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