Skip navigation
2013

I interviewed Ron Mudgett who discussed Supply Chain Job Searching.

 

 

 


 

Can you start by providing a brief background of yourself?


Sure, it’s great to be with you too, Dustin. I have a bachelor’s degree in supply chain management. I’m currently the director of education for the LA chapter of APICS, the organization for operations managers. I’m about 50 percent through with a master’s degree in the executive master’s in supply chain management at Michigan State University. I recently relocated to southern California.

 

Thanks. Can you talk about your experience with searching for supply chain job opportunities?

 

I can. I’ve been here since January. Today is September 10 and I’ve scoured all the job boards that are available here in southern California, I haven’t seen a lot of operations manager positions both in the manufacturing sector, as well as in the warehousing distribution sector, which is where, both of those areas is where the majority of my experience is in. I do have a background in development procurement and my personal business ownership. I have a pretty well-rounded background in my thirty years in employment. One of the things that I’m finding interesting is that I’ve noticed that a lot of companies are putting supply chain management as one of the competencies they’d like to see out of their operations managers in both sectors, both the operations for manufacturing facilities and distribution logistics facilities. But then when it comes down to the actual qualifications, that particular experience is not at the top of the list. For instance, with the manufacturing setting, what I’m finding is that—and I won’t mention any names of companies, but what I’m finding is that they want masters at widget makers but they aren’t allowing individuals with backgrounds strictly in supply chain management to, in my experience, even be called back for those positions. I think that’s kind of interesting. I think part of that can be they understand that as supply chain becomes more and more part of the overall company’s viability going forward, they’re still not ready to kind of give up those reins and put that person in charge that has an extensive supply chain background but not so much the production and product-building background.

 

Why are companies unwilling to allow supply chain training to be at the forefront of potential candidate résumés?

 

Well, that’s a really good question. I wish I could speak to that. I haven’t really had any discussion with hiring people from those areas, but I can speculate a little bit. I’ve spent some time in that area. The operations manager in a manufacturing facility has such a huge job, and it’s been over the past few decades that we, manufacturing facilities, we’ve put them under a different umbrella of Six Sigma or lean. Those tend to spread out and certainly making sure that they’re being as efficient as possible. I think, part of it I think is, as leaders in manufacturing, they don’t want to lose that aspect. Most manufacturing companies, I think, don’t realize is that that’s something, number one, we teach at APICS, and it’s something that I found to be very prevalent in my academic career at Michigan State. Those types of things are still there with an individual with a supply chain background. Maybe the point of the issue is that they don’t have enough information to know what someone with a supply chain background is going to bring to the table.

 

How should supply chain professionals approach the job search?

 

Well, I think that what I’ve done is, I’ve recently been CSCP-certified through APICS, and there are many different great organizations. I happen to be a member of APICS, as well as a board member, so I have the tendency to tout them a little more because I’m a member. Find an organization like that that gives you some accreditation over and above your schooling. In some cases I think we may be at a matter of going out, as I’ve done, and I’ve started my own consulting company and done some smaller projects for manufacturing companies as far as helping them even out their supply and demand and do some S&OP training, stuff like that. I think that anything you can do to put yourself out into the job market and network, all those things that I’ve mentioned are gonna give you an opportunity to network with professionals. I have a really good friend of mine who says he’s never gotten a job from his résumé; it’s always been because he either knew someone or has networked his way into the position. I found that to be true with my experience as well for the most part. Networking can be very, very important, so I think to use that aspect and to go out and find those opportunities either through an organization like APICS or to get yourself out into the community, maybe do some job fairs, do things of that nature to get yourself out there and be known. That’s the biggest thing that I think can be done in today’s market anyways.

 

Well, thanks for sharing your views on supply chain job searching.

 

Absolutely, Dustin, any time.

 

 

About Ron Mudgett


 

 

ron.jpg

Ron Mudgett


Executive Consultant

at RPM Global SCM

LinkedIn Profile

I interviewed Oliver Campbell who discussed What is a Healthy Supply Chain?.

 

 

 


It’s great to speak with you today, Oliver, and I look forward to hearing your views on the future of supply chains and some of the things you're doing at Dell that are different and other issues regarding healthy supply chains. Can you start by providing a brief background of yourself?

 

Sure, thanks Dustin. I think there are two things. One is: I’ve always been curious about how and why things work, and I’ve also always appreciated nature. It comes, I think, from growing up in a rural farming community in the Finger Lakes of Upstate New York. Working on a farm, one is always faced with how to get a job done with either limited resources or limited help, so you learn how to innovate very quickly. That background has served me well in my career and always trying to find a better way to do things. For university, my major was in agricultural and biological engineering at Cornell University. I had both bachelor’s and master’s degrees, plus an M.B.A. from the University of Texas at Austin. At Dell my career has been a progression within supply chain. My first role was the operational-strategy team, which I started. We used advanced mathematical methods such as linear programming to model the supply chain and answer questions such as factory locations, logistics lanes, delivery speed, et cetera. My next role was to actually manage several of those facilities, which I had located and designed…a bit of eating your own dog food, as it were. It was a fantastic experience to actually manage and be a part of that entire process. Next came roles in logistics and procurement to, finally, here in packaging, where I’m a director of packaging, engineering, and procurement. Packaging has been my longest role and has been defined by much of the innovation we’ve achieved in green packaging. I’ve been able to combine my two passions around innovation and sustainability. We still have more innovation in the pipeline, and I encourage students contemplating careers to consider packaging. That’s a brief background of what motivates me and what I’ve done here at Dell.

 

Thank you. My first question is: What is a healthy supply chain?

 

Well, I think the definition of supply chain is evolving. It was and still is for many the basics of logistics, supplier management, sourcing, demand forecasting, et cetera. Those are fundamental and don’t really change. What is changing is the incorporation of social and environmental responsibility into the supply chain framework for a holistic life cycle approach. That’s how I would define a healthy supply chain. It’s important due to concerns about the climate, population growth, and urbanization. For example, UN demographers predict—and they’re usually accurate—a population increase of another one billion people by 2025. That’s like adding another India or China in 12 short years. The question becomes: Where do all the resources come to create a future defined by prosperity and potential rather than poverty or scarcity? That’s why we’re developing packaging based on agricultural waste like wheat straw. Also, by 2025, based on a McKinsey study, 60 percent of global GDP will be in the top six hundred cities. That means their problems on waste disposal, for example, among others becomes your challenge. At Dell, we have an award-winning take-back program that makes it easier for customers and non-Dell customers to return their old computers in a sustainable and responsible manner. We’ve collected over a billion pounds to date as a demonstration of our commitment to the lifecycle approach to supply chain. I think this is how the definition of what a healthy supply chain is becoming. It’s this intersection of population pressures, urbanization, climate change with how we’ve done business as managed supply chains in the past. I think it’s a very exciting time.

 

How would you approach building or having a healthy supply chain?

 

I think it’s fairly straightforward. It starts out by mapping the steps in the lifecycle of your products from design, sourcing, logistics, use, and disposal and identifying what are the social and environmental factors associated with each. I think the identification of sustainability and job functions are becoming more pronounced, I think, as awareness increases. Really, any job anymore is becoming a green job it seems. I think having a governing structure as we do at Dell with our corporate sustainability council helps to keep everyone aligned across what is really a pretty big process. We’ve seen at Dell, people are really excited about the inclusion of sustainability into what they do. I think people intrinsically understand that doing things that are good for the planet in the long-term is good for the business, good for them, and good for their communities.

