Major US Corporations have recently experienced major Purchasing and Supply Chain issues in China that even conservative business observers are calling out as moral if not legal failures. The truth is US companies with few exceptions have never got this right. The existing models and processes based on what works in the West do not work and not amount of adjusting the current paradigms will truly solve this

1. Recent Events Highlight US Corporations
Failure to Manage Purchasing Supply
Chain with China

2. Supply Chain and Purchasing
Professionals Have Failed
• Fellow supply-chain professionals we have failed.
• Events over the last weeks show we do not know
what we're doing when it comes to managing
supply chains in China.
• Prior similar events have all elicited reactive short
term responses trying to follow the process
better and try harder ………………

3. We Keep Doing The Same things

4. For Now
• Set aside speculation on
what went wrong
• Who's to blame
• We can debate that for
years

5. MONDAY MORNING…. DO Not Wait because it
is already Tuesday in Asia
• Our organizations will demand results and
improvements now
• Purchasing and Supply chain management
professionals must advise CEOs and take the
lead
– what needs to change
– what resources are required and
– how it's going to happen effective immediately

6. Take The Lead Now
• If you're not ready to do that - step aside.
• We have been reminded again what is at
stake
– Peoples Lives
– Company Reputations
– Economic Security
– Jobs

7. