Case Studies

Outsourcing Manufacturing to Developing Countries

Posted by WMM1942 on August 13, 2020 at 9:04am

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

    • ssbt_biotechguy > ssbt1111 October 30, 2020 at 3:33pm
      This is a very good point but I wish to contradict on certain grounds like providing safety equipments to the workers. This is indeed a very good solution but it is not practically possible. A manufacturer may like to maximize the sales in order to acquire status and prestige in the business world or to dominate the market. But at the end of the day their main aim is to earn maximum profit. So, they will never adopt any method which will effect their profit. If the producers have to pay a higher price to secure the safety of their workers then it's cost of production will be higher. Hence, they will earn less profit.

      So, we have to come up with a solution which is practically possible. It is true that the management cannot be there all the time but they should guide them and provide a better working condition, breaks etc. They have to realize that their production and profit depends on their employees or workers. So, insurance policies, better wages etc can attract workers to work efficiently.
    • ssbtchhanda > ssbt1111 October 30, 2020 at 9:09am
      Yes, before setting up any industry, it is very much important that proper safety measures for the workers is ensured. What I feel is that there should be a separate committee looking after the safety measures of any hazardous industries. That committee must be independent of all types of planning and plotting to earn more money. This is because in the above mentioned case study we could see that Joe was honest and sincere in his work. He did not wanted to start up the industry after inspecting its features. He was not corrupt and honestly following his work. But what was the outcome? He was removed from the post by the higher authorities and eventually the post was offered to someone who happened to be the relative of the authority. Now, it wil be easier to get into corruption and earn more money without taking care about the workers. So, if the people who happened to be justice giver themselves become corrupt then we can imagine the condition of such country. So, in order to get benefit from the newly installed industries and factories, it is very much important to take care of the workers. If specialized committee are set up for inspection of newly installed factories and industries, then those people should be loyal and perform their duties with utmost sincerity since the lives of thousands and thousands of workers are in their hand .
  • ssbt_the_king_in_the_north October 30, 2020 at 8:18am
    1. The knowledge of work and trained professionals to do the work would be definitely great while working in a company. To solve the problems there is always a way to do it, one must be capable of thinking right ways and take proper decisions with confidence. The risks should not be ignored and proper ethics should be followed. The inspectors, technicians and workers should always give a look to all of the equipment in the plant. This is totally a team work as it can be handled alone. The team should be properly trained for all the situations however vast it is. The higher authorities should not neglect any happenings whether it is small or large. All the staff members should know who to use each and every equipment so in absence of any worker, it can be controlled.

    2. All the members in staff should be given proper education about all the materials and their harmful effects. They should now how to handle it at the time of its misbehavior. The higher officials should always give a look in between proper time period to avoid inappropriate circumstance. There should be a backup plan for every possible happenings to control it. The health of the people working there and also living near should be the prior concern. The plant should always consists of preventive measures. The workers should always wear proper gears to protect themselves.

    3. Corruption is only thing that is destroying a whole big project. The officials who recruited the workers without proper education lead to this casualty. As mentioned above, that local person was appointed as a manager, appointing locals was a nice idea but at such post it needs some experienced and educated person. They should have recruited locals for small works that would have given a helping hand and at the post of manager, they should have selected a educated person. The warnings about the system that was given to Joe was to be given a sight and solved as they were very required fields and most important fields of the plant functioning. For this complaints, the corrupted officials removed Joe from his post. This is why such plants risks and destroys life of public.

    4. The right things to do:
    - A particular channel for immediate contact to proper authorities
    - Developing skills in the workers
    - Educated officials
    - The main stream peoples should not be corrupted
    - The potential workers should be rewarded properly.
  • SS_SayantaniGhosh October 30, 2020 at 8:05am
    All that the stakeholders care about is money. The stakeholders, in this case, are the people in the government who allow for the multinational companies to set up their industries in their still-growing homeland or the mayor and his brother-in-law who repeatedly ignored the warnings of Joe Martin and his team about the conditions being unsafe. However, they forget that if the factory burns down, it is not just the employees and their families whose entire lives are going to be turned upside down. They as investors and as responsible people in position will suffer the consequences as well. Joe and his team were iffy in the first place before beginning work due to the lack of safety measures that were taken into consideration. Even after their work was completed, several safety concerns were found in need of fixing before work in that place began. The stakeholders again turned a dear ear to his word of caution before they replaced him and his team with local people who cared about immediate monetary gains over long term goals or people’s lives.