 

Where have you seen success?

 

I think we’ve seen success across the board, from the incorporation of sustainability and packaging and product design; the incorporation of sustainability metrics and procurement scorecards for suppliers; the energy reduction in many of our products; they require far less energy to run than they did a few short years ago; and our take-back program, which I had mentioned before. We’re also seeing an increasing number of customers include sustainability on their requests for quotations, or RFQs. That’s an area where we feel Dell is advantaged. We see others bringing this into their business as well, so I think success in the area of sustainability and supply chain has been very broad, and I think it’ll continue to advance in the coming years.

 

And what does the future of supply chains look like in 2020?

 

Well, I think sustainability will continue to increase, but one prediction I will make is that in order to achieve that sustainability, I think supply chains will be characterized by a much higher degree of collaboration of companies across different industries, so this is something very new. An example is, Coca-Cola’s probably a good example of this trend in how they’re collaborating on the plant bottle technology with others such as Procter and Gamble, Nike, and Ford. The driving function here is really the ability to scale capacity in order to scale cost. At some level we all play in the same sandbox, so this makes sense. We’re starting to have similar conversations with people outside our industry about how we scale some of our technologies on a global basis, so this is an area where I think in 2020, we’ll see more of this type of collaboration. Check back with me, Dustin, in about seven years, and we’ll see how accurate this prediction is.

 

Yep, I look forward to that. Can you talk about what’s the most surprising thing that you’ve done?

 

Well, I think without a doubt, that has to be our mushroom-based packaging. When I told my engineers that we would be developing packaging based on mushrooms, they looked at me like I was crazy, Dustin. I told them, though, that they would make history and they really did. It was about a year in development; as they got deeper into it, they got more excited about it. We developed some packaging cushion, and it actually worked better than our foam cushioning. That was really on the first generation of our design; we’re now into our second generation, and we look forward to releasing some of those products in the near future. When you start out in a career, you never know what you’re going to end up working on. I look back at my farm background, and it’s surprising the things that you're exposed to and you work on. They come back around and everything that you go through in life, I think, has an influence on what you do later on, and you have an opportunity to use it. I’d say that’s the most surprising thing, and I feel happy to have been a part of it.

 

What is different about Dell’s approach?

 

Well, I guess I’m going to be a Dell partisan on this one. I’ll caveat that from the front, but I think Dell really provides our people with the opportunity to work on what you're passionate about, and I’m a great example. When I started in packaging, I never had sustainability as part of my job description, but my job had the freedom to decide that was a direction that we should go in. Customers were starting to talk about it; we saw chatter on social media about sustainability and packaging. We went and did our homework by talking to customers, and the direct model that Dell has in its DNA makes that an easy thing to go do and see what they’re interested in. We had those conversations. We made our business case around the three Cs, which are cube, content, and curb, which was about how to make our packaging smaller, more sustainable, and the last one, for curb, about how to make it curbside recyclable. These were the things that customers were really interested in. along the way we went and creatively borrowed, as it were, some ideas around packaging from utilizing our bamboo packaging. We went and presented to Michael Dell our three Cs packaging framework. It was a very short conversation with him. He said go and we haven’t looked back since, and it’s been a fantastic journey. And our next program is our zero-waste 2020 packaging program. Again, that went to Michael, and he said keep going, so we are. I think that’s what’s different about Dell; it’s that ability to pursue your passions, work directly with customers, and it’s certainly in sustainability that extends from the bottom of the organization to the very, very top.

 

Thank you. And my last question is: How does sustainability factor in to a healthy supply chain?

 

You sound a little bit like my mom here when you ask that question. I answer it this way. Sustainability is a bit like eating, I think, your vegetables. They come in all different shapes and sizes and color, and they’re needed for, I think, a healthy and balanced diet. The consideration in this analogy, I think, goes with the lifecycle impact that one’s products have from material sourcing to disposal and everything in between. That adds to, I think, the diversity that powers the possible that enables human potential, which I think we’re all about in the end. When we look at our computer products, these are products that go to be used to, if it’s in a school, maybe to help a child to learn how to read or an automotive company to design more fuel-efficient cars or to an environmental remediation company that’s doing environmental remediation modeling to help create cleaner water or cleaner air. So, if we can do things that make their job being green or their aspects of their job about being green easier so they can focus on the things that they really want to do, it’d really make a difference for them and their business and their customers. We’re happy to do that. I think that is a really neat way of looking at business relationships, and it’s defined by sustainability. I think that’s how it factors it.

 

Well, thank you, Oliver, for sharing your views on healthy supply chains and sustainability, as well as what the future holds for supply chains.

 

Okay, thank you very much, Dustin. I enjoyed the conversation.

 

Yep, thank you.

 

 

 

About Oliver Campbell

 

 

 

oliver.jpg

Oliver Campbell

 

Director Procurement at Dell

LinkedIn Profile

I interviewed Tim Higham who discussed The Rise of TMS technology and How "free" TMS Technology Will Dominate?

 

 

 

 

 

It’s great to speak with you today, Tim, and I look forward to hearing your views on TMS technology and where you see it heading. The title of this interview is The Rise of TMS Technology and How "free" TMS Technology Will Dominate the Space in the Coming 3 to 5 years (allowing the 85% of logistics professionals not using a TMS today to access the same tech as larger companies).

 

Can you start by providing a brief background of yourself?

 

Yeah, I’m from the U.K. I’m English. I got to the United States about 23, 24 years ago. Essentially started my career in the insurance business. My mother wanted me to get a real job, so she said to be a doctor, accountant, maybe banking. I ended up in insurance. I found my way through America and started a computer company over here, which I sold in 1998. When I sold it I came down to Florida and got into the transportation business by accident. The next thing I know, we bought TMS, we started a 3PL and a group, and we turned it into Interstate, which is the company I run today.

 

Thanks. Can you talk abut the rise of TMS technology and where you see this trend heading?

 

Yeah, sure. TMS technology, or transportation management system or some people say transportation management software, is something that’s obviously very unique to the shipping world. And over the last 15 to 20 years, large shippers have used TMS’s to manage all the distribution, whether it be across the country or across the world. What I believe is going to happen, which I’m already seeing happening, is, we are going to see a continuation of the freemium or the free software that you see in many different categories. It’s going to basically take over in the TMS world. That’s one of the reasons we started InMotion Global, also known as FreeTMS.com. FreeTMS.com is basically an enterprise system that you can go and buy from some of the top-tier TMS providers, which you’d spend anywhere from one hundred thousand to a million dollars for, and what we do, we give it away for free. This has been very successful for us. We sometimes use the same analogy that many people do when they talk about free software. Google Docs is an example. Microsoft Word is something that if you buy a computer and you want to have programs like spreadsheets and word processors, you buy Microsoft Office, which has got Word and Excel and PowerPoint. But Google Docs decided, “Look, we can come up with a system that allows people to use word-processing software and spreadsheet software, but we’re not gonna charge for it.” So, I’m looking at the FreeTMS.com, InMotion Global, in the same light. It allows us to be able to give away a software product that’s got 90-plus percent of the features and functionality of a million-dollar system.

 

Who needs to care about this?

 

Well, today about 85 percent of shippers in the world—certainly in the United States—85 percent of shippers, according to Gartner, the consultants, don’t use a TMS. And 15 percent, the larger shippers, Fortune 1000 type companies, they do use TMS. What it does is it makes them more efficient, saves them money, they can do more with less people. I think that the market, because 85 percent of the small- and midmarket shippers are not using the technology, the market’s wide open for them to adopt the kind of software that makes the competitors more efficient.

