There is no question that talent management and a shortage of critical needed skills is a fundamental challenge for manufacturing, supply chain, product management and procurement disciplines. Industry environments are changing constantly and change brings new and different needs. This challenge is consistently identified or amplified in industry forums, industry analyst quantitative surveys or roundtables.
However, by our view, what seems to be missing from the ongoing dialogue is some straight talk regarding how to best address this challenge, especially in the light of an economy that has ample numbers of people seeking challenging and rewarding careers.
Reading the Wall Street Journal this morning, this author read the article: Just Whose Job Is It to Train Workers? (Paid subscription required or free metered view) By far, it was one of the more insightful articles that traditional business media has produced thus far concerning some root causes of current worker shortages. This is the takeaway quote within the article: “Companies complain that they can’t find skilled hires, but they aren’t doing much to impart those skills, economists and workforce experts say.” That is straight talk.
The article cites sources that indicate that today’s hiring processes take the form of a transaction matching exercise where employers expect highly skilled people to walk through the door. They are unwilling to evaluate candidates based on skill potential or invest in on-the-job training efforts. Instead, there is a high reliance on colleges and universities, trade schools and government programs to be able to train people for desired skills. To add further credence, the WSJ cites studies including one from MIT labor economist Paul Osterman which concluded that manufacturer’s spending on training has essentially been flat for the last five years. A Deloitte research study is further cited as indicating that from 2006 to 2013, the percentage of staffers dedicated to training and development has fallen by about a half.
While Supply Chain Matters acknowledges that there are leading-edge organizations that are willing to truly invest in development of people for unique skill requirements, they are being outnumbered by those that are not so inclined. The WSJ profiles dental instruments provider Hu-Friedly which is investing in skills development. Small and mid-sized firms may not necessarily have the complete financial resources to develop people but that is where industry and government subsidized training programs can pay benefits. In April, Supply Chain Matters highlighted summary conclusions from the landmark MIT Study on Manufacturing Competitiveness that also concluded that skill shortages have more to do with training and development.
The prevailing attitude seems to be that of inventory fulfillment- there are lots of people seeking employment and we should be able to snag someone. That is not a formula for building and sustaining world-class supply chain teams. Global competitiveness not only hinges on product and service innovation, but on the collective skills and problem-solving abilities of the workforce.
The purpose of this rant is to motivate more straight talk concerning skills development. Invest in the potential of people able to perform required responsibilities. Evaluate candidates on both hard and soft skills, stop filtering on age or other criteria, and compensate people for the skills that they demonstrate as opposed to managing a cost center expense.
The time is way overdue for straight talk on skills shortages and the notion of investing in talent. Let us all commit to stop looking at hiring statistics and more to meaningful talent development planning.
Our prior Supply Chain Matters commentary noted today’s stunning development regarding the suspension of the P3 Network among the top three global ocean container shipping lines. Procurement, logistics and transportation teams have to now place serious weight to the implications and potential scenarios of a shipping industry running out of capacity rationalization options and ripe for more consolidation. Any additional shipping industry moves can well impact shipping assumptions related to tariffs, service levels and routes.
An additional short-term concern relates to a more near-term threat, that of a labor disruption involving 29 U.S. west coast ports over the coming weeks. Negotiations concerning nearly 20,000 dockworkers located among various West Coast ports are approaching expiration of current contract in less than two weeks and the latest reports indicate little progress being made.
While many industry observers are not expecting a prolonged disruption in port activity, these events usually reflect hard ball positioning that usually brings the parties to the brink of contract expiration and beyond. In the past, U.S. regulatory authorities have been quick to exercise a cooling-off period, when the economic conditions warrant such actions, as is the current case.
The implication is that industry supply chains with a strong reliance on west coast ports will face a July or August period of high uncertainty as additional labor actions or potential work slowdowns continue to occur. As industry teams are fully aware, this same period represents the initial surge of container shipment movements from China and other Asian posts destined for U.S. west coast ports to fill the logistics and inventory pipeline for the upcoming seasonal U.S. holiday period occurring towards the end of the year. Transportation industry players are well aware of the implications and rest assured contingency planning is already underway.
Disruptions or slowdowns will equate to more pipeline and safety stock inventories which will all have to be adjusted and rationalized in the coming months.
While U.S. consumers are looking forward to upcoming summer vacations, picnics and celebrations, be mindful that logisticians, procurement and supply chain planning teams will be hard at work in responding to a host of challenges in global transportation movements, both short, and longer-term in scope.
