An important news item coming from our attendance at this week’s 2013 Smarter Commerce Summit, was the release of IBM”s first Chief Procurement Officer (CPO) study. Readers familiar with IBM will note that the IBM Institute of Business Value has conducted ongoing high-profile surveys of various C-Suite executives which include the CEO, CFO and CMO. Readers can download this study at this web link.

This new CPO study surveyed over 1100 executives in 22 countries, thus it has important global scope. The primary headline from the survey findings is that companies defined as top-performing procurement organizations reported 13 percent higher profit and 22 percent higher product margins than lower performing organizations.

That conclusion should not be a surprise to other functional supply chain or product management teams.  CPO’s are well noted for their relentless focus and organizational zeal on corporate spend savings.

What Supply Chain Matters found of interest are the findings related to internal collaboration and leveraged use of analytics.  According to the IBM CPO study findings, the majority, over 80 percent of high-performing companies report that collaboration among internal departments such as IT, marketing, sales, and presumably product management and supply chain, is a reported key strength and an investment priority. Again, not a complete surprise since other studies related to top-performing supply chains continually point to high rates of internal and external focused collaboration.

However, in our travels, procurement teams do not on the whole tend to gain high marks concerning internal collaboration. Too often, leaning on executive mandates for cost savings tends to rule the conversation and indeed the opportunity for team synergies. This study points to the fact that greater gains are garnered by two-way collaboration.  Readers are invited to weigh-in on your own observations, but there is an obvious sign posts for CPO’s.

Another important finding in this survey noted that 73 percent of top performing procurement organizations are effective in gathering insights from the supplier base, compared with 16 percent for lower performing counterparts. Effective mining of information and supply insights are the obvious tools being unleashed by these top performing teams.

Other separate studies that we have reviewed and discussed with clients reinforce that procurement leaders remained concerned about gaining broader leadership skills, and at the same time, perceive skill gaps within their organizations regarding the comprehension and leveraged use of todays more sophisticated analytical and decision support skills.

Thus, survey data is reinforcing similar insights.  Procurement teams benefit more from enhanced internal communication, collaboration and cross-functional leadership.  They must also address the need to further skill their team members in awareness of the power of analytics and the mining of supplier and product insights.

Bob Ferrari

The following Supply Chain Matters guest posting comes from Bronwen Hann, the president of Argentus Talent Acquisition, a specialist recruitment firm based in Toronto, Canada that finds Supply Chain Jobs for superstar candidates. (Twitter: @ArgentusTalent)

As a boutique recruiter who has specialized in supply chain management recruitment for more than 12 years, my firm is on the front line of the skills shortage that Supply Chain Matters continues to identify in its ongoing commentaries. We’re seeing an across-the-board shortage in qualified candidates for the many positions that organizations are looking to fill. There’s still a perception that supply chain management is a blue-collar transactional function within a company. In fact, supply chain management has rightfully achieved a seat at the board room table. This disparity between perception and reality makes it so that candidates with the right mix of technical, analytical, strategic, and presentations skills are in extremely high demand.

As the baby boomer generation retires over the next 7-10 years, this demand will only increase. On the other end, young people are simply not aware that supply chain management is an excellent career with huge growth potential. Every single company that brings a product to market has a supply chain, and yet high schools and universities aren’t doing enough to market the field to young people. The field has become so advanced that there’s a much higher educational and technological requirement that employers seek. These factors combine to make it so that young people aren’t graduating with the degrees and skills that employers are looking for. At the same time, many people who are already in the field often don’t have the formal education in supply chain that companies want to see when filling more strategic roles.

Here’s an example of a type of role that’s really hard for us to fill right now: a Supply Chain Analyst. Companies want people with 3-5 years of experience, with a blend of analytic, strategic, and presentation skills. They seek people who can do analytics, but also interface with stakeholders in a meaningful way. We’re seeing many candidates who have great technical skills, but less strong interpersonal and communications skills. Companies want high performers who have the potential to move into strategic sourcing roles, and these “soft skills” are what sets those candidates apart. In our recruitment practice, they’re also hard to find.