 

And what are your recommendations?

 

The recommendations are pretty simple. I think that anybody that ships a product from point A to point B or any brokerage operation that organizes the shipment of products for their customers from point A to point B should use a TMS system. if you don’t use a TMS system, you're basically costing yourself and your company money. If you do use a TMS system, you can, many times, take a shipping department that might have 15 people in it and you might be able to do the same or even more shipment with maybe a third of that head count. This has been shown, tried, and tested. This is not just numbers I’m pulling out of my hat. This is well-documented that if you have very sophisticated TMS software, you can ship your products around the world or from one side of the street to the other for a lot less money.

 

Thank you, Tim, for sharing your views and letting us know about your TMS technology.

 

You’re very welcome, Dustin.

 

 

About Tim Higham


 

 

timh.jpg

Tim Higham

 

President and CEO at

Interstate Logistics Group, Inc

LinkedIn Profile

I interviewed Guy Sanschagrin who discussed What is Transfer Pricing and What are its Impacts on Supply Chains?

 

 

 

 

 

My name is Guy Sanschagrin. I began my career in supply chain through Northeastern University’s industrial engineering program. I worked as an industrial engineer for about five years, performing dozens of projects to increase the efficiency of processes, streamline workflows, and lay out facilities. After obtaining an M.B.A. in finance and international business from the University of Chicago, I was recruited by Ernst & Young to join its transfer-pricing practice.

 

At the time, EY was recruiting people with supply chain backgrounds, like me, because they saw opportunities to bridge tax and transfer-pricing opportunities with company supply chain initiatives. I now, have about 15 years’ experience in transfer pricing, including three years spent on international assignment as the national leader of EY’s Belgium transfer-pricing practice…

 

Transfer pricing involves pricing intercompany transactions, which are transactions that take place between related parties, typically within a company, such as transactions between a company’s divisions or entities. The main types of intercompany transactions involve: 1) the sale of goods; 2) the provision of services such as a central IT group providing global IT support services; 3) intangibles such as the sale or license of technology across borders; and 4) intercompany financing, which includes loans such as one entity loaning to another entity.

 

Transfer pricing is a huge international tax issue, as it impacts where companies recognize profits when the intercompany transactions cross country borders. As a result, most countries have transfer-pricing rules in place that provide them with tools to claim their fair share of income tax. One of the fundamental pillars of transfer pricing is the arm’s-length standard. To meet the arm’s-length standard, companies must be able to demonstrate that the transfer pricing associated with their internal transactions are consistent with the results that would’ve been realized if independent companies had engaged in the same transaction under the same circumstances.

 

Companies get into trouble when they don’t take tax and transfer pricing into account when restructuring their supply chains. A multi-country supply chain initiative can subject the company to a high global effective tax rate when locating important functions in high-tax jurisdictions. Also, some companies are engaging in tax planning that is not well-aligned with their supply chains. These often result in tax structures that are not sustainable, as tax authorities can challenge a tax structure that lacks the business purpose of a supply chain initiative or substance such as important functions that can demonstrate the ability of an entity to manage important supply chain risks.

 

Companies can create sustainable tax-efficient structures by layering transfer pricing and tax planning with their supply chain initiatives. As companies expand or streamline their supply chains, they can make tax-smart decisions about where to locate the value drivers and the important functions within their supply chains.

 

For instance, if it makes sense to create a regional headquarters or centralized services such as a strategic sourcing group, companies can consider the tax rates that their cash flows will be subjected to in the various jurisdictions. Companies should keep in mind that there are significant differences in the tax rates levied by the countries they are operating in, and as they decide on locations of important supply chain functions, they should perform their cost-benefit analyses on an after-tax basis.

 

Many companies make decisions above the line on a pretax basis as they restructure their supply chains. As a result, they may not be maximizing shareholder value. I recommend that companies make their decisions on the after-tax free cash flows their initiatives are expected to generate. They should consider tax cost and tax-planning opportunities as the company expands or changes its supply chain.

 

Global intangibles and the high-value functions that go with them are important elements to consider. Companies should make certain they identify the important intangible assets contained within their supply chains. These intangibles can include know-how, technology, patents, and supplier relationships.

 

Companies should consider how these will change in value over time. They should think about locating intangibles and the people that go along with them in favorable tax jurisdictions. This approach will help companies maximize the value that their supply chain initiatives generate for their shareholders.

 

 

About Guy Sanschagrin


 

 

guy.jpg

Guy Sanschagrin

 

Managing Director at WTP Advisors

http://wtpadvisors.com

LinkedIn Profile

I interviewed Renaud Anjoran who discussed Why Chinese Factories Should Avoid Full Automation?

 

 

 

 

Can you start by providing a brief background of yourself?

 

Hi, Dustin, great to be here. In 2005, after I finished my studies and after I worked in France, I moved to Hong Kong, went to work in a small trading company, pretty small trading company, so I was involved on the sales side and also on the supplier-management side, quality-control side. It’s really a very tough job, so after 18 months, I quit; I’d really had enough of being in the middle and taking all the hits.

 

I set up my quality-assurance agency in south China. Since then, I have helped tons of importers, mostly from Western Europe and North America. I have visited probably hundreds of factories in many different industries. The main services that we provide, the main sources of our work are factory audits, meaning that we go in a factory, and we check them, we check their processes, we check what they’re doing, what kind of quality system they have, and so on. That’s for the importer that wants to qualify the manufacturers he works with before he places an order. The other types of service that we provide is the quality inspection. We go in and we check the quality of the products basically; check if the specifications are respected, check if there are not too many defects, if the packaging is right, and so on just to have the buyer confirm that the quality is all right and he can allow the supplier to ship. I have talked to a lot of manufacturers, and one of their big concerns, of course, is the rise of all their costs and the brutal price competition that they have to face. They usually complain a lot about their staff. One of their fantasies is to completely automate, so that’s what we’re going to talk about today.

 

Thank you. Can you start by talking about how do you define full automation?

 

Sure. Well, let’s say there are two kinds of automation. I’m talking about automating a process. You have people working, making stuff, right? Full automation consists of actually replacing the workers. You're going to have just machines. Ideally, one big machine will get the components of the raw materials in and will churn out fully packaged products at the end. That’s the dream, that’s full automation. There’s also another kind of automation that we will call semiautomation. As an example, you can take rifles to draw that point home. You have automatic rifles and semiautomatic rifles, right? What’s the difference? The semiautomatic rifles will only shoot when you pull the trigger. Manually, you pull the trigger, and the machine does the rest. In the automatic weapon you just keep the trigger pressed, and it just keeps shooting. Basically, you don’t need the human to take any decision. That’s full automation, a big, expensive machine, high-speed machine that, once it’s set up the right way for one kind of product, hopefully will churn out thousands of pieces in a short amount of time and without human intervention. That’s the idea, anyway. In reality it’s not that simple.

 

Can you talk about why Chinese factories should avoid full automation?

 

They have this fantasy of replacing all the workers, so they naturally think of full automation. They can just buy big machines, they don’t have to manage them, they can just turn the lights off. Well, the problem is that when they do it, some of them have already done it, and it’s not that simple. It’s a big investment—that they know—but what they don’t know is that, first, these machines are not necessarily very stable, meaning that they will break down or have some kind of disruption that will make them cause defects.

