Job dissatisfaction and supply chain risk

Jiang et al. (2009) wrote about job dissatisfaction of workers at suppliers in developing countries.

Goal & Methodology

The goal of the study was to analyze risk in a global supply chain, especially originating from labor dissatisfaction and turnover. The results were obtained using a survey of workers in the Chinese Pearl River Delta region. The methodology is presented precisely and comprehensively.

Risks & Mitigation

Three major risks are resulting from high turnover and job dissatisfaction: 1) A cost risk emerges directly from turnover costs and indirectly due to rising wages. 2) Job dissatisfaction can lead to operational risks (eg. low quality, not meeting schedules) 3) There can also be reputational risk, if low production costs are achieved by low standards for health, safety and welfare issues.

Risk mitigation measures in this case must be different to those in other markets, since labor markets behave quite differently to other input markets.

Labor quitting or turnover is a more social or collective decision making process

Therefore it is influenced by many factors at once.

h5. Study design & Results

Six factors which influence the quitting decision have been identified.

Correlation between influencing factors and the decision to quit the job
Factor	Correlation	Description
HR management at the supplier	positive	Up to now there is only little effort by chinese manufacturers to improve the HRM, since labor turnover is seen as costless or at least less expensive than investing in HRM.
Production- & operations management	positive	Job satisfaction declines rapidly with POM practices-related problems.
Attitude towards the relationship with the buyers	positive	The relationship with the buyers has influence on many aspects of the work environment within a supplier and therefore influences the job satisfaction of the workers.
Working conditions	no correlation
Compensation issues	weak correlation	Interestingly the correlation for compensation issues is only weak, probably since the expectations of the workers in this respect are usually quite low.
Opinion of industry	no correlation

h5. Implications

To lower the induced risks the results imply that suppliers should improve POM and HRM issues, thereby improving job satisfaction. The study also shows that buyers might be able to lower these risks directly by adjusting their behavior within the relationship to the supplier and indirectly by influencing the supplier to improve POM and HRM issues (see also the article about Supplier Responsibility at Apple Inc.).

h5. Summary

The article presents the methods used very completely, even the limitations are nearly complete so I only can list them: Survey was only conducted in a single country, there was no separation of successful and unsuccessful factories and neither the management of the supplier nor the buyers were included.

The magnitude of the resulting risk was never made clear. Especially in manufacturing jobs with only low requirements on the skills of the workers the risk of loosing an employee might prove to be only minimal since he/she can be replaced without major training cost. Particularly in a study on the manufacturing industry in developing countries this topic should have been addressed.
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