There are a few things candidates can do to market themselves and add appeal to employers. One would be to focus on continuing education by earning professional designations in different functions within the supply chain. In addition, they should spend time honing their “soft skills:” networking, writing, communication, presentation. These assets show potential employers that you’re both well-rounded and eager to advance your career.

Note: Supply Chain Matters extends an invitation to other global based recruitment professionals who cater to recruitment of supply chain management talent to submit other guest commentaries that reflect on filling required skill gaps from employers.  Send an email to: info <at sign>supply-chain-matters <dot> com with your ideas.

Last night President Barack Obama presented his 2013 State of the Union Address to the U.S. Congress which this author had the opportunity to view on television.  Overall it was a very uplifting speech which I enjoyed watching, but more importantly, it demonstrated vision and leadership.

The speech itself prescribed clear goals for the U.S. economy and addressed the various policy components related to insuring continued momentum in world class manufacturing and supply chain capabilities.  In this author’s view, the address provided a lesson in executive leadership in the midst of dysfunctional behavior and outright nastiness. There is no question that the President is an extraordinary communicator who can provide simple yet powerful messages that resonate for many. I especially enjoyed his articulation of a mission for U.S. economic direction:

“A growing economy that creates good, middle-class jobs, that must be the North Star that guides our efforts. Every day, we should ask ourselves three questions as a nation: How do we attract more jobs to our shores? How do we equip our people with the skills they need to get those jobs? And how do we make sure the hard work leads to a decent living?”

That is a powerful way to articulate mission and direction.  Further, he addressed a number of initiative areas to enable this direction, many of which have direct relationship with supply chain capability.  Perhaps we in the U.S. have finally learned that we cannot subsist as a pure service-centered economy.  We have to make stuff and add value. The President noted that the first priority is to make America a magnet for manufacturing, and to make policies to accelerate these trends.  He announced the launch of three additional manufacturing innovation centers where businesses could partner with government and academia to turn regions into centers of high tech manufacturing capability. The President also called for a broader effort to support 15 of these innovation hubs across the country.

Manufacturing must support innovative products that customers want to buy. The President cited increased investment in strategic research and development, not seen since the space race, to foster product innovation.  Without R&D, America would not have new products and vibrant industries. A proof point offered- every dollar invested to map the human genome returned $140 to the economy.

In our 2013 Predictions for Global Supply Chains (available for no-cost download in our Research Center) we cite the need to address and resolve the ongoing shortage of talented manufacturing and supply chain skills. The President outlined a challenge to redesign America’s high schools to better equip graduates for high tech economy skills. He cited the model of Germany’s technical high schools, where industry and academia partner to train students in specific skills required in a manufacturing and high tech economy.

We have penned numerous commentaries citing the need for more modern infrastructure. The President called for quick repair of aging infrastructure, including roads, bridges, ports and waterways.  He cited 70,000 structurally deficient bridges across the country.  To avoid taxpayers shouldering the total burden of modern infrastructure needs, the President is proposing a Partnership to Rebuild America program to attract private capital to invest in modern ports, pipelines and facilities.

In the area of supply chain risk, the President acknowledged 12 of the hottest years on record in the last 15, leading to droughts, severe floods and more intense storms, including superstorm Sandy. He urged Congress to pursue a bipartisan, market based solution to climate change while threatening executive actions to move toward a more sustainable nation. Cyber security was also brought up a continued threat including stealing of corporate secrets and attacks on vital services that underpin the economy. There are no innovative products if competitors steal your IP. There is no functioning supply chain if systems are disrupted or taken out of service. The President called on the Congress to pass legislation to provide the government a greater capability to secure networks and deter cyber attacks.

