Outsourcing Manufacturing to Developing Countries

Background

The development of new, more complex technologies continues at an accelerating pace. Many of these technologies have risks that have not been seen before or adequately assessed.  The risks these technologies incur are frequently exported to developing countries, which lack the infrastructure to support and implement these technologies safely. For manufacturers developing countries offer multinational corporations a competitive cost advantage compared to manufacturing in highly industrialized countries. Companies building plants in developing countries have the benefit of cheap labor and low operating costs. Health and safety regulations are often non-existent or at best inadequate to address the risks new technologies incur. There may be little incentive to promote environmental ethics, safety procedures and community investment. Even if regulations exist firms may find it economically advantageous to avoid compliance and pay penalties rather than to meet statutory safety or environmental requirements.

There have been numerous instances where plants established in developing countries have experienced workplace and community disasters that would be much less likely to have happened in industrialized nations. The 1984 catastrophe at the Union Carbide Plant in Bhopal, the capital city of Madhya Pradesh, in India is a prime example. Recently workers were trapped in manufacturing facilities with inadequate fire suppression or emergency exits as another example. Longer term health issues arise when workers are exposed to hazardous materials without adequate protective gear. Hazardous waste maybe introduced into communities without adequate treatment. The ethical responsibilities of multinational corporations and their senior management, engineers and scientists working for these organizations are frequently ignored.

Often there is a demonstrable difference in design, safety, operating and maintenance procedures when comparing plants in developing countries with similar plants in highly industrialized countries. Developing countries frequently lack community information and emergency response procedures to deal with large-scale disasters. The governments of developing countries may contribute to the risks if highly placed governmental officials are susceptible to corruption to overlook serious health and safety issues. 

The following fictitious scenario is based on a composite of real events.

Reduced Safety Standards In Design Specifications

Joe Martin is the Chief Design Engineer for a major multinational corporation. He leads a multidisciplinary team of engineers that have years of experience in the safe design of manufacturing plants in his home country, a highly industrialized nation. Joe and his team have been tasked with the design and startup of a new plant in Ethicana (a fictitious developing country). The plant will manufacture advanced solar cells and complete solar panels using a proprietary nanotechnology process that has never been used before. The decision to build the plant in Ethicana was primarily driven by the lengthy process to get approval by regulatory agencies in his home country. There has been very little research or data collected on the safe use of this new nanotechnology in manufacturing solar cells.

An important issue that Joe and his engineering team face is the design specifications set by management for the new plant have safety standards well below those for similar plants in his home country where the corporate headquarters is located. New computerized safety systems specified for use in his home country have not been incorporated into the design specifications for the new Ethicana plant to reduce costs. Joe’s team has been given a restricted list of approved low-cost instrumentation for the new plant that has a reputation of being unreliable.

Joe and his design team are very concerned. When Joe approaches senior management with his concerns he is sternly rebuffed and told that regulations in Ethicana do not require the same safety and environmental measures as those in his home country. Joe and his team feel very uncomfortable at the reduced design and safety standards for the new plant, but are keenly aware of management's negative reaction to their feelings. They feel compelled to design the plant to meet the specifications management provided. The plant is built accordingly.

 Starting up the plant.

Joe’s team immediately becomes aware that even existing safety standards are not being upheld. Nevertheless, the new plant is scheduled for startup.  Joe reports back to corporate headquarters that even though he has requested a safety inspection, the regulatory agencies of Ethicana have never inspected the plant and are not enforcing safety and environmental regulations. Joe requests permission from senior management to delay startup until safety inspections have been made. He is told to start up the plant immediately and that safety inspections will occur when local agencies can schedule time for a visit.

