Take the “raw” out of raw materials
Low-cost country sourcing requires a new level of supplier evaluation.
By Dave Hannon -- Purchasing, 11/2/2006 9:30:00 AM
Are your suppliers using slave labor?
A recent Bloomberg story highlighted the importance of deep-tier supplier evaluation and the impact it can have on OEM buying. According to the report, South American pig iron, used to make iron ore, is sometimes produced by slave laborers in camps in Latin American countries. The iron ore produced from that pig iron is eventually bought or used in products from some of the biggest companies in the world, including big steel buyers Ford Motor Co., General Motors, Whirlpool and Kohler. Ford and Kohler both buy pig iron through importer National Material Trading Co. of Elk Grove Village, Ill., which according to Brazilian officials is supplied by a charcoal camp that uses slaves. According to its website, National Material Trading is an “importer of basic, foundry and ductile pig iron from Brazil, providing the U.S. steel and foundry industry with high-quality, low cost virgin iron units.” The company says it imports more than 1,000,000 tons per year of basic, foundry, and nodular pig iron from Brazil. When Bloomberg questioned both Ford and Kohler about its work with National Material Trading, both stopped buying pig iron from the supplier immediately. “We wanted to suspend the shipments until we understand exactly what is going on and if in fact this material is making its way into our supply chain,” says Tony Brown, Ford's senior vice president for global purchasing. “We take this matter very seriously.” General Motors buys about $3.2 million worth of auto parts from Intermet Corp. in Texas, which, in turn, buys pig iron from National Material Trading. Bo Andersson, GM's vice president of global procurement and supply, told Bloomberg GM stopped buying products from Intermet on Oct. 12 because, “Intermet didn't act like they had a sense of urgency,” when asked about its use of slave labor. GM reinstated the supplier a week later when Intermet supplied documentation that its supply chain was free of slave labor. Officials from Kohler, which also buys from National Material Trading, said they will be starting their own investigation on the subject. “It is clearly disappointing to find that our broker's supplier's supplier employed slave labor practices,” says Steve Cassady, director of global procurement at Kohler. Several other manufacturers are cited in the story including Nucor Steel and Toyota.
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