Supply Chain Security

You would probably be surprised to know what a logistical feat it is to manufacture a smart phone. The base materials are mostly silicon, plastic iron, aluminum, copper, lead, zinc, tin, and nickel. There are also a number of rare earth elements that are present in small amounts but are integral for the phone to function: neodymium, dysprosium, and many lanthanide elements. Once these materials have been collected and processed, they need to be made into the phone itself. After the phone is built, it must be programmed with the software that lets it run. The vast majority of this process takes place outside of the United States—with the assembly and initial programming usually happening in Asia and the base materials coming from all over the world—and it constitutes just a small part of the global supply chain that underlies a huge portion of our information technologies. It is truly an incredible feat of logistics, and every step of the process is vulnerable to events that can damage both the product and the enterprise.

To begin with, the base materials for most modern technologies are mined or in the developing world. This can sometimes lead to companies running afoul of international labor standards. These compliance issues usually result from operators on the ground mistreating workers in the developing world in order to keep costs low. Apple has come under fire for this on several occasions, including after a 2014 BBC report accused Apple’s assembly plants in China of perpetuating inhumane working conditions and its tin suppliers in Indonesia of using child labor. Apple has been able to avoid serious reputational harm from these criticisms, but not every organization will be able to do the same. Ensuring compliance with labor standards is an essential part of managing supply chain risk and protecting one’s business.