 During startup, the operating technicians have reported the following problems to Joe and his team:

  1. Temperature and pressure gauges are unreliable and are frequently ignored.
  2. Process waste chemical volumes are exceeding the recommended capacity of the holding tank.
  3. The reserve waste storage tank is averaging 70% full and occasionally overflows.
  4. The refrigeration unit that keeps potentially explosive chemicals at low temperatures shuts down intermittently and requires manual restarting. 
  5. The gas scrubber, which is designed capture flammable gases escaping from the process, has been shut down due to an electrical problem. Escaping gases are being routed to the flare tower.
  6. The flare tower – which is designed to burn off flammable gases escaping from the scrubber -- has a defective automatic igniter. Periodically when the flame is blown out by high winds it does not re-ignite. An unknown quantity of unburned flammable gas containing nanoparticles escapes to the atmosphere until the flame is manually ignited.
  7. The water curtain -- which should capture any process gas containing nano-particles in the works area – lacks adequate volume. Process gas containing nano-particles escapes into the worker’s operating area.
  8. The warning system for the local community in the event of a plant emergency has never been tested and is not known whether it is operable.
  9. Recent nationalization policies of the Ethicana government have resulted in the premature replacement of members of Joe’s team of experienced engineers with less knowledgeable local citizens.  Due to training cutbacks, most replacement technicians at the plant are poorly trained, inexperienced and have little understanding of the manufacturing process. This has resulted in several accidents during operation exposing workers to hazardous materials including nano-particles whose long-term health effects are unknown.

Corporate Response to Safety Concerns

Joe reported his concerns to senior management at corporate headquarters and requested that the Ethicana plant operations be suspended until the faulty equipment, safety and operational issues are addressed. To make his point Joe tells senior management that this is a disaster waiting to happen and that if nothing is done he will be compelled to file a report with the Ethicana Worker Safety and Environmental Protection Agency. Senior management tells him to keep the plant in operation at all cost. He is told that ethics and morals have no role in operating a manufacturing facility profitably. 

Out of frustration Joe reported his immediate supervisor to the senior vice president for corporate operations regarding potential risks to persons living near the plant. He is told that there are no regulations in Ethicana requiring the communication of risks to the local population living near the plant. Nothing is done to inform the surrounding community of any potential risks.

Because Joe and many of his team lived in the local community during their assignment in Ethicana they are aware that there are no emergency response plans to cope with any events at the plant that could have a negative impact the local community. Joe knows that there is an inadequate supply of water and electricity which could affect the operation of safety equipment currently installed at the plant in the event of an emergency. 

Consequences

Joe is quietly replaced by a local citizen as the plant manager and transferred back to corporate headquarters. Joe receives a less than favorable performance evaluation from his supervisor for his work on the Ethicana project. The rest of Joe’s engineering team is replaced by local citizens and the team is transferred back to corporate headquarters. To add to Joe’s frustration, he finds out from an article in an Ethicana newspaper that the new Ethicana plant manager is the brother in law of the mayor of the city where the plant is located. The new plant manager's industrial experience is limited to vehicle maintenance for the city where the plant is located.

Responsibility of the Governments of Industrialized and Developing Nations

Currently, international law does not involve itself in industrial hazards, pollution or regulating multinational corporations in general.  Any disaster that results will be litigated in the country where the plant operates. The legal systems of most developing countries lack experience in dealing with multinational corporations or the consequences of a major disaster resulting from poorly designed and operated plants outsourced from highly industrialized countries. 

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As you read and analyze this case study, your reflective comments are requested on all of the following:

  • Who are the stakeholders, and how are they impacted both positively and negatively?
  • What knowledge and skills are needed to implement sophisticated, appropriate and workable solutions to the complex global problems facing the world today?
  • What interdisciplinary perspectives would help identify innovative and non-obvious solutions?
  • What insights can you articulate, based on your culture and other cultures with which you are familiar, to help understand your worldview and enable greater civic engagement?
  • What is your position on the right thing(s) to do?

