? Is this going to be made up of individuals from around the globe who have the power to enforce these rules? And ultimately what happens to these companies that do violate the conditions set forth? 

  7. Taimoor Zubar
    February 24, 2011

    When companies outsource their manufacturing to offshore partners, a critical issue arises when there might be differences in the labor laws of the country and the standards imposed by the company outsourcing the business. There might be certain practices such as long work hours, weekend work, underage work etc which the country may allow but these might be against the standards of the company. In this case manufacturers will have to redefine their processes to cater to the standards. However, there might be certain rules which are imposed by the standards but these might go against the standards of the foreign company. It's a difficult task for managers then to either adhere to the foreign company's standards or to local labor laws.

  8. elctrnx_lyf
    February 24, 2011

    The OEM's should be hold responsible for any problems with the laor conditions in the manufacturing companies. Since the contracts are offered by OEM's so it is their duty to check they are operating as per the global standards and are certified by a know standards organization. Any one who is not certified should not be offered any manufacturing.

  9. Barbara Jorgensen
    February 24, 2011

    It also occurs to me that auditors may not be welcome on every shore and a country would prefer to use its own version of OSHA (if they have one. ) There's a lot of complexity there and I thank our readers for raising all of these issues.

  10. Taimoor Zubar
    February 24, 2011

    I agree that local companies may not welcome the offshore auditors. The point here is that it is very difficult to have the same standards all over the world. Things such as children working to support families are a need in some countries, while they may be crimes in others. Unless you have the same socioeconomic conditions throughout the world, there is no way you can have the same laws and standards. The OEMs and the companies auditing them need to realize that.

  11. Barbara Jorgensen
    February 24, 2011

    Excellent point and something I had not considered. Very helpful.

  12. SP
    February 24, 2011

    I feel if a company that operates out of USA and has outsourced some of its manufactuing to Asia or any other part of the world, judging the labor conditions of contractor is how easy or relevant unless the parent company puts them in thor network does periodic audits etc. There are difference in the basic working conditions is US and other parts of the world. Thats why the wages are different. If you would want labor to be in the same conditions as in US then I guess you got to pay them accordingly. What is totally no-no in US can be ok in other parts of the world. 

  13. hwong
    February 24, 2011

    Even though Companies like HP and Apple impose and enforce labor law auditing at the offshore manufacturing, there will always be problems such as suicides at a Taiwanese Contract Manufacturer Foxconn. They announced the 14th suicde last November 2010 at the shenzhen factory.

    One of the videos the Chinese media illustrated a typical day of the life of a worker. Once he/ she signs up for a job there, the worker  leaves the family from the remote villages and resides in nearby dormitory. She/ He goes to work every morning at 6am and won't stop until 10 or 11pm. They have to work overtime in order to meet the demand of say a part of the iPads. Then he goes back to dorm and sleep and do the same thing everyday. Life could be pretty boring, tiring and hard to find motivation. 

    But, having a job is better than not having a job. These folks need to provide financial support to send money back to their families in the villages. At the end of the day, it just depends on how the person thrive.

     

     

    Foxconn, a publicly traded subsidiary of Taiwan's Hon Hai Precision Industry Co, is the world's largest manufacturer of electronic components. Its Shenzhen compound employs more than 300,000 workers and assembles — at great speed and amid high security — a wide variety of high-tech gadgets, from computers for Dell (DELL) and Hewlett-Packard (HPQ) to iPods, iPads and iPhones for Apple (AAPL).

  14. stochastic excursion
    February 25, 2011

    Globalization necessitates a less procedural approach to maintaining minimum requirements on working conditions than exists within a single statutory framework.  The appeal of off-shoring lies in part in cultural diversity, where views of conditions in the workplace can differ based on prevailing notions of class structure, social Darwinism, etc.  American workers have earned the right (so it is supposed) to have a certain degree of liberty and comfort in their lives and this standing simply doesn't exist for many workers overseas.  In this situation we have to rely on the honor system, both for the stakeholders here in the U.S. to stay vigilant about walking their talk, for NGO watchdogs to hold the line, and overseas manufacturers to stay faithful to their agreements with contracting organizations.  Seeking a quasi-governmental body to give their stamp of approval to an existing situation may not be effective

  15. Ms. Daisy
    February 26, 2011

    What about using the third party watch dogs that are already present and are familiar with the layout of the land? The supply chain giants, DELL, Apple, HP, etc can all collaborate to influence the labor laws of the countries they operate out of. Where there is a will, there is a way!

  16. prabhakar_deosthali
    February 28, 2011

    Between the two extremes of , Companies imposing global labor standards on their contract manufacturers , to OEM taking all the freedom in squeezing maximum work out of their employees,  the middle path can be found by the OEMs self certifying that they abide by the labor laws of their local governments.

  17. SunitaT
    March 29, 2011

    Barbara,

     I feel its not only the responsibility of the corporate entities but also the resposibility of the government. So government should also be held responsbile equally if there is any labour law violation.

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