“This Whole System Seems Wrong”

Felipe Montez and Concerns about the

Global Supply Chain1
In 2003 Felipe Montez was hired to be a Purchasing Director and Product Designer for a Spanish
electronics company. This company focused on supplying fashion-forward personal electronics (such as
cell phones or MP3 players) and had built their reputation by quickly responding to trends in electronics
while still maintaining a reasonable price point. In order to keep prices low and produce products
quickly, the company outsourced certain elements of their production, most recently to factories in
South China.

Until Felipe was hired, the company had a 27 year history of working with a distributor in Hong Kong,
during which time no one from the Spanish headquarters had ever visited the actual Chinese factories
where their goods were manufactured. Felipe had previous experience working in Asia, and decided to
cut out the middle-man by working directly with the factories in China that supplied his company’s
goods. Working directly with their factories eliminated the distributor’s mark-up (which was sometimes
as high as 30%) and allowed for faster communication and delivery from the factory.

On Felipe’s first trip to China he visited several factories. Conditions varied from one factory to another.
A few of them were clean and very organized, but some facilities seemed more chaotic. Felipe was
particularly concerned about the conditions in the factory that produced the majority of his company’s
goods.

Many of the employees at this factory appeared to be very young (Felipe guessed they were 12-16 years
old). In response to questions about the youth of the workers, the factory manager told Felipe that

1
This case was inspired by interviews and observations of actual experiences but names and other situational
details have been changed for confidentiality and teaching purposes.

These cases were prepared for the Giving Voice to Values program for Columbia Business School by Mary C. Gentile,
Ph.D. and Professor William Klepper, with the assistance of Clelia Peters, Columbia ’09 and Miguel Lopez, Columbia ’08,
and with funding from the Sanford C. Bernstein & Co. Center for Leadership and Ethics. This case is also available through
the Columbia CaseWorks collection and appears in that collection as #081803.

This material is part of the Giving Voice to Values curriculum collection (www.GivingVoiceToValues.org).
The Aspen Institute was founding partner, along with the Yale School of Management, and incubator for Giving Voice to Values (GVV).
Now Funded by Babson College.
Do not alter or distribute without permission. © Mary C. Gentile, 2010
1
younger girls were valued for their precision work: they had small hands and could mount chips on
motherboards very carefully. Although younger girls were slower than an assembly machine, the factory
manager told Felipe they were cheaper to “run” and “maintain”. The young factory workers had to work
for what the foreman claimed to be an 8-hour work day, 6 days a week. In general, the factory manager
seemed to regard the workers less as human beings and more as part of a mechanical process. Felipe was
shocked to discover that during their shifts the workers were not allowed to look up, because the factory
manager did not want them to lose one second of concentration. In spite of these long hours of
concentrated work, the young girls installing chips into motherboards did not have magnifying glasses to
ease the strain on their eyes.

Felipe was also concerned that working conditions in the factory were unhealthy. He noticed that, in
spite of high temperatures in the region (often above 100º Fahrenheit), the only employees working in an
air-conditioned space were the ones working with the assembly machines, because the machines needed
a constant room temperature. Felipe was especially troubled by the fact that some factory employees
worked in the immediate vicinity of melted lead, while others painted plastic cases with only paper
masks for respiratory protection from resulting gasses. (In fact, on a later visit Felipe discovered that
these workers were paid more, as it was well-known in the community that these workers would often
get seriously ill, and perhaps even die.) The workers’ lives outside of the factory also concerned Felipe:
all of the workers lived next door in a factory-owned building that did not have windows or running
water.

After his visit, Felipe could not stop thinking about what he had seen at this factory. He had visited a
number of factories in China, and while there were certainly factories with worse conditions, there were
many where conditions were far better. He was uncomfortable about continuing to source the majority
of his company’s products from the factory with conditions as they were. On the other hand, Felipe
knew that this particular factory was prized for the speed and quality of its work and that his job was to
maintain the quality of his company’s goods. Felipe was unsure if he had the expertise to find a suitable
replacement factory, and he reasoned that even if he took his company’s business elsewhere, it would do
nothing to change the lives of the young people working in the factory.

Felipe knew some representatives for the other companies that sent work to this factory, and he talked to
them about his concerns. On the whole, they seemed far less concerned. In fact, many of his colleagues
pointed out that without a job in the factory, the young people who worked there would likely be doing
more difficult work in the fields, or in the case of the young girls, might be pressured into prostitution.
They suggested that working in the factory was a way out of poverty for these young people, even if
conditions were a little rough.

He knew that many of these other company representatives were far more senior than he was and had
been visiting this factory for years. Faced with their responses to his concerns, Felipe wondered, “If it is
okay for them to do nothing about the conditions, maybe it is alright for me to do nothing as well? After
all, they seem to know more about the situation than I do.” But with more thought Felipe realized he
wasn’t comfortable with this mentality—while working in a factory may have been better than the
alternative for these young people, it did not mean that conditions could not still be improved.

When he returned to Spain, Felipe discussed what he had seen with his manager and detailed his
concerns about certain conditions in the factory. His manager encouraged Felipe to follow up on specific
issues he had identified, such as the need for magnifying glasses for the young girls doing precision
This material is part of the Giving Voice to Values curriculum collection (www.GivingVoiceToValues.org).
The Aspen Institute was founding partner, along with the Yale School of Management, and incubator for Giving Voice to Values (GVV).
Now Funded by Babson College.
Do not alter or distribute without permission. © Mary C. Gentile, 2010
2
work. However, he was discouraged from raising the larger issues, such as long hours and lack of breaks
for the workers, since his manager reasoned that any changes in the factory’s policies would increase
costs and therefore increase the purchase price of the goods they were sourcing from the factory.

Felipe knew that some larger public companies had more stringent requirements for their factories. He
had also heard that some electronics companies were talking about creating an industry group to enforce
better labor standards in their factories in Asia. However, most of these companies were placing orders
on a much larger scale than his company (often working as the exclusive client of large factories, unlike
his company, which worked with factories that were serving a variety of different clients), and he
suspected his management wouldn’t want to get involved in issues that might ultimately raise prices. He
did find out, however, that his company had a small charitable fund that focused on providing micro-
finance loans to women in India.

Still, as a junior member of the staff, Felipe was concerned about pressing this issue. He could tell that
his manager considered the discussion over, and going above his head seemed like a bad idea. Felipe
was also concerned that he could undermine his credibility in the company or be branded as too naïve.
However, when he thought about things he had seen in China, he felt guilty and sad, even when he tried
to tell himself that this was just the reality of the world. He wanted to act prudently and effectively, but
how? What could he do and say next?

Last Revised: 02/28/2010

This material is part of the Giving Voice to Values curriculum collection (www.GivingVoiceToValues.org).
The Aspen Institute was founding partner, along with the Yale School of Management, and incubator for Giving Voice to Values (GVV).
Now Funded by Babson College.
Do not alter or distribute without permission. © Mary C. Gentile, 2010
3