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Comments

  • In the Scenario involving Joe and his team along with their experience in Ethicana there are many stakeholders. The stakeholders include the locals in Ethicana, the Government in Ethicana, Joe and his team, and the multinational corporation they work for. The locals of Ethicana are stakeholders because first they are promised more job opportunities with the creation of the new plant in their community. However, they are in grave danger without even knowing because they were not properly informed about the hazards that come with the plant being installed in their local community as well as the low safety and regulation standards in the country. For the local Government of Ethicana, they too are blinded by the illusion of progress. When Joe and his experienced team of engineers are transferred back to their home multinational corporation office, the inexperienced brother of the local Mayor is put in charge. This might positively impact him financially but at the same time It will put the lives of his team and fellow country men in danger. Joe and his team will have to live with the fact that they left many people and a community in danger. As for the multinational corporation, they will be enjoying the profit made by the plant in the developing country and will spend less in improving the working environments to curb costs.Specialized knowledge and skills are needed to implement sophisticated, appropriate and workable solutions to the complex global problems facing the world today, including making global laws. The United Nations should consider cases such as that of Ethicana, which to today still take place in many developing nations and cultures as a crime against human rights. As someone who has lived in a developing nation for most of my life it is common for such situations to take place. Most times it is important to acknowledge that not many local governments will work in the favor of those they rule. For example, when the mayor saw that his brother got a job to run the plant, he probably shifted the idea of shutting down the plant until it is safely run.The industry does not care about the locals of Ethicana and how they may or may not be affected by their ignorance. They also did not invest time into training new people before replacing Joe and his Team. The right thing to do in this case is for the company to listen to Joe’s concerns and not dismiss them. By listening to Joe the company could still profit and at the same time avoid future disasters/scandals. A problem does not just go away without being solved and if they proceed to hire the inexperienced employees they are setting themselves up for a disaster. It is likely that when disaster strikes the company will be convicted of negligence causing an international scandal, a feat which could have been avoided at the beginning.
  • New, more advanced technologies are being developed at a faster rate with the "Outsourcing Manufacturing to Developing Countries" case study. Many of these technologies have drawbacks that haven't been fully considered or acknowledged.. Developing nations typically import the risks posed by these technologies because they lack the infrastructure to support and embrace them properly. Joe Martin and the residents of those nations who live in close proximity to the manufacturing site and infrastructure are the stakeholders most at risk when manufacturing foreign technologies in those nations. Before building such a complex technological advancement to benefit the country or region it is being installed into, there are many things that need to be implemented into these countries. regulations for things like the infrastructure's construction process, installation safety, the ethics of the personnel who will be operating it, and the testing that must be performed to ensure everything is functioning properly. International law and pollution risks are other potential problems. Overall, it is important to follow engineering ethics when creating and producing such a technological item, especially when doing so in a foreign country that is less familiar to us. The design specifications are one of the current safety standards that cannot be justified. Bringing all of these issues to a foreign country has its drawbacks since they do not fully get the repercussions and difficulties of creating new infrastructure, which is entirely our fault since they do not know us and are not a part of their daily lives. Implementing an expert into the process by building these innovations so they can help regulate and ensure the proper steps are followed during the construction process is one of the informed ways I can see helping the situation. I can also suggest hiring a professional to work on the given building, plant, etc. and instruct the nation's workers who will be in charge of everything while none of us are looking. Another suggestion is to periodically visit the infrastructure and conduct tests to ensure everything is operating as it should before wrapping up all of these checkups and safety precautions and letting them take control of the infrastructure on their own. Even though there have been numerous instances where technologies established in developing countries have led to workplace and community disasters, there are simply too many benefits to ignore for industrialization of countries lacking the technologies we have. This is true as long as engineering ethics are upheld.
