Research digest

Spring 2010

Chinese suppliers

Sourcing in China can deliver savings of up to 50 per cent, a survey by consultancy Inverto has revealed. It also found 69 per cent of companies are actively sourcing in the region.

The findings, based on a survey of almost 100 European firms, revealed that 43 per cent were saving 11-25 per cent and nearly a third were making savings of 26-50 per cent.

But more than half – 57 per cent – of those surveyed were either only “somewhat satisfied” or “not satisfied” with local suppliers.

Some of the obstacles encountered included insufficient and/or inconsistent product quality, as well as extended supply chains that result in poor delivery reliability.

The most important factors for success in sourcing from China is to choose suppliers that have quality assurance systems in place, to have a local presence and regular communications with suppliers, and a structured order management system to help meet deadlines (see chart 1).

“The savings from sourcing in China are significant,” said Minrui Ji, head of Inverto’s global sourcing office in China. “However, sustained success is due to, first, finding the right Chinese supplier, and second, maintaining a high standard of operational supply management.”

www.inverto.com 

Procurement recruitment

Almost a third of companies plan to increase staffing levels in procurement over the coming year. The 2010 Supply Chain Management Survey by Resources Global Professionals shows that 32 per cent definitely plan on increasing staff, while 42 per cent said there were no changes planned.

Just under a fifth – 17 per cent – said they were definitely planning on reducing staff. The survey, of more than 200 chief procurement officers and supply chain management executives in global companies across industries such as energy, utilities, healthcare, retail and electronics, also probed what types of positions would be most affected.

Respondents answered that there was high interest in hiring category and strategic sourcing managers, there was a trend for employing more contracts management/administration staff and a need for additional business analysts, as well as managers and directors in critical spend areas.

By contrast, headcount reduction would be focused on non-critical staff functions, mainly junior staff, respondents said.

Raees Lakhani, UK client service director, said the skills shortages are at the strategic, senior managerial level. He added: “The data showing an increase in hiring staff is evidence that companies believe we are over the worst and they can start planning on a higher growth strategy again.”

To obtain a copy of the survey results, contact Raees Lakhani at raees.lakhani@resources-uk.com

www.resourcesglobal.com  

Almost a third of organisations are integrating sustainability goals into supply chain relationships as part of their efforts to embed it across the business, research from the Economist Intelligence Unit shows.

Its Managing for Sustainability report reveals that 29 per cent of the 200-plus senior executives surveyed use supply chain relationships to increase their companies’ focus on sustainability.

It was the fifth most common measure for integrating sustainability goals. Top of the list, cited by 54 per cent of respondents, was promoting strong statements from top management (see chart 3).

“Leading companies are looking beyond their own corporate walls to include sustainability criteria when evaluating their supply chains as well,” the report said.

However, it also warned that embedding sustainability in the enterprise and the supply chain is not straightforward. Internal obstacles included the fact that immediate financial goals were more urgent and a lack of consensus on the ultimate goals of a sustainability programme.

www.eiu.com

Business activities

Less than half of companies expect to cut their costs throughout 2010, according to the latest McKinsey Economic Conditions snapshot.

In the survey, which attracted 1,467 responses, 47 per cent said they would cut costs this year to manage successfully in the aftermath of the economic crisis.

Only increasing productivity (54 per cent) and introducing new products or services to take market share from weakened competitors (48 per cent) were more popular (see chart 4).

Executives were more hopeful about their company profits in the year to come than they had been a year ago. Almost three-quarters – 74 per cent – expected profits to be higher annually in 2010, compared with 46 per cent in 2009.

Asked to choose the most likely outlook for the economy, 46 per cent chose “constrained global markets perpetuate imbalances”. This outlook includes strength in emerging markets but a weak US consumer sector.

Emerging markets respondents were the most optimistic about profits, consumer demand and even staffing levels. Seventy-three per cent of respondents in these markets expected economic conditions to improve before the second half of the year, compared with 63 per cent in Asia-Pacific, 60 per cent in North America and only 53 per cent in Europe.

However, 63 per cent of respondents in India were particularly concerned about rising commodity prices.

www.mckinseyquarterly.com

CEO priorities

CEOs have moved their focus away from crisis planning to preparations for recovery, according to the Conference Board’s annual CEO Challenge 2010 survey.

The survey asks CEOs, chairpeople and company presidents to rate their most pressing issues. In the latest survey, growth-orientated challenges such as sustained top line growth, profit and customer loyalty were the main concerns.

“In the late 2008 survey, worries about economic global performance, business confidence, geofinancial instability and integrity of capital markets leapt up into the CEO’s top 10, and each has now dropped by at least 10 places,” said Linda Barrington, the board’s managing director of human capital and one of the report’s authors.

www.conference-board.org