“China is clearly no longer a low-cost country in the traditional sense. The implications for talent management in a global supply chain strategy include a need to diversify away from Asia, and China in particular."
Kevin O'Marah, SCM World
LONDON (PRWEB UK) 28 September 2012
Supply chain executives in large companies are struggling to hire and retain talented white-collar employees in China, according to SCM World’s annual Chief Supply Chain Officer Report, published today.
A global study of almost 1,400 executives co-led by highly respected supply chain academic Dr Hau Lee found that rising labour costs and poaching are the biggest concerns in China, and that the country is regarded as by far the riskiest market for talent worldwide.
Almost two-thirds of those surveyed are concerned about the rising cost of knowledge workers in China, with respondents in the hi tech, industrial, chemicals and retail sectors particularly worried. It’s a similar picture on staff retention, where more than half (55%) of supply chain executives say they are concerned about poaching of their most talented employees.
Survey respondents based in the Asia-Pacific region (almost a quarter of the sample) are even more concerned about both issues than their counterparts in the Americas or Europe. On rising costs, 72% say this is a problem in China, while on staff retention the figure is 63%.
Overall, China was ranked as by far the riskiest country to operate it from a human resources standpoint, well ahead of other emerging markets such as India, Brazil and Mexico. And China ranked well behind the United States, and slightly behind Germany, in terms of value for money.
Kevin O’Marah, Head of Faculty at SCM World and co-author of the report, said the findings suggested that companies could be nearing a tipping point. “China is clearly no longer a low-cost country in the traditional sense. The implications for talent management in a global supply chain strategy include a need to diversify away from Asia, and China in particular."
“A move back toward high-wage countries make sense for organisations working to balance their talent portfolio.”
Other key findings of the survey:
Digital and eCommerce. The steady growth of online shopping is increasing supply chain complexity at many levels and forcing those closest to the consumer to adapt.
- Three-quarters of respondents expect changes to their manufacturing strategies and distribution networks, while 56% expect brands to increase their direct-to-customer fulfilment channels.
- By a ratio of 4:1 respondents expect consumers to be increasingly receptive to offers trading price, convenience and selection against each other rather than merely seeking the lowest possible price.
- Social media is playing little role today in supply chain strategies (47% see “no effect” today), but in the future many see opportunities to get customer feedback (56%), inform product innovation (46%) or warn of supply disruptions (41%).
- Most supply chain professionals shy away from the idea of mining individuals’ private web data (Facebook pages, Google searches, etc). But other sources of customer insight are seen as fair game.
Social and environmental responsibility (SER). The trend towards SER initiatives seems unstoppable and companies are becoming less tolerant of violations.
- Almost a third of companies now give no warning to suppliers when they breach SER standards, and of these almost half immediately terminate the relationship. Among those that do warn first, those terminating rather than reducing business has grown year on year.
- Only a quarter of firms believe they have good visibility of SER performance across their extended supply network.
- More than half of respondents report good results from SER efforts in complying with government regulations and laws, and in improving both supplier relationships and customer satisfaction. But measuring benefits is a challenge for almost 6 out of 10.
Risk management. The vast majority of companies have been hit financially by disruptions recently, and executives are on high alert when it comes to their suppliers.
- Shortages of raw materials and components top the list of risks that respondents are most worried about (a third are “very concerned”). Shipping disruptions, natural disasters and other incidents affecting supplier facilities, and the failure of key suppliers are close behind.
- More than 8 out of 10 companies have been hit by supply- and demand-side disruptions during the past two years. Almost half have suffered a loss of sales/revenue and more than a third have experienced lower profits.
- Dual or multi-sourcing of key materials and components is the most widely used approach for mitigating risk, with more than three-quarters doing this on the supply side.
Strategy alignment and value creation. Firms look to their supply chain functions for smarter product launches, greater customer loyalty and higher sales – not just operational excellence.
- While almost two-thirds of executives said operating cost reduction was a “very important” driver for their supply chain function, half also said the same about increasing sales revenue and differentiating customer service from that of competitors.
- The most significant ways in which supply chain excellence boosts top-line growth, according to survey respondents, are the ability to launch new products on schedule, ramp up production quickly, ensure repeat purchases through greater customer loyalty, and receive priority treatment from suppliers when key materials and components are in short supply.
- The standing of the supply chain function is growing. Six out of 10 respondents agreed that “supply chain is understood as an equally important part of business success as sales and marketing or R&D/product development”, compared with just 10% who believed it was still seen as a cost centre or service function.
Commenting on these findings, Dr Hau Lee, Chairman of SCM World and Thoma Professor of Operations, Information and Technology at Stanford University, said: “Our research shows that more and more companies are using supply chain excellence as a means to create value and competitive advantage. Those that still view supply chain management as a supporting function, or see it only as a way to reduce operating costs, have a lot of catching up to do. They are missing great opportunities.”
Capitalising on these opportunities, Dr Lee added, demands close alignment between supply chain activities and business objectives. “A value-creation view of supply chain management requires supply chain executives to work closely as an integrated part of the company’s top executive team. The supply chain function is not in the background in driving the company’s strategic performance; rather, it becomes part of the steering team in the executive suite.”
NOTES TO EDITORS:
About the research
A total of 1,385 supply chain, operations, procurement and other executives completed an online SCM World survey in July 2012. They work in a wide variety of sectors – the biggest being hi tech, consumer packaged goods, industrials, food & beverages, healthcare, pharmaceuticals, chemicals, logistics & distribution and retail – and are based across the major regions of the world: 38% each in the Americas and EMEA, 23% in Asia-Pacific. Half of the companies they represent have annual sales of more than $5bn.
The research was sponsored by E2open, a leading provider of cloud-based, on-demand software solutions enabling enterprises to procure, manufacture, sell, and distribute products more efficiently through collaborative execution across global trading networks. For more information, visit http://www.e2open.com.
About SCM World
SCM World is the leading global community and think-tank for senior-level supply chain executives. More than 150 companies from across multiple industry sectors use SCM World’s programme of end-user-led webinars, live events and research reports to enhance supply chain learning and development. They include Nike, P&G, Unilever, Cisco, HP, Starbucks, Nestlé, GlaxoSmithKline, AT&T, Shell, DuPont, BASF, Philips and Intel. For more information, visit http://www.scmworld.com.
To request a full copy of The Chief Supply Chain Officer Report 2012, or to arrange an interview with one of the authors, please contact:
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