Recent business headlines are implying that rising labor costs in China are diminishing its attractiveness as a sourcing partner. Logistics professionals know better. They know that material handling and logistics efficiencies, combined with a good set of alternative sourcing plans, can help manufacturers protect profit margins.
A recent study by Accenture suggests that low cost countries such as Vietnam, Thailand, Malaysia and Indonesia may become attractive alternatives for many manufacturers, but they'd still face other challenges like less developed infrastructures in ports, roads and facilities; shortages of skilled workers; and political instability.
The Accenture report suggests that by fostering collaboration between the functional areas of their own facilities and those of their partners in China, and by enhancing labor and process productivity, labor costs won't be such a burden. But let's set aside the cost of labor for a second. What about the quality? According to MH&L's 2011 Salary Survey, to be published in our March issue, several survey respondents indicated they had a talent challenge because talented people aren't drawn to logistics and those who are usually don't stay long. Do the Accenture folks agree?
Even at the upper levels in an organization, supply chain needs a stronger presence to attract talent, according to Rich Bergmann, Global Lead in Accenture's Supply Chain Management Practice. He told me he's seeing that happen as companies take a multi-disciplinary approach to strengthening their global presence.
“We in the U.S. have taken a more comprehensive view of supply chain from demand planning, procurement and sourcing, manufacturing, distribution and transportation, all the way through customer service, including the reverse logistics service side of the business,” he said. “Companies that have that wide lens can attract great talent because they have that great career diversity. If supply chain was transportation and distribution and that's it, it would be a less attractive career track. Product design and procurement are often a separate entity and don't have the interface with supply chain. The attractiveness and draw of top talent from universities is diminished. But now we're seeing more companies make the chief supply chain officer that C-level executive because supply chain is so important to that company's growth and financial viability.”
Accenture is in a unique position to assess logistics talent. It hires tens of thousands of people a year to serve its global client base. It used to have to place U.S. citizens into international markets, but now is finding it easier to hire local talent in offshore markets. Even Bergmann has had tours of duty in Hong Kong, Beijing and Shanghai. Today it hires nationals from those countries and they are on par with U.S. talent, but they also tend to speak English as well as they speak their own language.
Being multi-talented lends itself to having that Plan B, Plan C mentality so critical to supply chain and logistics professionals. You don't need a global supply chain to convince you of that.
“I've been an operations guy for 35 years of my career and you always think you have a good plan until something happens and you have to re-do the plan,” Bergmann says. “It's not just the planning, you have to align the execution capability very quickly. You don't have six months to alter the plan. You have days and weeks to alter the execution. There are technologies and business processes and a network of service providers that have to be looked at in combination. Be ready for a change, leverage some of the new supply chain visibility technology, and have a total landed cost management philosophy.”
Thinking about the cost of labor in China is just one of the many metrics supply chain professionals need to watch on a weekly basis. Annual, even semi-annual situational awareness won't cut it anymore. In fact here's something you can put on a mug and issue it to all new hires in their orientation package: “Supply chains = Supply Change.” Let's drink to that.