Improving Work Conditions in a Global Supply Chain

A comparison of two Mexican factories suggests that global companies should go beyond monitoring codes of conduct and attack the problem of poor working conditions at its source by collaborating with their suppliers to implement new management systems.

Many multinational companies attempt to monitor working conditions in suppliers’ factories in developing countries through corporate codes of conduct, along with monitoring to determine compliance with these codes. There is considerable debate about the merits of this approach. As part of a larger research project on globalization and labor standards, the authors conducted a comparison of two Mexican garment factories that supply Nike Inc. Both plants (referred to as Plant A and Plant B) received very similar scores on a Nike factory audit, and both manufacture T-shirts for Nike and other companies. Workers in both plants are unionized.

However, a closer examination revealed that working conditions in the two factories are in some respects quite different. Compared to workers in Plant B, workers in Plant A earn more per week, report greater job satisfaction and have greater say in workplace decisions. Furthermore, in Plant A overtime is voluntary and kept within Nike workweek limits, but in Plant B both forced overtime and excessive overtime occur.

What factors contribute to these differing working conditions? The authors conclude that, while there are a number of differences between the factories, a key variable is the way each plant is managed. Plant A has made the transition to lean manufacturing, and, in the process, workers received training and were empowered to participate in more decisions on the shop floor. Quality, worker productivity and worker salary all increased at Plant A. The authors conclude that global brands could help improve working conditions in supply chain factories by working with suppliers to help them introduce new management systems.

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Acknowledgments

We thank the Hewlett Foundation and the MIT Sloan School of Management’s Dean’s Innovation Fund for financing our research. We thank Lucio Baccaro, Suzanne Berger, Joshua Cohen, Simon Johnson, Thomas Kochan, Donald Lessard, Michael Piore, Alberto Brause, Din-sha Mistree, Jennifer Andrews, Fei Qin, Rushan Jiang and Alonso Garza for their insightful comments on previous drafts of this article. We thank numerous Nike managers — including Maria Eitel, Hannah Jones, Dusty Kidd, Kelly Lauber, Caitlin Morris, Mark Loomis, Jeremy Prepscius, Charlie Brown and Catherine Humblet — for their helpful comments on previous drafts of this article. Finally, we thank Nike manager Mike McBreen, who shared with us his knowledge of the compliance process and facilitated access to the audit data and the individual factories.