    The people in the government are the ones who are supposed to care for the wellbeing of ordinary common people. Yet they are the ones who are setting up death traps in their homeland for the sake of the economy. What knowledge, sophisticated or not, can be imparted to the ones who have already decided to put something so abstract over the lives of innocents? If we consider ethics to be a thin veil between humanity and inhumanness, then in this instance it can be said that they have already crossed to the other side. I would say for Ethicana to replace the people in charge with people who care about the life of others but that since that is the story of every developing country, the solution has to be more practical. Some of the “workable solutions” could be: 1. hiring people who score high on humanity and temperance in values for HR.
    2. Making thorough and rigorous ethics classes mandatory for anyone who even aspires to work for the government so that the next generation of people pulling the cords in the body that runs the country is responsible and ethical.

    The interdisciplinary perspectives would help identify innovative and non-obvious solutions. It has to come from a psychological perspective where the people in charge are provided therapy so that they are mindful of the actions they are taking. The consequences henceforth have to be long term rather than just thinking about monetary gains. Chasing after money, in the long run, is only going to bring losses because the industry can only do well so long as the employees are doing well.

    I am a mere grad student however my position on the right thing to do would be to always value living beings over non-living. All these plants and factories are built in developing countries in the first place because there is a lack of regard for the safety of human life and cheap labour as well (as it has been cited in various other researches). If multinational companies themselves could decide to not establish a factory until and unless there are safety measures implemented that would ensure a longer life span of the workers, then maybe the local government will be forced to listen and care. Labor is always going to be cheap in comparison to what labor would be in the home country of the organization, but if the ergonomics are taken care of then there would at least be one factor that might ensure job satisfaction for the employees.
  • ssbtvidisha October 30, 2020 at 7:27am
    1. To implement sophisticated, appropriate and workable solutions to the global problem the developing countries that lack infrastructure and technologies should be more aware about the health and safety regulations. The risk should be ignored and proper environmental ethics should be followed. The safety inspectors should always do inspections of these plants from time to time. The technicians should keep in check the problems from time to time. The safety standards should be made up to the level for the new plant. The multinational companies these days aim for increasing their profit by reducing the cost of production. The higher officials are corrupt and they indeed careless about the health of the people. Industrial safety should be maintained and chemical exposures should be minimized. Proper survey should be done before starting any new technology. In this case study we observe lack of ethics and morality among people. The employees should have basic knowledge on operating the technologies.
    2. We need sophisticated and innovative solutions to overcome the global problem. All the workers should be well educated. They should be given proper training. A specialized group of engineers and technicians should be appointed so that the equipments can be properly treated. The government officials should keep a check on these equipments. There should be no corruption within the system. The health and safety of the people should be the utmost concern of the companies. Proper and strict jurisdictions should take place in developing countries where employees are hinered and cheap equipments are used.
    3. From this case study we see that people from not so educated bacground only because of their sources gets their job. The corrupt officials fill up their pockets and replace the good quality products by the cheap ones. As they were relative to the mayor they gets their job. on the other hand even on the request of the engineers in charge the company refuses for the safety inspections. Joe and his team even lears that there are various problems during the startup. Further they are even replaced later by higher official to normal local technicians. To solve this problem one much find right people who can take the stand and allows proper coordination between every level of officials.
    4. I should take proper responsibility while fulfilling my duties. We should be more careful while doing this project. The chemical hazards should be treated properly and the waste should disposed off properly. Safety inspections should always take place from time to time. The new models that are used for installation in the plant should be properly checked. The emergency measures that would be taken at the time of emergency should be propwrly checked. Proper plan should be made which laying those instruments. Government should make proper rules and regulations stating the safety of the people and further the culprits should be severely punished.
  • ss.yash October 30, 2020 at 6:20am
    The administrative methodology will help recognize inventive and unambiguous arrangements - in light of the fact that Zone is a colossal misstep in its study. His group regularly overlooks his reviews. The compound volume is lost because of the regenerative limit of the holding tank and the waste stockpiling tank is generally kept at 70% full and the tank floods. They face electrical issues. The water screen is a cycle gas containing nano-particles in the work environment. The cycle gas, including nano-particles, departures to the specialist's working region. Function plant crisis nearby networks have never been tried. In this examination a few mishaps happened during the activity. Representatives with nano-particles whose drawn out gathering wellbeing impacts are obscure.
    Consolidating the points of view of science, trade and the humanities will make a wide scope of thoughts. There are unlimited issues on the planet that can be comprehended with the assistance of an exploration field. To play out the undertaking one must locate the correct pioneer and the correct character and requires the correct coordination between the group and the group chief. These can help illuminate creative and evident arrangements.

