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Consumers Are Paying Close Attention to Your Supply Chain

July 30, 2012
Apple and Nike learned the hard way that for global manufacturers, public attention will be paid to their global supply chains, in terms of how they treat the contracted workers who make their products in developing nations.

In the late 1990s, Nike experienced an onslaught of protests and negative media attention based on reaction to the working conditions in the Asian factories it used to manufacture its athletic shoes, a process that dragged out for years. In 2012, Apple, the world’s most admired company in many surveys, felt some of its harshest media criticism based on reports about the conditions of workers in the Foxconn factories in China used to manufacture the iPhone and iPad. What both of these situations revealed, in different decades, is that for global manufacturers, public attention will be paid to their global supply chains, at least in terms of how they treat the contracted workers who make their products in developing nations.

In fact, UL (formerly Underwriters Laboratories), which conducted a study late last year about how consumers and manufacturers in the U.S., Germany, China and India view global supply chain issues, concluded that consumers are interested in far more than the conditions of the workers who make the products they buy.

That study, called Navigating the Product Mindset, focused on four global industries: high-tech, food (processed and fresh), household chemical products and building materials. The results strongly suggest that consumers in both developed and developing nations are very interested in sometimes minute details of the global supply chain that produces so many of the products they purchase and use.

Perhaps the most surprising finding of the study was that consumers in all four countries are prioritizing the importance of knowing the origin of a product’s components or ingredients. Looking at the four industries covered in the survey, consumer sentiment ranged from 55 percent to 69 percent, stating it was more important to know the origin of a product’s components than where it is manufactured or assembled.

Why would consumers care so much about where a product’s components or ingredients are made and what are the implications? The study also found that two-thirds of manufacturers in the same four countries say that consumers are requesting more safety information about the products they buy. What is going on here?

A lot has changed since the Nike Asian supply chain issues came to the public’s attention in the 1990s. Specifically, Internet access is far more pervasive and in the past few years, we have seen the dramatic rise of social media as information and empowerment channels for more than a billion consumers.

The survey honed in on consumers’ perceptions of how manufacturers approach making consumer products, and what it reveals is not always so positive for manufacturers. Most consumers (between 67 percent and 72 percent, depending on the industry considered) said that manufacturers do not conduct thorough testing before launching new products. More than one-third of consumers said that manufacturers value sales more than product safety. And 76 percent of consumers said that manufacturers do not use the best raw materials or ingredients available when making their products. These findings suggest that consumers are interested in knowing where a product’s components or ingredients come from because they don’t yet trust manufacturers to give them the safest, most reliable products possible.

The implication: If a company has a product failure, such as a safety issue or in the case of a food product, contamination, the customer base—computer savvy and plugged in to social media—will drop that product (and maybe the company) like a hot potato, at least until the situation is corrected. The fact is that consumers, in growing numbers, consider “traceability” of product components and ingredients to be important now, and likely will be of increasing importance in the future.

As for Apple. company management has taken the right ethical actions in dealing with the factories where iPhones and iPads are made (including bringing in the Fair Labor Association for third-party inspections). But the UL study strongly implies that in the future, more attention will be paid to a product’s global supply chain issues than ever before. Executives at manufacturing companies need to keep this in mind when making a wide variety of sourcing and production decisions, or they may face the consequences of an increasingly educated and social media-wired customer base.

Clyde Kofman is chief strategy officer for UL (formerly Underwriters Laboratories).

Related Articles:

Corporate Social Responsibility in the Supply Chain

Audit Finds Rampant Overtime, Other Labor Abuses at Apple Supplier Foxconn in China

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