 

When you have a very high-speed machine that, let’s say, produces a hundred pieces per minute, there is a slight chance that it might go wrong and then produce only defects. Well, what do you do? You post one person in front just to tend to the machine and just keep watching. And that’s what happens, that’s what you're seeing in Chinese factories. Very often you have a guy just watching the machine, not doing anything, because if something goes wrong, he just presses the Stop button. Well, right here, your labor costs are not disappearing.

 

The second reason is that you still need some staff, but not the same kind of staff, to set up the machines and to maintain them. You need engineers, who are paid easily four or five times the salary of the cheap line worker who was doing a very simple manual job. Not only do you still need some people, but these people are more difficult to hire, are more difficult to keep, and, per person, the salary is much higher.

 

Reason number three is, as I said, these machines are very high-speed machines, very expensive machines. They tend to have long setup times. What that means is that it might be very well-adapted for runs of, let’s say, 50,000 pieces, but how many customers do they really have that can create these kinds of orders? What are they going to do with all these small- and medium-size customers? All of a sudden, it’s not economically interesting for these manufacturers to serve all these small and medium customers. The weight of their product, of the products they can make all of a sudden gets narrowed to just two or three kinds of products. That’s a very big problem.

 

I was talking to the girlfriend of a friend of mine who works in a printing factory in Xinxing. At the beginning it was a smaller factory and they had mostly manual operations, so it was semi-automated. They had some machines but there was a lot of manual labor around the machines. Setup time was pretty short and they could do small runs and they could work on the jobs of small print shops. Now, they wanted to get to the next step. They invested, they got big machines, and all these small orders now, they cannot take them anymore. These small orders used to be well-paid, but now they have to compete in the high-quantity orders that all Chinese factories are competing for. Once you can buy these big machines, you can bet a lot of competitors are also going to buy these same machines. In the end, maybe at the beginning you don’t have much competition, but after two or three years, you have a lot of competition. It’s very easy to compare prices, and they all come out of the same machines. That’s a huge problem, this necessity to accept only large orders.

 

Why is it such a big problem? Let’s look at the American buyers. Why do American buyers source in China? A lot of them have the choice, a lot of them buy some products in the U.S. and some products in China. Why do they buy in the U.S.? Very often they keep the large production runs in the U.S. because in the U.S., they have these fully automated factories already. They don’t need that from China. Why do they need China? They need China because for the small- and medium-size orders, Chinese factories, since they are less automated, can do a higher variety of products in shorter, smaller production runs. These factories are not really analyzing, these Chinese factories that are thinking of full automation, they’re not analyzing the demand. They think, “Oh, we’ll just buy this big machine, and we’re going to have a new kind of orders. We’ll just get big orders.” They don’t see that there are not that many big orders, actually of big, big production runs coming to China, so they’re in for a big disappointment.

 

Last month I was talking to someone also in Xinxing who works in a PCB factory. It’s a big factory, three thousand people. Two years ago they said, “We’re going to invest. Labor cost is going up dramatically. Let’s just automate, let’s buy these big machines.” Now what did they found out? Their cost to hire, well, because it’s not that simple, in advance, to predict what the exact cost is going to be with these big machines. They’re not very good at that. And, of course, the salespeople from the machines’ manufacturers are just going to paint the rosy picture, right? I just say usually: Be careful.

 

First, go for semiautomation. You have some staff working; just focus on making them more productive. Buy them some devices, think of new tools and fixtures to help them do the job faster, easier, with higher quality. There’re huge gains waiting for manufacturers to go down that road, because labor productivity in China is not very high. There are a lot of low-hanging fruit to seize right here. Before they start going to full automation, they should really work ******* semi-automation. It takes a lot of creativity. Sometimes for some operations they need two hands, maybe give them something like a pedal to operate by the foot, and then you know right away, it frees up one hand that can do something else. It’s this kind of thinking. First, go down that road. And then if you really want to go full automation after that, first analyze your demand and make sure, make pretty damn sure that you will have these big orders for long production runs. That’s my advice for Chinese manufacturers.

 

Thank you. Did you have any other recommendations?

 

On this topic, no. I think I tried to explain it as well as I could.

 

Great, thank you.

 

All right. Thank you, Dustin.

 


Link about automation:

http://www.qualityinspection.org/semi-automation/

 

 

About Renaud Anjoran


 

 

renaud.jpg

Renaud Anjoran


 

Quality Assurance &

Factory Improvement in China

LinkedIn Profile

I interviewed Frederic Petit who discussed What is Engagement, Change Management, and Communication for Sourcing and Supply Chain Managers?.

 

 

 

 

 

Can you first provide a brief background of yourself?

 

Yeah, sure, thank you very much, Dustin. My name is Frederic Petit. I’m a senior director at RGP. RGP is a public tradeed global professional services with a big 4 heritage. RGP was founded in 1996 as part of the light and public trade company from 2000. We are a global company and working with big clients around the world. I’m based in Paris. First part of my career was about sourcing. I was a purchasing director in a pharmaceutical group called Laboratoires Fournier. The second part of my career is in consulting from 2001, and I joined RGP in 2005. I have also…another part of my activity at HEC, where I am professor, an interim professor—we call that adjunct faculty—for sourcing and supply chain, and I wrote several papers about supply chain and purchasing and sourcing.

 

Can you talk about what is engagement, change management, and communication for sourcing and supply chain managers?

 

Sure. Engagement, change management, and communication are very important in the job for sourcing and supply chain management, as there is a big part of the project, where supply chain managers and sourcing managers are involved in. You can’t now just do your job; you need to speak and you need to be involved in other departments in the project, in supply chain and sourcing. It’s very important to take into consideration engagement, communication, and change management. That’s the fact for small and big groups and to take into consideration differences, differences in the history of the company but the history to the people you are working with.

 

Why is it important?

 

That’s important because if you’re doing your job alone, that will be just the result for yourself and not for the company. It’s important to work with the others to take into consideration their project and to work for the others, with the others as a group and in a project. I think an example for supply chain management, if you want to, for example, to involve the suppliers in innovation, that can be done with the other departments of the company, with the stakeholders of the company. In the past we called that internal clients, but, finally, I prefer the word stakeholders and partner for business, because supply chain and sourcing are a part of business and the results. To involve the suppliers for innovation, that means that we need to communicate internally in the company with the stakeholders, with the other departments, and, of course, with the suppliers. That means that to begin something, we need to prepare the company to the project, we need to communicate, and we need to change. Without change, nothing would happen.

 

How should it be done?

 

I suggest to have several steps in this area. The first one is engagement to show that you work on the priorities for the business from the supply chain. Are we in a company where we need cost advantage? Are we in a company where we need innovation? Are we in a company where we need work on delivery time? That makes priorities for supply chain. In this priority we’ll need to convince or to be convinced that we are in the same way of strategy to decline this strategy into the supply chain strategy and to present, to prepare for the others the supply chain strategy. That’s the first part. And to make it sticks to the company’s strategy. Today we need to prepare change management and communication. We have, and a lot of companies are using, several tools for change management and communication. The first one for me, very important to change something is to mobilize for change. For that we need the buying from the stakeholders. That’s a very important step in change management.

 

My reference in change management is a professor called John P. Kotler from the Harvard Business School. He wrote a lot of papers and books about change management and the last one about buying. Without that, the supply chain managers are alone, and that’s not good to take into account and to put in place change. So, that’s about change. And communication,  is very important. We see , in our last survey that the first skill that comes into the first part of the answers are communication. We need people who know how to communicate. It’s not just to blah, blah, blah. No, it’s to prepare a real communication plan with steps and how we will implement a real communication plan internally and externally with our stakeholders and with our suppliers and coming from the project, we are mobilized on, we are engaged with.