  • In the case study written by William Marcy, Outsourcing Manufacturing to Developing Countries there are many stakeholders that can be affected in this ethical dilemma. The major stakeholders were Joe Martin and his team of engineers, the local citizens who live near the plant and the local workers who are hired on the plant after Joe Martin and his team were relocated. They are all impacted negatively because Martin and his team did not feel comfortable making that plant with such low safety requirements, they knew something could go wrong and that it wasn’t ethical. The local citizens are the ones who are most impacted negatively since they area the ones who are getting affected by pollution and are put in danger by operating the plant with such low industrial experience and long working hours just for the owners profit. Some of the knowledge and skills I would implement would start in high school with education about ethics and safety and leadership. Being able to stand up for something takes a lot of courage but it can help resolve a lot. Having knowledge In environmental and civil engineering, chemistry and economics. Learning more about the people and culture before moving a manufacturing plant to it. Understanding where the people get their water from, flow of water in streams and surrounding water can significantly change things before breaking ground on construction. From my culture and background, I can understand that saving money and getting things done fast is a big motivating factor. Sometimes it is okay to do that, for example, I was building a small shed with my dad, but needed one more 2x4 stud, but we didn’t have anymore, so we combined other scrap lumber to make it work. In that instance, I think its okay to cut some corners, but the bigger the scale with heavy industrial equipment and machinery, there has to be a standard in place. I believe that both countries can benefit from bringing a manufacturing plant as it provides with jobs and opportunities, but at the same thing the company/person who owns this plant needs to provide the basic needs for safety and not overwork and underpay their employees, it can happen if someone is willing to pay for it.
  • In the case article, “Outsourcing Manufacturing to Developing Countries”, the stakeholders are Joe Martin, a multidisciplinary team of engineers, and the people near the plant. Joe Martin and his team of engineers are negatively impacted in this case study. This is because they are fired from the job at Ethicana. The citizens near the plant in this case is positively impacted because they gain a source of employment. On the other hands, they can also be negatively impacted, if something were to happen to the plant in Ethicana, they could lose their lives or get injured. The knowledge and skills that are needed to implement the problems we’re facing in today’s world are experience, education, and leadership. If all these things are met, making ethical decision will be a little easier. The interdisciplinary perspectives that could assist with the solution could be having a background its ethical decision making. This could be done by taking a course in it or having a minor or a major in it. Another would be to bring experts to back up Martin’s cases. If one were to bring an expert in any of the reports were found and have them back him up, the results might be different. For example, bringing medical professionals to access the situation in the plant and help them bring it up to the higher ups. Bringing the attention to the public like telling news reporters, this isn’t the best thing to do but if all else fails, this is the most ethical thing to do. Keep others safe. It is important for a person to be well rounded and having experience would help tremendously if these actions were to happen in real life. Based on my culture, the moral and ethics of the hiring untrained workers are a big no. Since the management team wants to get this done, they should have done it properly. If things were to go out of hand, it will risk the lives of the people around the plant. In this case the management team have no moral compass. I believe Mr. Martin did his best in trying to get the higher ups to take responsibility. If I were in his shoes, ethically I would release the finding public even if it cost me my job. By releasing the findings to the public, maybe the city near the plant will riot and shut done the plant or get better safety measure. I will try my best to keep others safe because it is the right thing to do.
  • The article "Outsourcing Manufacturing to Developing Countries" talks about the issues that can arise when delegating manufacturing plants in underdeveloped countries. There are multiple groups of people affected, I would like to focus on the plant workers and civilians of the area where the plant is to be built. I believe choosing to act in an unethical manner here impacts these groups of people the most. To act ethically, you must understand the culture and society you impact. I think it would be wise to hold a town hall meeting with the people of Ethicana, this would enable them to express their concerns. Having environmental engineers would greatly help this project to provide perspectives that other disciplines might not consider. The way the firm is solely motivated by economic growth only encourages unsafe practices and neglects the previously mentioned stakeholders. I think the right thing to do here is to reevaluate the firm's goals and values. Establishing ethical standards in the engineering firm would direct the focus away from profit but instead to bettering the world.
  • In the Case Study that I read and analyzed called "Outsourcing Manufacturing to Developing Countries" the author and contributor William Marcy from Texas Tech University pointed out the ethical dilemma when it comes to a developed country like The United States setting up manufacturing plants in developing countries for cheap labor and cost. The main stakeholders in this article would be the workers from this developing country and the company that outsourced for the cheap labor and manufacturing cost. On one side the workers are seeing poor working conditions and are being exploited because there is no international law protecting these workers from unsafe working conditions. On the other hand, the company that is outsourcing to this developing country is seeing higher returns on their production and seeing a decline in the cost of operation at one of these manufacturing plants. The next step the world needs to take is to regulate these working conditions in developing countries. For example, one of the solutions could be if a worker gets injured at a plant that doesn't follow the same safety regulation as a manufacturing plant in the home country of that company then the company is liable to get sued, and pay the employee 'x' amount of dollars. Another solution could be United Nations stepping in and regulating the manufacturing plant's safety across the world. And if a company doesn't follow protocol then the United Nations would go to the county responsible and that country would have to take action. Now if we look at a country that this is happening to for example an African Country, let us use Sudan as a more specific example. Sudan doesn't have the luxury of being able to produce goods and services for the world and for their country to use. There is no innovation happening in Sudan, therefore there is no need for more jobs and opportunities. Sudan will see a country trying to set up a manufacturing plant in their country as a good thing. This means more jobs and paychecks for the citizens of Sudan. My position on the argument that it's good for Sudan and also The United States is that yes it is good, but The United States companies are exploiting these workers by not giving them an equal quality of safety at the manufacturing plant they are working at. Therefore these United States Companies are committing unethical acts.
