Supply chain talent battle brews in China as manufacturers push out new "people programs"
By Cole Ollinger, senior contributing editor -- Manufacturing Business Technology, 2/1/2007 12:00:00 AM
In an economy like China's, conventional wisdom holds that it's still possible to solve a business problem by throwing more people at it. But when it comes to the supply chain, there aren't enough skilled and experienced people to throw at the problems.
The resulting battle for experienced Chinese supply chain executives and managers is driving up labor costs and turnover rates. According to human resources (HR) consultancy and outsourcing provider Hewitt & Associates, Lincolnshire, Ill., supply chain salaries rose 8.4 percent in 2005, and annual turnover is 14 percent—two to three times higher than the global average.
These figures go right to the heart of the value proposition for contract manufacturing in China.
How severe is the situation? Nearly 50 percent of respondents to a 2005 survey by worldwide executive search firm Spencer Stuart cited "lack of available talent" as the top challenge in operating supply chains in China. In other words, HR issues such as recruitment, training, and retention are now as great a concern as are counterfeiting, corruption, and cultural barriers.
One reason for the intense competition is that proven procurement and supply chain talent comes with a clear value proposition, says Jamie Bolton, a Shanghai-based managing director with the supply chain management practice of New York-based Accenture. "If they do their jobs right, they can save their companies millions of dollars," he says.
To help its global clients, including those in China, get up to speed on best practices and technologies, Accenture developed the Supply Chain Academy, a broad-based learning program with 250 courses in inventory management, warehousing, and basic tools and techniques for supply chain analysis. Courses are available in multiple delivery media, including instructor-led, online, and self-study. Certifications for APICS, CIPS, and even specific SAP modules are available.
More than 60 companies—including Unilever, Volvo and Roche—use the Accenture academy to standardize processes and terminology across far-flung operations. In particular, London-based Royal Dutch Shell has rolled out the academy to its global procurement organization, with 2,000 professionals in 60 countries responsible for $35 billion in annual spending.
"The Academy is an asset with very broad appeal in China right now," says Bolton.
Other companies are adopting different approaches. To refine its hiring practices and benefits packages, Philips Consumer Electronics focuses on recruitment by polling university graduates to better understand what they're looking for. To combat a 12-percent turnover rate, logistics provider BAX Global offers detailed training and succession plans for its 20 locations in China. BMX also rotates high-potential Chinese staff through various areas of the organization. "While training alone will not solve all of the talent challenges, it increases our odds of having the right people in place," says John Carr, president of supply chain management for BAX.
Beyond experience, companies are looking for managers with knowledge of the China market, networking ability or contacts, and fluency in English. Familiarity with lean, demand visibility, and other management concepts is important, as are IT skills.
The Chinese government is doing its part to address the talent shortage. The latest five-year plan, last released March 2006, increases education spending to 4 percent of GDP, up from 2.8 percent. The goal is to move up the value chain by developing a more innovation-oriented and knowledge-based economy that will reduce the country's dependence on foreign investment.
An estimated three million engineers are expected to graduate from Chinese universities in the next few years. Executive MBA programs, unheard of in China just a few years ago, now are under way at 30 Chinese universities.