 

Thanks for sharing your views today on the topic of change management and engagement specifically for supply chain managers.

 

May I speak about some rules and tools or is it enough?

 

Yes, that would be great.

 

Okay. Just more about change management, two things about change management and two things about communication. The first one about change management, there are steps to transform a project into success. The first one, as I mentioned, is engagement and the sense of urgency of the project we need to implement or we think that’s important to implement. And in the different step in the change-management process, and I encourage you to see what are the steps, but in the steps there is a communication step, and that step is very important in the change. For the communication plan and to know who will be involved, it’s not only enough to have a real plan in my computer. I need to speak and I need to prepare the different people involved with the project. There are rues and tools in communication that are very important. For example, public opinion prepares action, so if you need to know if your project could be opened to change in your company, it’s important to know if opinion is prepared. It could be a good tool to check if your new project is able to be managed. There are several tools about how to implement communication, and I would be happy to speak with you in another interview about it.

 

Yes, I look forward and I’d like to speak with you in the future. Thanks again for participating today in the interview.

 

Okay, thank you very much.

 

 

About Frederic Petit


 

 

fred.jpg

Frederic Petit

 

 

 

Senior Director RGP and

Adjunct Faculty HEC Paris

LinkedIn Profile


I interviewed Renaud Anjoran a who discussed In China, Importers Should Work with a Factory of the Right Size.

 

 

 

 

It’s nice to speak with you today, Renaud, and I look forward to hearing your views on China, as far as Chinese importers, and your views on whether they should work with a factory of the right size. Can you start by providing a brief background of yourself?


Sure. Hi, Dustin. Glad to be here with you today. In 2005, after I finished my studies and after working for some time in France, I moved to Hong Kong, worked in a small trading company there, working in garments. Very small trading company, so it was pretty interesting working both on the sales side and on the purchasing and factory management and quality-control side. After 18 months I was tired of being a rock in a hard place. It’s pretty hard to do trading, especially without all the resources you will need. I stopped doing that. I quit; I started my own company actually doing QC inspections, quality control, factory audits, product inspections, those kinds of things, having some importers in China.


I have been doing this since the end of 2006, early 2007, there was a transition. I have been based in Guangdong—that’s south China—since then. I visited probably hundreds of factories in very different industries either to evaluate them, typically before an importer would place an order there. They want to make sure that the claims are true and what kinds of processes they have and what kinds of products they’re really making and they really have the engineering capabilities they say they have and all these kinds of things. Also checking product quality to make sure it’s up to the buyers’ standards. I have been working with tons of importers, mostly from western Europe and North America, of very different sizes, from the small one guy working, maybe selling on e-Bay or Amazon or something like that, to the division within a much bigger company. That’s given me some perspective on the different needs of different types of buyers. I think that’s what we’re going to talk about today.

 

Why should importers in China work with a factory of the right size?

 

Well, that’s pretty important. When an importer starts to look for a new supplier, that’s provided they don’t want to work with a trading company, because if they work with a trading company, then that can smooth out a lot of things. That kind of has a lot of other problems also. You're kept in the dark regarding your supply chain, and you don’t really know if you're gouging the pricing, so most buyers will try to buy direct. When you buy direct you really want to make sure you work with a factory of the right size. Here’s why. If you work with a factory that’s way too big, your order is going to be peanuts for them. Maybe your order is going to represent .1 percent of their annual production. They’re not really going to care about you; they’re going to give you a higher pricing.

 

Very often we see this in China. A factory will give very good pricing to their big buyers because they really want their orders, they’re very excited about high-volume orders, but they would make most of their margin, if not all of their margin, on the smaller buyers that don’t really have much choice and that are willing to pay 40 percent more or sometimes double the price. If you work with a much bigger company, as I said, you might have to pay more. And the second problem, also, is that you don’t want to wait on them. Even if they’re big, they’re still run the very Chinese way, if I may say that, meaning that they’re late a good part of the time, so who gets the priority when it comes down to expediting orders? Of course, the big customers, so all the small customers need to wait. Your orders just get bumped to later and later; sometimes it’s two months late and that’s it, it’s take it or leave it. Chances are, they have already got a 30 percent down payment from the buyer, and they don’t really care. “You want to go somewhere else, no problem, whatever. You're just peanuts to us.” They don’t give much importance to your orders, and they’re not going to be very flexible.

 

Now, you shouldn’t work with a factory that’s way too small for your orders. First, they’re not going to be able to complete your orders, the whole quantity by themselves in the time frame that you give them, which means that they’re going to have to subcontract. There’s an external company in China, and that’s one of the main reasons why you have quality disasters here, because the factory just farmed out the job to some other place. Of course, don’t get me wrong, when they farm the job out, they don’t put it in a nicer factory. It’s always driven by cost. “Okay, we don’t have the capacity; we’ll put it somewhere else. Let’s just put it in the place that gives us the lowest price, the lowest cost.” It ends up in small workshops that don’t even have a quality-control staff most of the time. I’m talking about 20 people, 50 people, maybe 100 people totally unstructured, 100 percent focused on making production as fast as possible. Don’t expect good quality from these kinds of things; you’re going to have problems. Part of it will be good and part of it will be bad depending on where production ended up but that’s very risky. That’s what I would say. Be careful. Don’t place production in a very large factory, and don’t place production in a small factory that can’t handle your volumes.

 

Do you have some examples of importers working with factories of the right size?

 

Well, sure. For example, I have a client that has a seasonal activity, so they work a lot, let’s say, they buy a lot for shipments around April and May and then around October and November. They work with factories that are going to be, let’s say, 50 percent busy with the orders during that peak season. They don’t want to be only 5 percent of their capacity because, again, that would be a cause for problems, bad follow-up by management, mainly, and high prices, no leverage, really. And they don’t want to be 110 percent of the factories during the peak season because it just doesn’t happen. What are they going to do without other customers? They need to product anyway, right, so it’s going to be in a rush. When it’s done in a rush, quality always suffers. You're basically forcing the factory to subcontract. Even if you tell them it’s forbidden, they’ll just do it. That’s an example.

 

Let’s take another example. A small client of mine that visits in a very nice Taiwanese-owned factory, very big, was very impressed—that happens a lot. The guys told him, “If you want to work here, your orders are pretty small. We’re not going to do several payments. Just pay us a hundred percent before production starts.” The buyer says, “Well, all right, I’m safe. These guys are really good.” And he gets screwed. They subcontracted with someone else and the quality was terrible and he was really upset about that, but they totally refused to rework. They said, “Well, the quality’s not that bad. It’s fine with our other customers,” and blah, blah, blah. In the end, the buyer just had to decide: Do I take the goods or do I just forget about all the money I paid? That’s really what you want to avoid.

 

Do you have any final recommendations?

 

Well, keep this in mind when you're starting to source suppliers, keep this in mind: the site of the supplier. That’s one of the criteria that you will use to select them. You need to form the idea of the perfect supplier profile in your mind, and then go look for that profile. If you're in a very narrow product category in China, you might have difficulties finding a lot of suppliers and really have the choice, but if you work in one of the major companies—iPhone covers or e-cigarettes, something like that—very dynamic categories, you have hundreds of manufacturers now doing that. You’re going to have an easy time on GlobalSources.com or Alibaba.com or at tradeshows, you're going to have a lot of choice, so narrow it down. Check on their profile, what’s the size. Too big, one thousand people, two thousand people. If you have small orders, just forget it; you should shoot for, let’s say, four to six hundred people. That’s, I think, the conclusion for buyers. There’s a lesson right here. Just keep this in mind, and make it one of the criteria in your supplier-selection process.