Supply Chain Matters had the opportunity to attend the Gartner Supply Chain Executive conference held in mid-May. As an AMR Research alumni analyst who specialized in research coverage of supply chain software and network technology, I am fully aware that the roots of this particular conference are deep, extending to the late nineties. The conference featured many well-known and respected research analysts and its reputation was often that of “must attend” among any who either practiced supply chain leadership or provided technology and services to the supply chain community. While we have admittedly not attended this conference for the past several years, we decided at the last minute to attend this year’s conference. Overall, the conference provided some highlights and disappointments. We walked away with impression that the conference is not what is used to be in terms of research depth, insights, and analyst personalities, although it still draws a very influential audience.
The opening keynote was a highlight since it reflected on a look back of supply chain management for the prior ten years, and Gartner’s perspective of supply chain requirements and needs for the next ten years. Acknowledged was that the span of control among industry supply chains are indeed wider and that 40 percent of senior supply chain leaders now report to their respective CEO. As we at Supply Chain Matters can certainly attest, Gartner further noted that articles about supply chains have tripled in the Wall Street Journal. That is somewhat of good news, and not so good news aspect since what happens in the supply chain more directly affects business results and overall performance. Further noted was that the adoption of cloud-based technology within industry supply chain IT environments has increased 40 percent, which is a rather significant development when one considers that supply chain systems are often viewed as mission critical in nature and scope.
Reflecting on the next decade for supply chain management, Gartner’s viewpoint is that industry supply chains will continue to lead in the next decade. However, spaghetti-like networks with silos of conflicting goals, not aligned to singular, over-arching goal remain as an obstacle that needs to be overcome. According to Gartner, too many people are bogged down in trivial tasks. Analysts pointed to talent management as a continuing challenge and top priority for the next three years. Further noted was that universities are not keeping up with changing skill needs. We are not completely convinced about that conclusion, but colleges and universities that specialize in supply chain management need to do a better job at overcoming cross-curriculum barriers to insure that students are prepared with broader exposures to other required skills. For technology adoption needs, Gartner cited social, mobile, cloud, advanced information analytics and the Internet of everything as the only feasible way to manage supply chains more profitably.
Tom Peters, noted author of the iconic book, In Search of Excellence provided the second day keynote, and candidly, could have well been the opening keynote because of Tom’s unique, direct communication style. He opened with the statement that “there is no more sexier profession than that of supply chain management.” He pointed to the management conundrum of “damned if you do, damned if you don’t” as especially pertinent to supply chain professionals and made reference to the “huge, huge, huge issue of supply chain network vulnerability.” Peter’s viewpoint was that supply chains are the focal point of all operations and should be more responsible for sales and marketing goal fulfillment as opposed to reducing costs. His belief is that a supply chain must have formal research and development or center of excellence group, or go home. One quote that especially caught this author’s attention related to the critical importance of managing supply chain risk: “You (the supply chain), can destroy an 80-year-old brand in a matter of a week.” Dwell on that statement the next time Finance questions the overall supply chain budget. Peter’s final words of wisdom were to de-emphasize items, trucks and planes and concentrate on big “S”, services.
Two other sessions we found to be insightful were one titled: The New Realities of Digital Manufacturing delivered by analysts Simon Jacobson and Mike Burkett, and the session: Key Findings from Gartner’s Chief Supply Chain Officer (CSCO) study also delivered by research vice-president Mike Burkett. Both sessions stressed the needs for industry supply chains to think more about product management and its integration to the new era of digital manufacturing technologies. Both the digital and physical worlds of supply chain processes are indeed on the verge of coming together. Among the key highlights of Gartner’s latest CSCO study was data reflecting that new product introduction and sustainability capabilities have been the most often added in the last three years by either direct or dotted-line reporting responsibility. According to the Gartner CSCO study, the top priorities for supply chain centers of excellence are:
- Standardize and improve processes
- Performance management and analytics
- Supply chain strategy
- Supply chain technology enablement
Yet, talent and change management appears to be lower in priority and Gartner raised the concern of why so low, since both of these competencies are required for the above to succeed.
Another rather important takeaway from Gartner’s latest CSCO study was the survey reflecting expected levels of investment and expected benefits over the next two years. Without taking thunder away from Gartner, the important takeaway for us was that product launch and portfolio management along with supplier collaboration and flexibility are highlighted as emerging medium and top priorities for investment in the next two years. That correlates with what we have been hearing and picking-up with our conversations with clients and readers.
