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Conflict in the Supply Chain

By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE | 0 | 0 | June 13, 2014

After reading the headline, you may be thinking, “hmm, of course there’s conflict in the supply chain.” In this case, I am referring to conflict minerals, minerals sourced from areas such as those controlled by armed groups in the Democratic Republic of Congo, a topic I’ve covered here previously. Last week, because of reforms mandated by the Dodd-Frank Act, thousands of companies had to report their use of conflict minerals.

According to Time magazine, Google, Apple, Intel, and other technology giants revealed that their devices may contain the conflict minerals. “Tungsten, tin, tantalum, and gold—products common in electronics and known collectively as ‘3TG’—are mined heavily in the Democratic Republic of the Congo and other central African countries,” Time's Victor Luckerson writes. “Proceeds from some of the mines are used to fund an ongoing war that’s become the deadliest armed conflict since World War II, according to one study.”

The supply chain complexity involved with these minerals is what makes them hard and expensive to eliminate in phones, laptops, tablets, and other devices. There’s smelters, who extract the metal from its ore; component manufacturers; and distributors. The new rule will cost companies $3 billion to $4 billion in its first year and $206 million to $609 million in subsequent years, the US Securities and Exchange Commission estimates.

According to the Enough Project, Dodd-Frank reforms “have helped significantly reduce the involvement of armed groups in eastern [Congo] in the mines of three out of four conflict minerals.” Previously, the minerals were thought to generate as much as $185 million per year for the armed groups and the army. Mines formerly controlled by warlords “are now part of peaceful supply chains,” says Sarah Lezhnev, a spokesperson for the Enough Project in a June 10 Agence France-Presse article.

Corporate social responsibility

In the pages of Supply Chain Management Now, over the years, I’ve written often about the broader ideas behind sustainability, emphasizing the triple bottom line of people, planet, and profit. According to the APICS Operations Management Body of Knowledge Framework, “in triple bottom line reporting, environmental, social, and economical aspects all are equally considered.”

Dodd-Frank reforms are forcing tech manufacturers to phase out conflict minerals from their supply chains; thereby, examining the people side of this intricate equation.  The scope of sustainability can seem unwieldy—from humane animal treatment and decreasing greenhouse gas emissions to complying internationally with conflict-free standards and fair-labor practices.

There isn’t a roadmap for meeting these vast, but worthy challenges on the supply chain front. What we do know is it will require discussion; information sharing; and developing and improving definitions, metrics, and scope. APICS provides businesses and professionals with a central forum for these activities. For example, the APICS Annual Conference provides formal and informal opportunities to learn what works in supply chain and what doesn’t. More broadly, the APICS Certified Supply Chain Professional program increases knowledge and expertise in the field of global supply chain management, specifically in the areas of customer relations, international trade, information technology enablement, and physical logistics. With this greater knowledge comes greater understanding necessary to solve tough challenges.

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