 

And thank you for sharing.

 

Yeah, thanks for having me.

 


Link about the factory size:

http://www.qualityinspection.org/chinese-factories/

 

 


About Renaud Anjoran


 

 

renaud.jpg

Renaud Anjoran

 

Quality Assurance &

Factory Improvement in China

LinkedIn Profile

I interviewed Peter Balbus who discussed The Rise of the Asian Consumer.

 

 

 

 

 

My guest today is Peter Balbus, Managing Director of Pragmaxis LLC – a niche consulting group that specializes in assisting clients with their strategic innovation and sourcing initiatives.

 

In this segment, Peter and I will be discussing key trends and learnings about the rise of the Asian consumer, a major shift in the structure of global business and a source of both new opportunities and new risks in global commerce.

 

Welcome Peter – and please provide a brief background on yourself.

 

  • Thank you Dustin – great to be here with you again.
  • I have been a consultant for nearly 30 years specializing in strategic innovation management, and focusing on two primary areas for strategic innovation: first, identifying emerging new markets -- and closely related to that from an operational perspective, strategic sourcing and supply chain transformation.
  • I help clients accelerate the definition and execution of core strategic growth initiatives and customer fulfillment capabilities.
  • My education includes an undergraduate degree from MIT in chemical engineering, and completion of the University of Chicago executive program in finance and strategy.
  • I also hold professional certification   as a master business innovator from the Illinois Institute of Technology.
  • My clients are varied   in terms of their size   and the industries in which they compete. Most are mid-to-large scale firms with global operations, and are spread across multiple industrial segments   including manufacturing, chemicals, energy and electronics.
  • I’ve also done some significant recent engagements   for clients in the food & beverage and financial services segments, as well as working with a couple of leading private equity firms.
  • Prior to founding Pragmaxis in 2001, I held senior practice leadership positions with KPMG, CSC Index and Booz Allen & Hamilton.

 

Our interview today is on the topic “The Rise of the Asian Consumer”. How would you characterize this new dynamic and why do you feel it is occurring?

 

There is a new megatrend in the global economy. It is the rise of the Asian consumer, particularly in China and India. It is a story that will play out over the next several decades and promises to have at least as dramatic an impact on the world as the rise of the American consumer in the post-war era of the 1950s. It will have huge implications – for companies (both within Asia as well as foreign multinationals), for investors and for governments -- not to mention the consumers themselves.

 

The rise of Asian economies over the last 50 years – which began with Japan in the 1950s, then spread to Korea, Taiwan and Singapore, and later to the rest of Southeast Asia -- with China and India taking the lead since the 1980s – has been mainly a story of production, not consumption. With the notable exception of India, Asia’s rising prosperity has been largely driven by an export-oriented economic model. Asia has been the world’s biggest factory, a gigantic, increasingly integrated production machine churning out everything from toys, textiles and tchotkes to electronics, engineered products and automobiles.

 

For the last 50 years, the United States and Europe have voraciously consumed what Asia has produced. In the process, Asian countries have run virtually uninterrupted trade and current account surpluses. America, by contrast, has run deficits that have ballooned in recent years.  Between 2003 and 2008, for instance the US current account deficit averaged US$700 billion, equal to around 5% of GDP.  Almost half of the US trade deficit was with the countries of East Asia. In short, America has been the main consumption engine and Asia the main production engine for the global economy.

 

So how is this dynamic changing?

 

Well, this dynamic is changing in a very major way. Asia’s growing prosperity, especially since the 1980s, when the Chinese economy started to take off, has been a major impetus behind this change. Asia’s pro-export policies – essentially low wages, freedom from environmental and safety regulations and cheap currencies – are becoming increasingly obsolete and unsuitable. This has become increasingly evident after the global financial crisis of 2008/09.

 

The roughly 3.7 billion consumers in Asia account for more than half of the world’s population, but less than 30% of global GDP. In China, the most populous country, consumption as a proportion of GDP is about 35% – among the lowest in the world — compared to 65% in the United States. Asia’s underperforming consumers is what makes economists believe that if the world economy is to have a new consumption engine, then outside economic interests guiding a developing Asia must be a big part of it.

 

The key to the Asian consumer story is the rise of the middle class. According to a seminal study by economist Homi Kharas published in 2010, if we define a global middle class as those living in households with daily per capita incomes between $10-$100 per day in local parity purchasing power, then Asia accounts for 28 percent of the world’s middle class today in terms of numbers of people. By 2020, that share could double. And by 2030, two thirds of the world’s middle class will be in Asia.

 

As income levels rise to a point that approaches those of the develop world, consumers tend to gravitate towards international brand-name goods. Middle-class Chinese consumers in particular show clear preferences for international brands of discretionary and luxury goods. This is however not true in the case of essential goods and services, where locally branded items do as well or better. Chinese consumers are also increasingly showing a preference for higher-end foods and beverages, both of which are likely to remain fast-growing industries in China for decades to come, not only in large cities, but even in third and fourth-tier towns.

 

A notable trend among Indian consumers, according to the survey is that they tend to spend proportionately more on education than others – around 7.5% of total income on average. They also exhibit a relatively high degree of sophistication in their savings behaviors. The penetration of banking and insurance is quite high compared with other emerging economies. And also unlike elsewhere, most consumers have a bank account. Simple forms of mobile banking using cellular phones are also spreading across India at a rapid rate enabling innovative new business and payment models.

 

Increases in incomes will change patterns of consumption. The experience of developed economies over the last century suggests that as incomes grow, the proportion of income spent on food and other essential items declines, while that spent on “useful” and discretionary items increases. However, while this is broadly true, it will not happen at the same pace everywhere. There are important variations between different countries. Therefore a more detailed examination is needed of consumptions trends and aspirations.

 

What is China’s role in all of this?

 

China's role in driving global demand isn’t shaped so much by the size of its internal GDP -- as by its demand for imports.  Household consumption as share of GDP has fallen since the late 1990s, from over 55% to just 35% in 2012.  This reflects income transfers from households to firms, primarily state-owned enterprises that yield enormous economic power.

 

Driving domestic consumption-driven growth is as much a challenge of uncertain politics as it is of economics, but the key is shifting spending power away from these enterprises and back towards consumers.  In general, while China is a major importer of parts and components, it is mostly for final assembly of products such as consumer and commercial electronics and plastics for export to more developed external markets.  Internal Chinese segments still represent undeveloped major markets for the region's manufacturers.

 

Thus, for China to become a sustainable growth engine it would need to raise its domestic consumption as a proportion of GDP by at least 50% including imports of final goods from the region.

 

China’s currency undervaluation (by as much as 30 percent, according to some estimates) is disputed by its government. But as China’s Yuan gains strength against the dollar and European currencies, other Asian countries will be more comfortable allowing their currencies to do so as well. This will help fuel a consumption boom in the region

 

What are the population dynamics and how is that driving the shifting economics towards Asia?

 

The overall long-term macro trend is clear: with the region's growing population and increased incomes -- 40% of total global consumer spending is expected to come from Asia by 2030 – up from around 20% today. Beyond China, a more integratedhttp://www.nationmultimedia.com/search/?keyword=+ASEAN+ASEAN Economic Community is a key part of this shift, with a projected population of 650 million by 2020, half under age 30. Emerging Asia's middle-class households, with annual disposable incomes between $5,000 and $15,000 are expected to increase more than 150% by 2020.

