US Corporations Failure to Manage Purchasing and Supply Chain in China

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Major US Corporations have recently experienced major Purchasing and Supply Chain issues in China that even conservative business observers are calling out as moral if not legal failures. The truth is US companies with few exceptions have never got this right. The existing models and processes based on what works in the West do not work and not amount of adjusting the current paradigms will truly solve this

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US Corporations Failure to Manage Purchasing and Supply Chain in China

  1. 1. Recent Events Highlight US Corporations Failure to Manage Purchasing Supply Chain with China
  2. 2. 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 ………………
  3. 3. We Keep Doing The Same things
  4. 4. For Now • Set aside speculation on what went wrong • Who's to blame • We can debate that for years
  5. 5. 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
  6. 6. 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
  7. 7. 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.
  8. 8. 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
  9. 9. 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
  10. 10. 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.
  11. 11. 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

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