At a dinner in February 2011, Steve Jobs of Apple Inc. report- are safe, workers are treated with respect, and manufacturing edly responded to President Barack Obama's question about processes will not harm the environment. The company's own what it would take to make iPhones in the United States and audits found consistent violations of this code of conduct. In bring those jobs home by saying that these jobs were not coming March 2012, the Fair Labor Association found, in an audit of back. Apple had made the long-run decision that its iPhones 35,500 workers at three Foxconn facilities, at least 50 legal or and iPads would be made overseas, given cheaper labor, large- code violations or policy gaps, including violation of 60-hour scale foreign factories, and the flexibility, diligence, and indus- work weeks and other health- and safety-related problems, trial skills of foreign workers. Labor cost is actually a small such as the lack of systems for protecting workers from excess component of total costs for most high-technology companies. sive heat. More important is the expense of buying parts and managing Other manufacturing companies face long-run decisions supply chains that involve hundreds of companies. similar to those of Apple Inc. The combination of inputs that These issues were illustrated in 2007 when Jobs demanded firms use, as well as location decisions, depends upon the type of an iphone glass screen that could not be scratched about a products manufactured and the costs of all the inputs of produc- month before the phone was to appear in stores. Although tion. Standard Motor Products in North Carolina, which makes Apple had already selected an American company, Corning and distributes replacement auto parts, competes with Chinese Inc., to manufacture large panes of strengthened glass, the firms." Fuel injectors are made in the United States because they problem was how to cut the glass to fit an iphone screen. require current technology, strong quality assurance, and highly A Chinese company, subsidized by the government, received skilled workers. They are also likely to be made in small batches the contract. iPhones are now being assembled in a complex for different makes and models of cars. Many of Standard's cus- known at Foxconn City that has 230,000 employees, many tomers, who see the company as a distributor rather than a man- working six days a week, often for 12-hour days, and living in ufacturer, expect the company to be able to deliver its products company barracks. Although Apple managers had estimated anywhere in the United States within 48 hours. These decisions that it would take nine months to find 8,700 industrial engi- led the company to increase its fuel injector production in the neers in the United States to oversee the assembly lines needed United States. Company managers continually re-evaluate the to produce iPhones, it reportedly took 15 days to find those decision about whether to outsource, but argue that they would engineers in China. Even though iPhone software and market- need to save at least 40 percent of U.S. costs to do so. ing campaigns were created in the United States, Apple made Several Canadian manufacturers and other companies have the decision to locate its manufacturing in China because it moved their facilities to the United States, citing more compet- believed there were not enough U.S. workers with the needed itive wages, lower energy costs, and increased productivity. skills or factories with sufficient resources. In 2012, wages and benefits at a Caterpillar rail-equipment The quest by Apple for long-run efficiency and cost cutting plant in Illinois were less than half of those at the company's has not come without controversy.' It has been alleged that locomotive-assembly plant in Ontario. Navistar International Chinese workers assembling iPhones and iPads work excess Corp. sought more flexible work rules and lower wage costs vertime, live in crowded dorms, and may have to stand when it closed its plant in Ontario and relocated production so long that their legs swell. There have been charges that these to Ohio. Sweden's Electrolux AB planned to close its Quebec suppliers did not properly dispose of hazardous waste, falsified plant and manufacture its ovens, ranges, and cooktops in records, and disregarded workers' health. Workers have been Memphis, Tennessee. Bridgestone Corp. had built industrial killed by explosions in the plants and injured by the chemi- radial tires only in Japan, but decided in 2011 to build another cals used to clean iPhone screens. Apple developed a code of plant in South Carolina to get increased productivity and to conduct specifying that working conditions in its supply chain minimize transportation costs for many customers