Date post: | 22-Nov-2014 |
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Business |
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Recent Events Highlight US Corporations Failure to Manage Purchasing Supply Chain with China
Supply Chain and Purchasing Professionals Have Failed
• Fellow supply-chain professionals we have failed.
• Events over the last weeks show we do not know what we're doing when it comes to managing supply chains in China.
• Prior similar events have all elicited reactive short term responses trying to follow the process better and try harder ………………
We Keep Doing The Same things
For Now
• Set aside speculation on what went wrong
• Who's to blame
• We can debate that for years
MONDAY MORNING…. DO Not Wait because it is already Tuesday in Asia
• Our organizations will demand results and improvements now
• Purchasing and Supply chain management professionals must advise CEOs and take the lead – what needs to change – what resources are required and – how it's going to happen effective immediately
Take The Lead Now
• If you're not ready to do that - step aside.
• We have been reminded again what is at stake– Peoples Lives– Company Reputations– Economic Security– Jobs
Put Your Own Senior Employees at Outsource Suppliers
• There will be various responses based on industry but one that applies to all is – Putting your team at suppliers in high risk areas
• You simply cannot rely on– Third parties, – Annual audits – Industry Supported Organizations standards/ surveys – Local employees.
It will increase costs and take top talent
• Ex-pats in China that have high skill levels
• Authority to make decisions on the spot to mitigate risk
• Cannot simply be auditors trained on the audit process
• They must be there long enough to really get to know the suppliers and the region
It will increase costs and take top talent
• Must have strong infrastructure support and seamless direct communications back to headquarters.
• The recommended model is each person has primary focus for a single major outsource supplier
• They will be based in close proximity to that supplier and spend 50% of their time there.
• They may be assigned up to 3 other suppliers of varying degree of risk that they will visit twice per month
This will drive up the cost of outsourcing.
• Each of these representatives including salary, benefits and operational costs will cost $400,000 to $500,000 USD
• If you're not willing to spend the money and resources then the prudent thing to do is to move production from China or any other high-risk country.
Summary
• Management of Outsourced Suppliers in China and other high risk areas will demand attention more than ever.
• Current paradigms do not work• Take direct control of this now• Get advise and benchmarks as prudent but only
trust your best and brightest to watch your vital interests
• Rethink the risk, reward and total costs of sourcing