Is Apple looking at total costs?

A recent report describes an audit conducted by Apple Computer of its suppliers that uncovered 17 core violations pertaining to Corporate Social Responsibility at 60 facilities. These violations included excessive recruitment fees, use of non-certified vendors for hazardous waste disposal and falsified records. At least one supplier was terminated as the audit found the same problem had been uncovered the year before. We wonder if Apple added the cost to audit, apply corrective action and then terminate unrepentent suppliers to its total cost of outsourcing in these 'low cost regions.' One of the most common discussions we have with our OEM clients is related to how much they spend internally in support of their outsourcing initiatives. This is never an easy number to pin down, as the methodology used to support and manage these types of initiatives varies considerably from company to company and each situation needs to be carefully reviewed. But in the case of the situation described in the report cited above, I'd be very skeptical of any analysis that found the time, money, and potential brand compromise of having to perform this level of diligence (and corrective action!) as being justified by the purchase price advantage achieved from these geographically remote, so-called lower labor-cost solutions? Author: Charlie Barnhart, Charlie Barnhart & Associates