In our Part Two posting, we will provide additional comments of some other highlights of the recent Gartner supply chain conference including the annual Top 25 Supply Chains announcements, along with some interesting and noteworthy presence among supply chain technology providers.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Supply Chain Matters has featured a variety of prior commentaries concerning the current resurgence in U.S. manufacturing. Recently, Al Powell, Vice President of Sales at Serus Corporation called our attention to a WiredYouTube video that features an inside look at Tesla Motors manufacturing facility in Fremont California.
This three minute video takes the viewer inside the predominantly vertically integrated factory that literally transforms coils of sheet metal to fabricated car bodies through automated processes. Tesla’s Model S electrically powered automobile is produced in 3-5 days, starting with rolled sheet-metal to rolling off the assembly line. Included is a look at the totally automated paint and body shop along with the general vehicle assembly line that supports an inside-out process. Notice that some of the advanced robots are able to change their own tools and perform different assorted assembly tasks.
We were fascinated by watching this video. It provides a look at how innovative advanced manufacturing techniques can provide a competitive edge for U.S. based manufacturing. We can just imagine how the proposed Tesla gigafactory will look like.
Readers can view the video by clicking on this web link.
According to the 2014 Semiannual Economic Forecast issued by the Institute for Supply Management (ISM), purchasing and supply management executives across the United States remain optimistic concerning the growth of revenues for their firms.
Manufacturers are planning for an average 5.3 percent growth in revenues in 2014, up from a forecasted 4.4 percent at the end of last year. Estimates for spending on new equipment and plants presents an even more optimistic perspective, with an indication of a 10.3 percent increase, compared to a forecasted 8 percent increase in December 2014. However, the outlook for employment was little changed from December’s forecast, projecting a 1.5 percent increase.
From our lens, these forecasts are a stronger indicator that new equipment spending is being directed squarely at automation and increased productivity. They further reflect the prediction that the current momentum in U.S. manufacturing continues across many industry supply chains.
Last week, Germany’s BASF SE announced what was described as the single largest plant investment in its history. The global chemicals provider indicates that it was considering investing upwards of $1.4 billion to build a gas complex somewhere in the Gulf Coast region of the United States that will convert low-cost natural shale gas into propylene. According to report published by the Wall Street Journal, BASF estimates that it could save upwards of $500 million per year in energy costs if this new chemical plant is located in the U.S..
U.S. based retailer Target Corp. announced today that after extensive discussions, it is replacing its Chief Executive Officer effective immediately.
Gregg Steinhafel, a 35 year veteran of the retail firm is stepping down immediately, leaving a temporary void in executive leadership. Chief Financial Officer John Mulligan was appointed as interim CEO while Roxanne Austin, a current board member will take over Mr. Steinhafel’s chairmen role as the company recruits for a new CEO. Mr. Steinhafel will reportedly stay on in an advisory role while a successor is recruited.
The announcement comes in the wake of the massive credit card data security breach that impacted the personal information concerning upwards of 70 million consumers at the peak of the 2013 holiday buying surge. In early March, Target sacked its Chief Information Officer (CIO) who has now been replaced with the appointment of Bob DeRodes, a former IT advisor to the U.S. federal government’s Homeland Security, Department of Justice and Department of Defense agencies.
Included in the appointment of the new CIO was announced plans to incorporate MasterCard chip-and-PIN technology within the retailer’s sponsored credit cards. The retailer was in active search for a chief information security officer and a separate chief compliance officer. The new CIO announcement laid out a series of new information safeguards including decommissioning vendor access to servers, coordinated reset of over 400,000 employees and contractor passwords and broadened login authentication measures that will impact suppliers and vendors.
Supply Chain Matters previously called attention to our readers to a published Bloomberg Businessweek artcle: Missed Alarms and 40 Million Stolen Credit Card Numbers: How Target Blew It. The article outlines the set of events leading-up to the breach, and shortly after this breach. The article reported that while the data breach occurred around the November 30th timeframe, the data did not actually move out of Target’s network until two days later, instead being stored on an internal server. Once more, security systems alerted to a potential data breach. Reports indicate that Target has already incurred upwards of $60 million in expenses directly related to the retailer’s response to the credit card information breach.
The incident has apparently now taken the toll of the U.S. retailer’s top executive and provides another poignant reminder to the perils of today’s online fulfillment business strategies when processes and systems are not tuned to responsive safeguards or when management is not actively involved in threshold exceptions in round-the-clock business fulfillment operations.
Target’s new CEO will inherit action plans to not only address information security but to move the prominent U.S. retailer forward in combating the ongoing threat of online e-tailers such as Amazon, Wal-Mart and others. The open question is perhaps how long it will take to recruit and select this individual.