Risk management: Immigration issue impacts the supply chain
Buyers, supply chain managers debate risk of illegal immigrants in their supply chain
By Dave Hannon -- Purchasing, 3/21/2007 2:30:00 PM
The immigration raid of a New Bedford, Mass. leather products manufacturer in March that resulted in the arrest of 350 out of its 500 workers on immigration violations made national headlines. But for purchasing and supply chain professionals, it brought perhaps more questions than answers—questions like, “Do we need a contingency plan in place if one of our suppliers gets shut down as a result of an immigration raid?” and, “Is it in our best interest to evaluate the status of our suppliers’ workers?”
In a follow-up survey by Purchasing, 94% of buyers polled said they currently do not ask their U.S.-based suppliers anything related to their workers’ immigration status. Even among those that do ask their suppliers about their workers’ immigration status, there is little structure or enforcement around the issue.
“We only ask them and take them at their word, but don’t require any proof,” said a purchasing professional responding to the survey anonymously (more than two-thirds of the respondents did not want their names or companies mentioned).
John Guerin, sourcing manager at PacifiCorp in Portland, Ore. says his company asks suppliers “to certify that all employees in their employ are in the U.S. legally or legal U.S. citizens. We also ask them to certify they abide by all U.S. labor and OSHA laws. The U.S. needs to make it more expensive to break the law than follow it.”
A few buyers report that they have put clauses in contracts that stipulate suppliers must abide by all U.S. laws and failure to do so will be considered a breach of contract. Nicole Kelly, a sourcing lead at Sprint Nextel in Kansas City, says “a few years ago, we put wording into all of our service agreements that workers should be properly documented. The suppliers are responsible for ensuring that they are.”
One survey respondent said, “We do some defense work so illegal workers at our suppliers are out of the question. We would never pass an audit.” But the company in New Bedford that was raided was a government contractor itself and somehow passed audits.
A high percentage of buyers polled said that, while they agree the issue could cause a supply disruption, it was simply impractical to think they could monitor the immigration status of their suppliers’ workers with any level of accuracy.
Michael Bury, a purchasing pro at Microscan Systems in Renton, Wash. echoed a lot of buyers’ sentiments when he said, “It would be impossible to micromanage a supplier down to the actual immigration status of each of their employees. Instead, the emphasis must be placed on analysis of a company’s compliance to immigration law on the same level as analysis of financial and business practices.”
Michael Meehan, a buyer at a high-tech firm in New Jersey feels that adding immigration questions to a supplier evaluation survey would be “self-defeating.”
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“We cannot ask every question anyone can think of, nor can we think that doing so will eliminate all risk,” Meehan says. “I don’t think immigration raids are common enough to impact American business to the extent that questioning that potential need to be a standard in a supplier survey. We can, and should, ask representative questions that can reveal the tenor of a potential supplier’s corporate culture. But if you feel the need to ask a potential supplier if they could be closed by an immigration raid, do you think you could trust the answer to such a question?”
A buyer at a West Coast iron works says its policy is simply “Don’t ask, don’t tell” when it comes to suppliers’ workers, adding: “Until the government fixes our illegal immigration policy, industry shouldn't be the watch dog.”
Very few buyers said they have knowingly bought from suppliers that employ illegal workers, but 3% of respondents chose to “take the 5th” on that question in the survey, indicating they’d rather not say.
“I would not knowingly purchase materials from a company employing [illegal] immigrants,” says Dave White, purchasing agent at Herr & Sacco in Landisville, Pa. “I view it the same as buying counterfeit or knock-off materials—it's illegal either way.”
Less than 4% of buyers said their supply chains have been impacted by immigration issues and only one said it was the result of an immigration raid. Several respondents said they saw suppliers struggle when illegal workers went to their home countries for holidays and did not or could not return. Several others said they saw disruptions during an immigration protest day last year.
But Meehan summed it up well when he surmised: “Basic purchasing policy tells us that the best contingency plan for protection against potential supplier shut-down is multiple sourcing. A second source is almost always available and that is a part of our operating procedure. Second source should be a given, a matter of policy.”
When asked about their ability to separate personal political feelings from professional duties, the overwhelming majority of survey respondents said they have no problem putting the company’s needs ahead of their own personal feelings on political matters, although many said the two meshed on this issue.
“Buyers need to maintain high ethical standards and this includes an understanding of our suppliers’ workforce,” said one respondent. “Knowing that a raid could occur could put my employer at risk with supply disruptions for an unknown period of time.”
Robert Newton, a senior buyer at HH Sumco in Indianapolis, says personal views have little to do with the immigration issue in his mind. “What matters is if my suppliers abide by all laws and regulations. If not, then we will certainly address these issues. The problem I could see is how much specific detail to put in a contract—Don't break this law or that law or any other law.”
Steve Harradon, a buyer with Sharon, Mass.-based sheet metal fabricator inMetal, says, “My obligation is to my employer first. Choosing suppliers is based on quality, performance and price. While I don’t like the idea of illegal immigrants taking the jobs from Americans, I leave it up to the suppliers to police themselves and Government agencies to step in when needed.”
Another respondent said, “Anyone who calls themselves a purchasing professional should rely upon their professionalism, ethics, and common sense to dictate the appropriateness of personal opinion at any given time for any given topic and/or situation.”
Most buyers polled said immigration is an issue they expect to hear more about in their professional lives going forward. Michelle Smith at W.L. Gore and Associates in Newark, Del. said, “In an issue like this, awareness is huge. It's common sense for supply chain risk, although I would bet many companies have never even thought about it.”
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