    • I really liked your application of this into a real world example! I agree that it can benefit both parties but both also have to do their part to avoid exploiting people of Sudan. I say both because the more developed country usually takes advantage of the cheap labor and no regulations because most of the time the host country does not have a well established government or infrastructure.
    • I enjoyed your comparison to a real-world example. I also liked how you mention that establishing manufacturing plants in Sudan is good on paper but how the companies tend to exploit the people of Sudan. I believe that if we only allow companies with strong ethical leaders to build such factories then it results in less exploitation. I would like to know your thoughts @DrewPickens about how we might be able to accomplish a screening of some sort.
  • In the case study “Outsourcing Manufacturing to Developing Countries” the author addresses how safety requirements can be lost when outsourcing a service to a developing country. Many stakeholders will be affected negatively by these safety conditions including the people who live near the plant that can be harmed by pollution or any faults with the plant, the people who work in the plant who can be killed or injured by any safety feature that was overlooked, and the government whose countries name can be tarnished by the disaster that can occur from an unsafe plant. Other stakeholders can gain from the cheap labor such as the engineering firm that gets their product for a cheap price, the government that can provide jobs for the citizens of their country, and the people who purchase from the firm because they will also get cheaper prices. While there are lots of monetary gains to be made from the plants by the firms by using a respect for persons approach to the problem we can understand the lives of the people working in the plant must not be used as a means to an end. To my understanding of the world the only entity that can control the firm is the law which can require the firm to have safety regulations. The two involved governments that can regulate the firm are the government in which the firm is in and the government of the developing country. These two governments should work together by using the government of the firm to help the other government understand what regulations must be in place to assure the safety of their citizens. In the more specific example the author provides I believe Joe did almost everything he could the only other option for him was to report the safety issues directly to the government of Ethicana because they would be the most affected by these damages. They may be able to apply the safety requirements in time to save lives or they would not be in fear of losing business with the firm and not making any changes. My position on the right thing to do if I were the manager of the operation is to manufacture the plant in a more developed country that already has regulations on the matter because these regulations should allow the plant to be a safer environment. The matter the author describes is very complex and the stakeholders either do not have the power to make a change or they do not have the incentive to make changes to the safety.
  • This Case Study was very fascinating, it was called Outsourcing Manufacturing to Developing Countries, the stakeholders in this case were Joe Martin and his team of engineers. They were sent to set up a new plant in Eticana and it will manufacture advanced solar cells and complete solar cells. The positives and negatives are split because the people of Eticana get energy and an opportunity to get a job at the plant. The negatives vastly outweigh the positives. We can start by since they are not in the United States, ethics are not followed how they are supposed to. The plant is extremely dangerous to work in because of all the things that can go wrong starting from the chemical volumes exceeding the limit or the replacement of Joe’s team with civilians who are not engineers. With Joe witnessing all of this he tries to explain to the higher bosses, but they do not listen to him. Later he is replaced and him with his team are sent back to headquarters. The skills they needed at Eticana were just simply to follow Joe’s lead by doing things an ethical way so no one would be in danger. On the other hand, they did the opposite and are very much in danger with the way they handled the situation. If you look at it from an interdisciplinary perspective, they could bring a medical professional to find a way where they can use some sort of mask or shield to protect them from pollutants. Also create medicine that cures the person if they were to inhale the pollutants. This would help if they were not following proper ethics. Based on my culture this whole case is a no because of the disregard of ethics and safety of the whole plant. You would think keeping professionals in their jobs and listening to them is the right thing to do but they did the opposite, and it was a terrible mistake by Eticana for not listening. My position in this case is that Joe and his team tried to do their job by keeping the plant afloat, but they did not follow their lead and will pay for it. Setting up new plants in countries that are not developed is a challenge, but it can be done if you have good leadership and a country that is willing to listen to the professionals. What they did was not right because they did their own thing and replaced the professionals with civilians who are not trained to work in a plant like that.
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