Supply chain executives can add another item to their list of things to worry about in the next few years: Recruiting qualified talent. In spite of near-record levels of unemployment in the US and other industrialized nations, finding the right people for the right job will be a growing problem, according to market researchers.
China, of course, is a leading player in this dynamic. China's low-cost labor has lured manufacturing jobs -- and by extension, supply chain jobs -- overseas, leaving many US tech workers unemployed. Yet, academics and trade associations insist US tech companies have a hard time finding workers (See: Is America Losing the Battle for Tech Talent?.) What gives?
TV news magazine 60 Minutes recently did an enlightening segment on this topic. US manufacturing companies, including well-known names such as Alcoa, are indeed having problems finding workers. In a nutshell, the skills of unemployed US workers don't match employers' needs.
Competition has forced many US manufacturers to turn to automation for their manufacturing lines, and this automation isn't turnkey. Among the qualifications to run this equipment: trigonometry. Manufacturers aren't looking for EEs; they're looking for mechanical engineers. The labor pool is chock full of over-qualified workers or entry level employees who need to be trained.
Many of the manufacturers still operating in the US are small, niche businesses that produce high-quality precision parts for mission-critical systems. Faced with a dearth of skilled talent, these companies are training their entry-level employees. The average commitment per employee, according to 60 Minutes, is about 18 months, at a cost of $60,000. (For the record, $60K is about what an experienced manufacturing employee can expect to make in a year.)
The report went on to talk about employer responsibility vs. the public education system when it comes to this skills gap. That's a discussion that won't be resolved in a single, or even a series of, blog posts. Supply chain executives have to manage for the present as well as the future.
So what are smart companies doing? Managing risk.
It's interesting to note that supply chain companies are tackling this problem from the risk management perspective. The question posed to supply chain executives in a recent SCM World survey (paraphrased) was: "What's your level of concern that an employee you train will jump ship for a better job?" Not surprisingly, that concern is much higher in China. According to "The Chief Supply Chain Officers Report 2012":
The dynamic of the market for talent in China appears to be heavily influenced by poaching. Our data does not so much point to a limited talent pool (ranked joint third overall as a concern) as to a talent pool made up of people willing to be lured away from rivals for more money. As we'll see, this may translate into substantial risk for businesses which suffer high short-term costs of transition. In other words, betting on building a great, long-term supply chain team in China may not be so smart.
In sales-driven organizations, such as electronics distribution, poaching is a common occurrence. During the channel's heyday of merger and acquisition, several high-profile lawsuits were launched when a competitor recruited employees from an acquired operation.
Given the current level of consolidation -- market leaders Arrow Electronics Inc. (NYSE: ARW) and Avnet Inc. (NYSE: AVT) have acquired most of their biggest competitors in North America -- there are fewer secrets left in electronics distribution to protect. Instead, the concern has moved to a global stage, where the strategies, knowledge, and relationships developed in the channel are at risk because of differing attitudes on intellectual property.
Distribution companies have proceeded with caution in regard to China. Avnet's first foray into the region was through an arm's length partnership with a Chinese trading organization. Avnet has since acquired several distributors in China, and is one of the largest resellers in the region.
Leading competitor Arrow has made acquisitions in China as well. Both companies have held on to the "think global, act local" philosophy in regard to Asia. Rather than impose the Americas distribution model on their Asian partners, both companies use a best-practices model that leverages global assets (warehousing, inventory) where it makes sense, but maintains local practices (sales and support) as well. The CSCO study indicates that it's a sound approach to talent management in the supply chain:
As we saw earlier in this section, supply chain leaders consider the issue of relocating talent internationally, to countries such as China or Mexico, to be a relatively low-level concern. Anecdotal evidence, for instance from PC maker Lenovo, suggests that global leadership of a supply chain organisation can be assembled from all over the world, even on a Chinese foundation. China may be essential to most global supply chain strategic designs, but it need not, and probably should not, be strictly Chinese.
For the supply chain, at least, it appears that employee training is a safe investment.