I have been careful to describe the Supply Chain Top 25 as being about “demonstrated leadership” rather than any absolute benchmarking of on-time-delivery or efficiency. As such, I’ve always pointed to visible leaders like Procter & Gamble, IBM, Samsung, and the like as deserving their rankings because of the new ideas and strategies they have brought to our discipline. And yet, China for all its massive growth in manufacturing and supply chain over the past ten years has gotten little love in this discussion. Our latest field study on supply chain organizations and budgets suggests folks like Lenovo, Foxconn, Haier, and their brethren need a closer look – at least they’re saying the right things.
Consider this question and the data we got in response:
Which of the following are your company’s top five supply chain priorities for the next 12 months?
Among 100 US supply chain executives asked 74% chose “reduce operational costs” among their top five and 29% chose it as #1. Both were high scores among all countries surveyed (U.S., U.K., China, Germany, Brazil, Australia, Japan). The 62 Chinese supply chain executives we surveyed chose “improve customer satisfaction” as their top priority overall. Plus, for things we consider advanced like “increase market share”, “reduce supply chain risk”, and “respond to diversified customer demand” Chinese execs came out tops in terms of prioritizing these issues. Whether everyone walks the talk is not perfectly clear, but the Chinese sure seem to know how to identify what we in the research world consider leadership.
Beyond these perception questions we collected harder data which also points to Chinese leadership in supply chain innovation. The top supply chain executive in Chinese companies reports to the CEO or president 87% of the time while in the U.S. this is true only 61% of the time. The median headcount for U.S. companies’ supply chain “center of excellence” is 11, whereas in China the COE median staff is 250. Plus, the duties of a COE in China are dramatically more likely to include such things as Technology Enablement, Transformation and Change Management, and Process and Innovation. It is a shame to see dedicated supply chain strategists clinging to the illusion that they can drive meaningful change from a COE with only a handful of people and no real organizational power. In a Chinese company it looks like you’d have a few hundred souls to deploy on projects and direct access to top management as you fight the good fight. In the U.S. you’re much more likely to be viewed a cost center and maybe even a frivolous luxury. Ouch.
I probably shouldn’t be surprised be these findings. Chinese manufacturing has cut its strategic teeth with such short lifecycle product categories as consumer electronics and apparel. Many have won business by competing with western companies’ internally owned production facilities meaning they need to show an edge not only in cost but competence. Microsoft’s Brian Tobey whose supply chain for Xbox and other consumer electronics product runs through China says he looks to suppliers first for engineering expertise, second for business savvy and only third, for lowest cost. Is it possible that top strategists like Tobey and his peers in Beaverton, Palo Alto, and Waterloo have taught their Chinese counterparts a thing or two about what supply chain needs to bring to the party? Sure looks that way.
As far as the Top 25 is concerned, it’s increasingly clear that demonstrated leadership, while still very much a feature of the best U.S. companies, is happening more pervasively in China than among the everyday folks back here in the States. Remember, if you see yourself as a cost center senior management will too. Not a much of a formula for job security, is it?
As we follow this field research with deeper more personal, one-on-one interviews I hope we’ll discover some new ideas and icons to look up to. If anyone is interested in spending 30 minutes with me digging into these questions, I’d welcome the opportunity.
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