Solving the sweatshop problem through “lean manufacturing”

Greg Distelhorst, Assistant Professor of Global Economics and Management, works with MIT faculty and students to shape how leading global companies approach labor issues in their supply chains

Greg Distelhorst is an Assistant Professor of Global Economics and Management in the Sloan School of Management. He is also an investigator with The Governance Project at Stanford University's Center on Democracy, Development, and the Rule of Law, which aims to understand the role of governance in China and the U.S. Distelhorst spent five years living in mainland China, and he currently works with firms to improve working conditions in factories in the developing world.

He views the “sweatshop problem” in global production as a social dimension to sustainable business. He advocates the development of business models that safeguard the dignity and well-being of employees and communities around the world. 

However, that’s easier said than done. “In many parts of the world, workers have little protection against hazardous work or being taken advantage of by employers,” Distelhorst says. These employers, for their part, often argue that improving working conditions would create financial burdens and threaten their position in competitive global markets.

Distelhorst’s research suggests that advanced manufacturing management can reduce this tension.  For example, “lean manufacturing” techniques, initially developed by Japanese automakers after World War II, increase productivity through training investments and grant more decision-making power to workers. To retain these workers, companies may have to entice them with better pay or working conditions. Lean and other advanced manufacturing techniques have been widely adopted in advanced economies, but less-developed countries—like Vietnam and India—lag behind in this regard.

To test the hypothesis linking lean manufacturing to higher labor standards, Distelhorst and two colleagues completed a research project concerning Nike’s efforts to encourage its apparel suppliers in the developing world to adopt lean manufacturing. Nike’s objective was to create high-end products in smaller quantities over shorter timespans.

Distelhorst and his team ultimately found that, under this model, serious violations of labor standards decreased markedly, suggesting employees garnered more factory wages, benefits, and rest days. “When facing tension between competitive and ethical sourcing, multinationals should consider a “high road” approach to the supply chain: investing in new managerial practices and worker skills,” Distelhorst recently wrote in a piece for the Harvard Business Review.

Distelhorst credits MIT Sloan faculty and graduate students for conducting a series of influential series of studies. “MIT is responsible for much of the foundational research on enforcing labor standards in global supply chains,” Distelhorst says. “The research agenda that emerged from this work has in turn shaped how leading global companies approach labor issues in their supply chains.”

This academic year at MIT Sloan, Distelhorst is mentoring a Sustainable Business Lab (S-Lab) team working with the American clothing company Patagonia on fair wages in its contract factories.  Patagonia has committed to ensuring that the workers in their supply chain are treated fairly and given safe and healthy working conditions. As part of its efforts to ensure that workers receive not just legally compliant but "living" wages, the company intends to collect detailed worker wage data from its suppliers. A team of MIT Sloan students is working with Patagonia to develop tools to efficiently and accurately obtain these data. Distelhorst was instrumental in forging this partnership between Patagonia and MIT Sloan, and the Sustainability Initiative is excited to see where the collaboration will lead.

This is a foundational challenge in sustainable supply chains: the problem of low wages, which in turn promote extremely long work hours and high levels of worker stress in many export factories,” Distelhorst says. “If Patagonia can develop and publicly validate a model, we hope to see ripple effects throughout global manufacturing.