PUMA AG (PUMA) is a German-based company that produces high-end sportswear. According to PUMA’s financial report, in the year 2007, PUMA earned a profit of $510,944,031 excluding taxes. Although the company’s headquarters is in Germany , its main production sites are in China and other developing countries. While the company can afford to invest millions of dollars in advertising, behind the scenes, workers who manufacture its products still earn the bare minimum. In the last three years, China Labor Watch (CLW) has been monitoring the conditions of PUMA’s suppliers in China. During an investigation on Taiway Sports Ltd., a supplier that “has enjoyed an “A” ranking for years now” according to PUMA’s 2005/2006 Sustainability Report, CLW has found deplorable conditions. Conveniently, on March 19th, after CLW notified PUMA about Taiway’s conditions, PUMA said in a statement issued on April 2nd that Taiway is now only a “B+” factory and stated that many of CLW’s findings on Taiway were either unfounded or largely exaggerated.
In order to substantiate the accuracy of the report and emphasize the workers’ poor conditions, CLW contacted Der Spiegel, a German media group, and arranged for them interviews with Taiway workers. After the interviews, Der Spiegel published articles on April 1 th and the 21st describing the conditions at Taiway. On May 5th , PUMA publicly responded to CLW, claiming that CLW has not sufficiently taken into account PUMA’s efforts in improving the factory and stated once again that most of conditions described on CLW’s report were unfounded. Between May and June, over the course of one month, CLW completed a report on Surpassing Shoe Co. Ltd., another PUMA supplier located only a few miles away from Taiway, after interviewing some of its current and former workers.
Gravely concerned about PUMA’s repeated accusation, prior to the release of the Surpassing report, they invited reporters from WirtschaftsWoche – The German Business Weekly to interview a few workers from the Surpassing factory. They firmly believe that only through independent media broadcast would PUMA recognize the problems at its suppliers. CLW resent PUMA’s intention of using its efforts in a single supplier to portray itself as socially responsible. Poor conditions at Taiway have persisted for years, and it wasn’t until the release of CLW’s report on the factory that reform began to take place. Disappointingly, although the report on Taiway emphasized that PUMA should not limit its reforms to this one case, PUMA still failed to notice problems at its other suppliers. The problems that CLW had found are not limited to one or two of PUMA’s suppliers, but rather, it is a reflection of poor conditions of PUMA suppliers in general.
POINT OF VIEW
If I were the CEO, first, I will strictly command my subordinates to obey the Chinese Labor Laws and Regulations. I will not abandon our company’s supplier factories, but rather commit to them and to be resolute in making sure that violations are corrected. I will always monitor them to keep updated and be aware on their current issues. I will make a move whenever I know that our supplier is forcing overtime work for the employees without pay. I will urge our supplier to offer legal work hours, fair wages that allows sustainability and eliminate discrimination at work place. And also, I will warn our supplier to obey our terms of conditions, as well as the CLW laws and regulations, if not, I will replace them a more productive and trustworthy supplier.
STATEMENT OF THE PROBLEM
(Conditions in the Suppliers)
• Excessive Overtime; workers are forced to work overtime, working about 12 hours a day on weekdays, at least 11.5 hours and sometimes even overnight on Saturdays. • Workers are paid 64 cents an hour for each regular hour • Excessive fines; workers could be fired and given a 43.35 USD fine if they refuse to work overtime up to three times. • Poor management; workers have been insulted for filling out contract incorrectly, lectured for asking about payment details. • Poor dormitory conditions. Garbage can be seen everywhere in the hallway, and at least 80 workers sharing one bathroom and restroom.
• Questionable food conditions; Insects are often mixed with the food. • High risk work conditions; workshops reeks of an insistent mixture of chemical smell that makes workers feel uncomfortable and disgusted and the factory does not enforce workers to wear safety equipments unless audits are taking place. • Unethical waste disposal procedure; waste such as paint and glue and etc. are dumped into the sewer. • Workers have hard to quit; Surpassing rejects a large number of resignation requests and withholds workers’ luggage.
Therefore, the main problem is not the suppliers, but the PUMA itself for being not aware on the happenings on its suppliers. PUMA has lack of its communication and investigation on assuring that its suppliers are working good and legal.
To be able to analyze the problem and make recommendations for PUMA to improve its awareness on what is happening to his suppliers.
AREAS OF CONSIDERATION
• Puma is established over 90 countries and employs around 8300 employees all over the world.
• Puma is the main producer of enthusiast droving shoes and racing suits in both Formula One and NASCAR.
• Puma is entered into partnerships with famous companies like Ferrari and BMW.
• Puma brand is very innovative and has a very rich Research and Development team. The Company produced the first screw boots for football and “Mexico 68” with the innovative brush soles, which were the most comfortable running shoes.
• Puma has an excellent brand name throughout the world.
• The brand has excellent management and marketing strategies and has the advertised the products very well and eye-catching throughout the world.
• Puma has entered into sponsorships with various players and teams in different sects of the sporting industry.
• Puma was the official sponsor of the FIFA football World Cup
• Puma has tough competition and limited market share compared to Nike and Adidas
• The company has less financial strength compared to the other brands in the industry
• Tie-ups with sports academies and schools
• The company can attain more sponsorship as more international events in the sporting industry are taking place.
• The company can start entering the lifestyle section of the industry
• The current economic situation is very bleak, hence expansion is minimal.
• There is extensive completion from existing players and new players which is growing in the industry.
• Limitations of the brand is extensively increasing
ALTERNATIVE COURSES OF ACTION
|SOLUTIONS |ADVANTAGES |DISADVANTAGES | |Maximize the communications between the |The company will be updated on the current |More time should be given by the company | |company and the supplier |issues of their suppliers | | |Introduce to their suppliers the |It will support the top down auditing |Their supplier partners will lend enough | |sustainability reporting |system practiced by PUMA |time for that | |Always monitor if the supplier is obeying |To make sure that the supplier is following|Also, it needs more time to do it | |the rules and regulations of the company |what had been discussed on the | | | |Contract of partnership | | |If necessary, hire a new supplier. |It might be a better one. |You don’t have the assurance. |
We suggest that PUMA not only focus on a single supplier, but commit to fostering improvements in all of its suppliers. PUMA needs to refocus its priorities and remediate its flawed audit system. Also, PUMA should urge its supplier to offer workers legal work hours, fair wages that allows sustainability and eliminate discrimination at work place. They can also replace their supplier with a new one.
DETAILED PLAN OF ACTION/CONCLUSION
|SOLUTION |PROCEDURE | |Maximize the communications between the company and the supplier |Step 1. Maintain the communication within the company and the | | |suppliers | | |Step 2. Keep updated on the activities done by the suppliers. | | |Step 3. Always demand them a report regarding of the raw | | |materials given by them. | | |Step 4. Assure that the qualities are good, so that cost of | | |inspection will be lessened. | |Replacing the old supplier to a new one |Step 1. Seek for a company that is popular for its high quality | | |standards. | | |Step 2. Make sure that this company will be a good partner. | | |Step 3. Make a research about this company to know more about its| | |background. | | |Step 4. Make a contract for your terms and conditions of the | | |partnership. | | |Step 5. If approved, continuously do the procedures above.
Therefore, I concluded that without sustainable suppliers, they will not be able to produce sustainable products or credibly report about PUMA’s own sustainability initiatives. Supplier relationship development, management and collaboration are keys to achieving legal compliance and sustainability on an ongoing basis.