    The best thing
    Increasing the level or ability of correspondence between colleagues.
    Proper checking and examination of the creation plant ought to be done occasionally.
    There is no defilement in the association.
    The legislatures of agricultural nations need to establish laws for preservation just as nature protection and contamination control.
  • ssbtpurvkish October 30, 2020 at 6:14am
    Firstly there should be a well versed knowledge of things before taking charge and its safety as it is rightly said “Safety comes first”. There are MNCs coming up for doing projects/ setting up plants but the employees don’t have proper knowledge about what they are doing. Are they putting anyone’s life at risk??Their less knowledge about the project alarms the safety of the workers as well as putting local community’s life at stake. It should be taken into consideration that not only development is important but safety also shares the same page.
    Proper safety measures are very important for any project, but here in this case study Joe Martin and his team was restricted to apply full safety standards for the plant. They were restricted and were force to use low cost instrumentation. The team knew that the safety standard was not up to the mark and nothing could be done by them as they were given orders by the agency. In their case safety inspection was not done. There were many problems which were neglected by the authorities. Here we can see nepotism as person with very limited knowledge was made plant manager as he was related to the mayor of the area. This kind of carelessness may lead to major problems. This plant does not have any backup plan if in case any negative happens. Hence, there were many wrong decisions made for the ethicana plant. This only shows the greed of humans and humans lacking humanities. It is said that “there is enough for everyone’s need and not for greed”. The interdisciplinary perspective here in this case was not ethical. From this it can be said that primary importance is given to profit which would be earned and keeping safety measures secondary.
    The right things to do would be involving government agencies for looking the safety areas, discussing the detailed blue print of entire project which should satisfy the design engineer team. It should also involve legal systems to keep a check on plant and they should have a backup as well. A common set of rules should be made by the law that every plant should follow whether being small scale or large scale and in case of not if it is not being followed allegations should be charged.
  • ss_kolkata October 30, 2020 at 5:59am
    1) The knowledge of work and trained professionals to do the work would be definitely great while working in a company. Now, to solve the problems there must be a way to it, one must be capable of taking right decisions and should always work with confidence in the work environment and that will be perfectly fine .
    2) There was a lack of proper Safe measures in the Ethicana project , it would have been great if they maintained a proper safety measures in the project act according to it.
    3)Firstly, we have to reduce the operational cost of a company so that it can think more of gain. It would help the company to grow and build strong.
    4)To understand the situation and have a complete knowledge of the product that i am working with. And, would also maintain tye proper safety measures to the project and then plan for the rest.
  • ssbtanushka October 30, 2020 at 5:26am
    It’s become quite apparent in the twenty-first century that human needs and desires have been increasingly given more worth above all else. It’s equally undeniable that the needs of the Earth and importance in preserving and protecting it have been slowly stripped away in favor of those treasured human desires.

    Human greed has manifested itself in new ways, many of which are causing irreparable damage to the environment. This societal shift is anthropocentrism, where humankind is given intrinsic value; or being important merely for existing in and of itself. When human beings make decisions using this mindset, it reduces the world around them to only having instrumental value; or being important only in relation to what it provides or does for humankind. The environment becomes a malleable plaything from which we derive anything and everything we want, with consideration for our needs and desires, and with a lack of concern for the effects and damage it may cause to our generous planet. In the above case study we see how human greed and power took over innocent lives and how people who raises their voice gets suppressed and destroyed.

    There is no issue in manufacturing a plant but taking correct safety measures, having a prerequisite knowledge about what you're doing, keeping relief workers, having a good quality management, having an unbiased authority, giving attention to all the minute details etc are very important. The sustainable use of common pool resources has become a significant global challenge. Its now widely accepted that specific mechanisms like community-based management strategies, institutional responses such as resource privatisation, information availability and emergent social norms etc (briefly mentioned above) can be used to constrain individual ‘harvesting’ to socially optimal levels. However, there is a paucity of research focused specifically on aligning profitability and sustainability goals.
    • ZMorgg > ssbtanushka October 30, 2020 at 10:49am
      The management in this story simply do not care for life, but rather their own pocket book. This does not mean, however, that believing in the intrinsic value of human life is a poor stance. I know I agree with the idea of humankind having intrisic value by just existing, but doing that correctly also means caring for the world around us. Caring for humanity means we have to care about the planet as well. I disagree with the idea that only human life has value, but I do agree that humanity should always be the first value.
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