A Tale of Social Compliance That’ll Keep You Awake at Night

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It was about Mr. Sheehan’s bed time, a nightcap of fine bourbon on his night stand. He slipped into his 800 thread count bed sheet – although he’s never believed it’s actually 800 threads as advertised – it was soft and cozy, just the way he liked it. He turned on TV to an old rerun of “I Love Lucy,” which had always helped him to sleep with smile. Tonight’s episode was his favorite. In it, Lucy works as a factory worker on the assembly line wrapping the chocolates. It looks like an easy job, but the chocolates on the assembly line outrun Lucy’s hands as she tries to pack them. She ends up flipping and hiding all the chocolates in her mouth, hat, and blouse. He gives a good chuckle, nearly spilling his drink.
Suddenly, Mr. Sheehan’s phone rang. The only person that’d call at this late hour would be his General Manager, Li-Pin, staffed his company’s office in China. And calling with bad news. Not the way he intended on ending his night – but without a choice, he answers the call.
“Boss, we have a problem,” Li-Pin quickly blurted out. “Han’s factory is going to be shut down by Walmart due to severe violations of Social Compliance rules.” Li-Pin’s words tumbled out so quickly that Mr. Sheehan could barely respond.
“What?!” he exclaimed. “Did “China Labor Watch” publish another report on us? Was it another underage worker again? I thought we just did thorough interviews and checkups with all of them last month?”
Wave after nightmarish wave of past violations and Social Compliance issues flooded his mind.
“Or was it an over-time problem? Were there no restroom breaks given? Were there problems with the migrant workers’ documents again? Was–”
“No, sir,” Li-Pin inserted. “This time, err, it was…” He paused, carefully considering his next words.
“You know how you increased the productions of item 53516 due to your big TV commercial and Walmart’s great forecast for this Christmas? The contracted factory’s boss, Han, he thought he could handle it. But, a recent worker shorter forced him to borrow some from his brother’s factory.”
Li-Pin could feel Mr. Sheehan’s temper rising from across the Pacific as he continued.
“See, Boss, yes, we just conducted a Social Compliance inspection with the Disney representatives and WE all passed. We’ve been very careful to watch this ever since China Labor Watch issued its last report on us the past few months. But, Walmart came to the factory with an unannounced Audit.”
“Two of the workers from the OTHER factory were underage. That’s a zero tolerance violation – Walmart just told us to shut down this factory, stop all shipments, and recall the shipment from the last checkup date.”
Mr. Sheehan understood that once Walmart made the call, there would be no turning back. Trembling with anger, he quickly commanded Li-Pin:
“Quickly move all the molds and tooling to another contracted factory. Pay extra for them to start production. I cannot allow shipments to Walmart to stop. We’ll lose millions now, and have losses in chargeback and future sales.”
Li-Pin, shivering, replied:
“Boss, I tried. But Han’s afraid that we won’t pay for his finish goods since he can’t ship them to Walmart. So he’s holding our molds and tooling for ransom. If we don’t pay him first, we won’t be able to move the molds and tools elsewhere.”

As many other owners like Mr. Sheehan have come to learn, a slight oversight on a Social Compliance issue can ruin your business. You can get all the orders you want from Walmart, make beautiful products, promote them on television, pass all the QC/QA tests, and have great logistics for overseas delivery – but you have to obey Social Compliance rules.
Walmart, Target, other retailers, and brand owner and licensors absolutely can NOT afford negative press from China labor issues. They’ve demanded complete factory visibility. www.ChinaLaborWatch.org will demonstrate how seriously retailers like Apple, Walmart, and Disney take this. As long as you are their supplier, they will constantly monitor and carry out surprise inspections on your factory.
Call upon professionals to avoid the consequences tied to Social Compliance. A little careless documentation can ruin your business. Don’t let it happen to yours.