In many of our past commentaries related to manufacturing and supply chain policy, Supply Chain Matters has often taken U.S. legislators to task for not sensing the urgency of what is required for world class supply chains, and for lacking a long-term strategic framework to support industry.  After viewing the President’s State of the Union address, we have little doubt that “he gets it”.  Today, the President visited the Linamar Manufacturing facility in Asheville North Carolina.  The visual is one of the President of the United States speaking from the shop floor, and relating how he gets the notion that manufacturing and supporting supply chains do matter. The success of American business is dependent on the skills of its workforce and robustness of its supply chains.

The question remains as to whether the Congress “gets it” and will do its part.

Bob Ferrari

Supply Chain Matters has been echoing other thought leadership voices across the manufacturing and supply chain spectrum addressing the continuing shortage and/or retention of skilled workers. In our 2013 Predictions for Global Supply Chains, we again noted these challenges as inhibiting the current renaissance of U.S. Manufacturing, and in Prediction Four, specifically addressed supply chain talent development and retention as a continuing challenge. These challenges are global in perspective, particularly involving China, the prime focal point for global manufacturing and distribution.

Thus it was with peak interest that we came across a New York Times article, syndicated on CNBC.com this weekend that reported that Chinese college graduates continue to frown on assuming any factory floor job opportunities.  It reports that thousands of Chinese factories struggle to find workers who can operate complicated production equipment, much less maintain or repair such equipment.  Students aspire to pursue academic courses of study leading to professional occupations, while vocational training has stagnated.

The problem is not uncommon, particularly for a developing nation.  Students aspire to become part of the elite working class by pursuing a college education.  They view the hard, perhaps factory or farm related work of their parents in negative connotations.  Parents themselves aspire that their children will be better off economically, and often sacrifice to have their children attend a college or university.  It is a common problem, seen and experienced in many countries that have developed and matured an economy.

The critical aspect for China is that it has positioned itself as the global hub of manufacturing. We noted in a recent posting how China’s leaders now want to shift the focus of manufacturing toward higher value, higher margin strategic industries that can compete both within China and the global economy. The implication of course, translates to a more skilled workforce, not only on the manufacturing shop floor but across the multi-functional aspects of supply chain management.

How do we, as a community solve these problems of attracting required talent to pursue manufacturing and supply chain careers?

The answer lies in many dimensions.  It begins with industry, which must stop whining about skill shortages and initiate program, community and academic partnerships to recruit and effectively train people in required skills or occupations.  The stigma of manufacturing work is best addressed by placing more value to the workers that perform such tasks.  That includes competitive wages, a more attractive working environment and an organizational climate that values worker input, initiative and career progression.  For China specifically, it implies moving beyond some current “militaristic” supervisory and working environments where workers are scorned. The stigma of labor social responsibility is one that must be addressed in a more positive fashion.  Apple alone disclosed last week that it will institute stepped-up audits of working conditions among Chinese suppliers after it continues to find multiple cases of use of underage workers, discrimination and wage problems. The company is also encouraging its suppliers to institute student intern programs. Samsung had previously announced stepped-up audits of suppliers based on recent findings.

Multi-functional supply chain skill shortages are addressed by industry-academic partnerships that foster world class supply chain management curriculums at universities, along with opportunities for internships and on-the-job training.  Universities such as Michigan State University and Massachusetts Institute of Technology (MIT) have instituted partnership programs with other universities in developing regions to train students in modern logistics and supply chain skill areas, and more should be encouraged.

As a community, we need to continue to spread the word on the value of manufacturing and supply chain related careers, to counter current stigmas among younger students.  This is the future of our discipline.

Readers are encouraged to share their views on this topic in the Comments section below this posting.

Bob Ferrari

Once a year, just before the start of the New Year, the Ferrari Consulting and Research Group and the Supply Chain Matters Blog provide a series of predictions for the coming year. We have maintained this tradition since the founding of the blog in 2008.

Readers can view the entire listing by clicking on this web link: 2013 Predictions for Global Supply Chains.