 

But most of this growth will be at the low end of the middle-class range.  Average annual household income in Asia is projected to still be $6,000 by 2020, as compared with closer to $40,000 in developed economies. The vast majority of the populations of emerging Asia will continue to be low-income and lower middle-income in the foreseeable future.   Fragmented markets, a high rural population and growing income inequality will all conspire to hinder discretionary consumer spending.  Still, emerging Chinese and Asian markets represent considerable business opportunities for international businesses.

 

So, what should global corporations be thinking about now?

 

Great question Dustin!  For most firms, the challenge is not just to export, but to strengthen the capacity for innovative responsiveness to consumers in emerging Asian market segments.

 

The nature of Asian emerging markets suggests a broader perspective on innovation. Benefits of innovation may be captured anywhere along the value chain, from development of new technologies, to changes in marketing and distribution systems.  Especially in China, smaller enterprises (SMEs) and adapting existing technology to local user needs may be the most accessible route to commercially viable innovation for Asian emerging markets.  Investments in early interactions with potential consumers on product development, process improvements, and new types of business systems and business models can play a central role in shaping innovation and commercializing new ideas. This is especially important for markets where consumers with high aspirations but limited disposable incomes and constraints not found in developed economies look for products at a relatively low cost, with fewer features and tailored to local user conditions.

 

There are examples, particularly from India and China, of successful innovations for emerging markets and beyond. First Energy's Oorja stove, developed originally for rural India, is a low-cost, low-smoke, highly efficient stove, powered by rechargeable batteries with pellets from organic biofuel derived from processed agricultural waste. It is now being widely marketed across Southeast Asia.  China's Galanz developed microwave ovens that are simple, energy efficient, low cost, small and flexible for local needs with novel applications for stir-frying, deep-frying, and steam cooking -- then built on local success for expanding global exports. In India and China, GE developed ultrasound and electrocardiogram (ECG) machines specifically to meet income, infrastructure and service constraints found in emerging Asia; they have now also found lucrative US niche markets for almost identical products.

 

What do you see as the key to competition in these rapidly emerging markets?

 

Taking advantage of Asian emerging market opportunities requires a firm-wide commitment to innovation-led growth. Most corporations hold an enormous potential for innovation, reflected in their capacity for sophisticated strategic marketing and globally products. But exploiting this potential for international markets almost invariably requires strengthening the internal corporate "innovation system" – the internal and external collaborative networks of creative thinkers, paradigm shifters, status quo challengers, change agents and commercialization experts.  From an executive perspective, corporation need to ensure that governance models enable these innovators to interact effectively with corporate policies, institutions and programs design to foster and sustain market-leading innovation.

 

This involves not only needed investment in cutting-edge R&D, but also addressing existing gaps such as financing for early-stage innovation and supporting external infrastructure such as "innovation parks", which have been highly successful in Asia. Considerable pay-offs can come from innovation all along the value chain, including from investment in areas such as user-oriented product development, and new types of marketing, sales and distribution models.

 

Do you see any shifts in the way that strategic Innovation needs to be managed in Asia?

 

At most companies today, there is likely to be more internal innovation on going-to-market strategies and thinking about new business opportunities than there is in on technical innovation. Technical innovation general lags behind market and product innovation in maturity as a driver of business growth, but in the case of China, represents a significant source of long-term strategic business advantage.

 

One note of caution: what China does better than any place else in the world is to innovate through commercialization, as opposed to iterative R&D perfecting the theory, like we tend to do in the West.  When the Chinese get an idea, they test it in the marketplace. They’re happy to do three or four rounds of commercialization to get an idea right, whereas in the West companies spend about the same amount of time on internal research, testing, and validation before trying to take products to market.   The Chinese may have more improvements to go, and they’ll work on them in parallel with finding out what the customer really likes and adapting to that.  The difference is that by the time a western company rolls out their introductory product or service, their domestic Chinese competition may already have a 2-3 year head start and a commanding market position!

 

That’s an innovative way of doing innovation, something that the rest of the world is struggling to understand.

 


Thank you Peter!  For further information on this topic or to contact Peter Balbus directly, please visit www.pragmaxis.com – that’s spelled P-R-A-G-M-A-X-I-S.



 

About Peter Balbus


 

 

peter.jpg

Peter Balbus

 

 

Certified Master Business Innovator and Business Operations and Growth Expert

LinkedIn Profile



I interviewed Jim Schlusemann who discussed US Manufacturing On-Shoring. Current Dynamics, Barriers to Success and Actions to Remove Those Barriers.

 

 

 

 

Can you start by providing a brief background of yourself?

 

Sure, Dustin. I just recently left Navistar, Inc.. to start up my management consulting business (Prosperia International LLC.)  Navistar is a global manufacturer of on highway trucks and diesel engines. My career with Navistar was rich and diverse. When I first started there, I was in manufacturing and manufacturing-engineering. Years back when computers found their way from the office to the factory floor, I pioneered and developed teams in Navistar’s truck and engine plants to take advantage of new technologies and expand IT capabilities to Navistar’s factories. Following that role, I was CIO for Navistar’s global engine business. I held that position for 16 years and during that time our business expanded to South America, India, Mexico, and China. Following that assignment, I joined a Navistar team responsible for global business development for Navistar’s engine business.  In that role I created and led a team with members from Brazil, the US and China responsible for launching an engine joint venture in China. My most recent and final role at Navistar was in their component business where I was involved in re-launching Navistar US foundry operations and in on-shoring some CNC machining capabilities.

 

Great. It sounds like you have an extended history in the area of U.S. manufacturing and onshoring and these types of manufacturing issues. What have been your observations of the trends in the past?

 

Early in my career, Navistar and other major automotive companies for the most part manufactured most components onshore here in the U.S. Through the ’70s, ’80s, and into the ’90s, there was a pendulum swing toward taking many of those manufacturing capabilities and jobs offshore and for good business reasons at the time. There were differences in the cost factors, and we could procure components much cheaper offshore than here in the United States.

 

Do you see any changes or reversals of these trends going forward?

 

Some of the cost factors that originally benefitted the offshore model are reversing a bit and experiences with these extended supply chains have demonstrated flexibility constraints, so the pendulum may start to swing back a little bit. I’m not sure yet, but I think so.

 

And in your opinion, what are the dynamics bringing about these changes?

 

The dynamics are like a leveling factor. Many of the countries that we outsourced to for labor savings, their labor costs are actually starting to rise, which begins to work against that previous cost savings model a little bit. And I think businesses are starting to see and recognize some waste and instability in the supply chains through the offshoring model. There are issues in the pipeline itself and surge inventory impacts; hurting just-in-time operations. In many cases, offshore manufacturing sites for components are not close to company R&D facilities, and there are some losses by not having R&D close to the point of manufacture. Issues are also beginning to come up with managing and controlling a company’s intellectual property in the offshore model. And then there are also some regulatory compliance risks. The laws here in the U.S. are different than in many of the countries where US companies outsource, yet we’re responsible by law to adhere to US regulations even though these operations are offshore. So there are issues cropping up around compliance. And finally, there’s just the ability to quickly respond to customer demand. I think when we experienced the business slowdown in ’08 and we are now seeing a ramp-up in demand, the extended length of the supply chain hurts inventory management. These dynamics could reverse some offshoring arrangements.

