The Show Must Go On
Supplier relationship managers have a thing or two to envy from Bob – The Employee. This story unfolded a few weeks ago about an employee identified only as Bob, who had outsourced his own IT job to a firm in China. He reportedly spent his work hours watching cat videos or browsing Reddit and eBay while his Chinese counterpart churned the code behind the screens.
To top it all, Bob received exceptional ratings from his managers for his outstanding performance until the scam was unearthed during an IT security audit. You’ve got to hand it to him for balancing his outsourcing act with his supplier over the years. But elsewhere, in the Pearl River delta – the hotbed of outsourced manufacturing in China, things are changing at a rate that’s leaving everyone worried.
A recent article in the Wall Street Journal summarizes how the manufacturing-driven Chinese economy is losing its edge as the world’s factory floor due to a multitude of reasons. Continually increasing labor costs is seen as the primary culprit by many. The metamorphism of the Chinese manufacturing industry is a continental drift that stands to upend the buyer – supplier dynamics in the foreseeable future.
As an economy that accounts for close to 20% of the world’s manufacturing output, such trends carry heavy implications. From the demand side point of view, it means going on a war footing to keep input costs on an even keel. The writing is on the wall for many enterprises that have traditionally maintained their manufacturing base in China. Faced with shrinking margins, many such enterprises are now scouting for supply bases in new and emerging geographies.
The larger question that this situation poses is – How can supply chains be more nimble to respond to the shifting market place dynamics? And it is answered in large part by enabling collaborative commerce between buyers and suppliers. It is in this context that the business network has been playing an increasingly critical role.
In the networked economy era, the business network has enabled buyers and suppliers to connect with each other while helping them navigate the changing business landscape. And as a result such enterprises today are buying smarter, selling faster and managing cash better. A classic example of this phenomenon at work is Plaid Enterprises.
Plaid Enterprises is a medium-sized manufacturing firm that specializes in do-it-yourself products. Like many enterprises with operations in the Chinese manufacturing belt, Plaid too felt the squeeze of rising labor costs impact its business adversely. They relied on the power of the business network to discover and qualify new suppliers and were in for a surprise. Within a matter of days, folks at Plaid were talking to a range of suppliers – from suppliers in the low-cost manufacturing regions in Asia to others as close as a mile away from their office.
Readily available intelligence inputs in the business network on supplier performance resulted in expedited qualification. Finding their perfect supplier match on the business network resulted in reduction of costs by 34% and lead times by 75%. Plaid Enterprises is not an isolated case. Thousands of organizations, buyers and suppliers alike, are tapping on to the power of the business network and are reaping the benefits.
While geo-political risks, natural disasters, or shifting economic landscapes will forever cast a shadow on the supply chain apple cart, the enterprises that emerge successful are the ones that can keep pace with the change and embrace it for good. Because at the end of it all, the show must go on.