In our Part One posting, we explored our first two predictions for 2013, the overall economic and business challenges, and our prediction of inbound commodity prices.  In this commentary, we move to our Predictions #3 and #4.

Prediction #3: The renaissance of U.S. based manufacturing will continue in 2013, but further momentum is dependent on addressing key challenges in legislative and industry barriers and the new transformation of manufacturing.

In our Supply Chain Matters weekly and Newsletter quarterly commentaries, we have acknowledged conditions that have spurred the ongoing increased attractiveness for firms to invest in U.S. based manufacturing.  The latest and most high profile announcement came from number one ranked global supply chain Apple, which announced in December, a $100 million effort to transfer a line of its Mac computer production to the U.S.. Apple’s announcement, although motivated by image considerations, is another watershed announcement.

A boom in North American natural gas production, coupled with economic factors related to exploding double-digit growth rates for direct labor in China and other low-cost manufacturing areas, along with perceived instability of currencies such as the Euro and the Japanese yen, have fueled the current U.S. based manufacturing renaissance.  During 2012, global manufacturers such as EADS-Airbus, Honda, Lenovo, Toyota and others reinforced the momentum. The Financial Times notes that manufacturers have announced more than $90 billion of investments in the U.S. as a result of the attractiveness of energy costs.  This trend was especially prevalent in asset-intensive manufacturing, and included petrochemical, fertilizer, steel and heavy equipment industry.  Since the start of 2010, U.S. industrial production has increased 12 percent in the U.S., while falling 2 percent in China.

In 2013 however, U.S. legislators, private industry and trade union partnerships must address remaining identified structural issues to insure this renaissance continues. The U.S. Presidential Commission on Manufacturing Competitiveness, various private industry groups and academia have called for efforts to apply existing regulations more intelligently, streamline bureaucracy in obtaining approvals to build facilities while addressing a multi-year program to improve overall transportation infrastructure. Similarly, there are identified needs to address a shortage of a more skilled manufacturing focused workforce that is adequately prepared to assume today’s more technological advanced manufacturing processes.  Manufacturers continue to lament that they cannot fill existing needs for skilled manufacturing people in the U.S.. These efforts require more active and more committed partnerships in 2013 that provide more opportunities for concentrated curriculum and training.

Similarly, a new era of manufacturing transformation is underway.  Increased private/public partnership programs addressing the next wave of required productivity, harnessing more custom, additive manufacturing and more advanced automation techniques will be fundamental in 2013 to continue U.S. based manufacturing momentum.  Even in the high tech sector, where many have written off any viable U.S. manufacturing presence, Apple’s challenge represents an opportunity to re-establish some forms of a core presence for certain innovative products.

A globally competitive manufacturing presence implies continuous innovation in process and products as well as the existence of an associated vibrant domestic supply chain.  For many industry supply chains, that will continue to unfold across the U.S. in 2013.

Prediction #4: For manufacturers and retailers, supply chain talent retention, management and development will remain a significant problem across global supply chains, with special emphasis in China and Asia.

Throughout 2012, industry forums, executive roundtables, general media and industry analyst research all identified supply chain talent retention, management and development as a significant challenge that needed more attention and concerted efforts in the coming year.  The talent skill gaps are clearly impacting global supply chains. In spite of high unemployment levels across the globe, finding the right people with honed skills has become a recognized problem, which leads to a supply problem. The challenge is articulated for needs in managing the broader supply chain as well operations at the shop floor. If the global economy were to grow more dramatically, the problem would be even more acute.

At executive leadership levels of supply chain, the gaps are identified in the need for broader leadership skills in the areas of supply chain strategy, change management, regulatory compliance and implications and tradeoffs of decision-making.  The current rapid clock speed of business coupled with the numerous challenges that supply chain teams must address each day, or each week, now require skills that extend beyond singular functional knowledge or depth. These talent skill needs are especially identified as lacking in developing markets or high volume manufacturing regions such as China and Southeast Asia.  Those professionals, who have acquired necessary skills, find themselves in high demand and jump to other organizations, causing additional frustrations with the organization that made the investment in training.