 

And can you talk about what roadblocks lay ahead in the U.S. that could influence future direction?

 

Yes, a major roadblock that I see to reshoring efforts is the erosion of our manufacturing capabilities in the United States. Our shortcomings are in workforce skills, technical knowledge, and manufacturing know-how.  In the past, people were driven to manufacturing because of high-paying jobs that provided income levels for supporting a family. Those dynamics changed with lower wages, less jobs available in manufacturing and an old (and currently inaccurate) image of manufacturing as a low-tech position in a dirty work environment.  Modern manufacturing jobs call for strong math and science skills. I read of US manufacturers struggling to find qualified candidates with these skills. The other major roadblock I believe is the image of manufacturing in US society and being able to attract people into that sphere again.

 

What needs to happen to mitigate these roadblocks?

 

We need change in a few areas. The first one I see and really believe is our country needs to put more emphasis on math and science in our educational system. That’s the skill foundation needed to bring these types of capabilities back to the United States. There needs to be a business case for bringing manufacturing work back to the US. (There’s was a business case for going offshore.) I believe that there’s a business case for bringing things back onshore and I will share with you a good source for building that business case. And then the other thing would be the image of manufacturing; that needs to get fixed. I think there’s a reputation or image of smokestacks, dirty factory floors, and if you’ve been through some of the current, modern manufacturing facilities, they’re very bright-light, clean facilities and very much high-tech.

 

And what resources are available to U.S. manufacturers that are interested in mitigating these roadblocks and participating in the manufacturing global-growth opportunities?

 

Well, in the area of creating your on-shore business case—(and that’s probably the first thing to do; getting and promoting your business case) there’s an organization I ran across; The Reshoring Initiative (www.ReshoreNow.org) has some pretty good tools. It’s a not-for-profit organization that seems to be doing a pretty good job in this area. The tools on their site allow you to enter the dynamics of your business along with your supply chain features. It then uses your data to develop your on-shoring business cases. They use 29 cost factors to evaluate things such as freight rates, duty calculations, a lot of things that hit your bottom line when using the offshore model that could increase profits by bringing parts back onshore. I recommend them highly. We talked about the negative image of manufacturing.  A good resource in this area is another not-for-profit organization called SME, and they’re at www.SME.org. They’ve really got their arms around promoting the image of manufacturing. In fact, they have some programs that reach down into grade schools and high schools to educate and promote manufacturing. They have a program called Manufacturing’s Cool to get kids involved and interested early on in manufacturing. And for established manufacturers, they have a great organization called Tool U to train U.S. manufacturer’s workforces. SME is also a great resource.

 

Thanks, Jim, for sharing your views on U.S. manufacturing and onshoring and some of the dynamics and barriers to success. Thanks for sharing.

 

It’s been a pleasure talking to you. Any other time in the future, give me a call. It’s great meeting you and great talking with you about this topic today.


Thank you.

 

 

About Jim Schlusemann


 

 

jim.jpg

Jim Schlusemann

 

President at Prosperia

International LLC

LinkedIn Profile

I interviewed Tobias Jonasson who discussed E-Commerce Logistics.

 

 

 

1.   Please provide a brief background of your self

 

I am Tobias Jonasson and am currently serving the role as Group sales and marketing director at Logent AB.  After completing my master thesis in Logistics and ICT at Chalmers University of Technology I started my career at DB Schenker Logistics in Gothenburg, Sweden. DB Schenker Logistic a division within DB Schenker Group’s global organization where I served as a logistics development resource, mainly  working with internal development issues related to various client assignments.

 

Spending only one year at Schenker and new in my career I got the exciting opportunity to work as an logistics consultant at a small software company. It was a very instructive period in my early career where I had the opportunity to closely study and analyse different approaches to business critical logistic activities and processes.

 

I then joined the Logent group in 2007. Before my current role I was managing director for a subsidiary company within our consulting business. At the end of this year I have fulfilled two years in my current position.

 

I would also like to give a brief introduction to Logent AB. We are a fast-growing logistics company with an all-embracing service offer to logistics-intensive companies. We operate within four areas of business and offer services such as site and staffing solutions, consultancy services within logistics and customs, freight management, port and terminal operation and logistics training. Logent has approximately 2,200 employees and an estimated turnover for 2013 at EUR 150 million.

 

Increasingly our customers request highly complex logistics solutions ranging cross boarder our defined business areas at Logent. Therefore we are now giving a great focus on wrapping our different areas of logistics competence into comprehensive industry-specific solutions (4PL). One segment that we are successfully focusing on is the automotive industry.  Another is e-commerce and what we call e-commerce logistics.

 

2.       What is e-commerce logistics?

 

E-commerce logistics is the concept of adapting existing supply chain methods and processes to fit the e-commerce business which in several aspects differs from traditional logistics processes in terms of refining and optimizing the sequences that's included in the processes, from system integration to distribution and KPI's.

 

3.       Why is it important?

 

Online retail and shopping has seen a significant growth over the last decade and is expected to grow even further for the years to come. Saying this more and more of the traditional retailers invests in an online platform and where the online sales accounts for an increasing share of the total sales volumes and is increasingly becoming more important as it constitutes for a larger share of the total revenue stream.

 

As competition goes tougher the margins are decreasing each day to you as a merchant as you constantly need to provide your clients with unique competitive advantages which effects on your profits, which means that with small margins, you need to refine your processes further to keep up with the competition. This is one of the reasons why we as an e-commerce logistics service provider sees the rapid development that is going on in the business and the fact that more and more small- and midrange merchants choose to outsource their logistics to gain a competitive edge.

 

4.       How should it be carried out?

 

This is of course varying a lot due to the nature of each specific business but one can in general say that giving priority to their logistics processes and constantly review and measure certain KPI's and compare with an outsourcing solution or investments in ones existing supply chain.

Today there are few outsourcing alternatives that can accommodate all the needs for every retailer as there are several factors that plays a critical role such as size of the business nature of products, other value added services that you'd require in your logistics solution. This will be particularly evident, especially if you are a small or mid-range retailer that would need an end to end solution for your business. However Logent has seen a great opportunity to offer and to accommodate the needs of these smaller retailers as well and consolidate their volumes at a single location and utilize the synergies that's created through this collective way of thinking.

 

Within the e-commerce segment there are a number of specific issues to address and for the logistics service provider (LSP) to take in consideration when developing the future solutions of e-commerce logistics. Below follows some examples.

 

- Collect-in-store: The LSP need to support multichannel distribution concepts. This means that a retailer should be able to use its network of physical store as delivery spots as a complement to the traditional pick up locations. Thus there will be opportunities for the retailer to for example sell more but also to handle returns.

 

- Return handling: In order to help their clients to make it easy and comfortable for their customers to buy online he LSP need fast and cost effective procedures when it comes to handing returns. Still slow and complicated return routines are one of the major reasons for people to choose another competing online alternative or even skip online shopping.

 

Delivery on weekends: In a physical store it is has been obvious to people that one can buy and pick up their products not only at weekdays but also on weekends. To make the online alternative more attractive the LSP need to facilitate delivery on weekends.

 

- Same day delivery: This is another logistics issue that needs to be addressed in order to make the online alternatives more attractive compared to the physical store. Sometimes it´s urgent and the customer need their products later the same day. Thus local same day delivery has to be an option for the clients of a LSP in the future.

 

 

About Tobias Jonasson


 

Tobias Jonasson


Group Sales and Marketing

Director at Logent AB

 

LinkedIn Profile