The benefits of global supply chain to Nike are that its factors of production have become more mobile which also helps it lower production costs by moving to places with the cheapest labor costs around the world. Nike doesn’t own production facilities but instead outsource production to contractors such as Saga Sports in Sialkot, Pakistan (Montero, 2006). The risks in having a global supply chain are that it becomes more difficult for Nike to monitor its production activities as it strives to ensure that quality standards are maintained and applicable U.S. labor laws are followed. Global supply chain is also at a higher risk of being affected by natural disasters and logistics failures (Malone, 2006).
Nike should not employ child laborers whose families depend on their income because it would only encourage more people to force their children to work. Nike’s actions may bring temporary economic hardships to families but over time they will adjust to new economic realities. Nike will also send a strong message to contractors to play their role towards ending child labor. The U.S. values and working conditions should transfer to sourcing production environments because Nike is a U.S. company and generates a significant portion of sales in the U.S. In addition, U.S. labor standards are one of the best in the world and due to its global status, Nike is in a position to export these values to other countries many of whom have weak labor laws.
Costs will go up if labor conditions are improved because Nike will also earn goodwill in the process. If Nike continues to ignore labor violations at its contracted production facilities, the damage to its brand may have higher economic costs than what improved labor conditions would cost Nike. To protect themselves against PR nightmares that may emanate from supply chain globalization issues, the companies should conduct unannounced inspections of contracted production facilities from time to time. The companies should also force their code-of-conducts on their contractors and do not hesitate to terminate relationships should the contractors fail to live up to their responsibilities. The companies may also hire watchdogs and independent inspectors to monitor the activities of the contractors.
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