As was noted in Prediction #1, the talent shortage extends to the manufacturing floor where needed positions in the U.S. remain unfilled because of a declared lack of qualified people. Manufacturers, especially small and mid-market firms, have turned to higher levels of automation and process sophistication to meet higher customer expectations and needs for increased productivity.  The impact has been on the need for more math and process-focused skills among operators.  Some equate skills to those of entry level mechanical engineers.

The problem has many facets, and in 2013, much work remains. Primary and High School students lack awareness of supply chain as a career path.  Some colleges and universities with concentrated educational programs in areas of supply chain management remain grounded in academic fiefdoms of either operations or business management, not building broader curriculums. Industry has perhaps unrealistic expectations that the numbers of experienced skilled talent required can be acquired without the need for on –the-job mentoring.  Training programs are expensive, and when employees decide to jump to another firm, employers feel the effects of a lost investment. Senior leadership shows signs of understanding that more must be done in providing professionals attractive career progression plans supported by on the job training experiences across different geographic regions and varied supply chain roles. State governments have been showering many forms of economic incentives, amounting to millions of dollars, on manufacturers in order to attract these firms to their regions. These incentives now need to address worker re-training and skills development.

With global economic uncertainty continuing, 2013 may be the ideal year for supply chain organizations, academia and industry groups to step up the game in concerted and coordinated efforts in the identification of critical required skills in the coming years, as well as active programs to identify and train people in these skills. For our part, Supply Chain Matters will provide updates and expand visibility to successful programs throughout 2013.

This concludes Part Two of our 2013 Predictions for Global Supply Chains. As always, readers are encouraged to comment on these predictions as well as add additional thoughts as to what to expect in 2013.

Bob Ferrari

© 2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.  All rights reserved.

Supply Chain Matters Attendance at Oracle Open World- Commentary Four

Supply Chain Matters continues with our observations from this year’s Oracle Open World being held in San Francisco. Readers can view previous commentaries by clicking on the below links;

Commentary One

Commentary Two

Commentary Three

As I observe, speak with and listen to supply chain and B2B fulfillment professionals, one clear, consistent message that has resonated of late is the stated and well identified shortage of the key skills required to manage the complex aspects and information-aware decisions required to manage globally extended supply chains.

This week, as we navigated the vast array of Open World sessions that articulated the current and not too distant awesome power of analysis and decision-support tools that emerging technology will deliver, one really gets a sense to the profound implications of these tools.  Make no mistake; these capabilities go far beyond the notions of what was once an MRP, MPS or forecasting view of the supply chain.

In his second keynote, Oracle CEO Larry Ellison conducted his own self-directed demo of analyzing over 5 billion records associated with 27 billion relationships to support a hypothetical decision as to who could be the most influential spokesperson for the Lexus automobile brand.  Think of that, one of the world’s most wealthy executive, surrounded by handlers, took the time to understand and effectively demonstrate the power of the technology that his company advocates.

While readers can logically argue that such a scenario is a bit extreme to today’s every day supply chain decisions, the point is that the implications of this technology are profound to the skills required in the intelligence-driven supply chain.  In an interview with a high level decision support manager for a major corporation, we talked about the current reality of how some individuals readily embrace these newer and more powerful analysis tools while others may resist.  That is not to take away from the inherent skills required in leadership, team building and managing multi-cultural work teams.  It does imply however that advanced analytic tools, leveraged by experienced people, can provide pretty powerful implications for evaluation of all likely alternatives and making the best informed decision.

Each time I attend these technology conferences, I come away with yet another reinforcement of the profound implications on how businesses and their associated supply chains will be managed in the not too distant future.

We depart Oracle Open World tomorrow.  After assimilating our extensive notes and thoughts, our final commentary will outline our summary impressions from this year’s conference.

Bob Ferrari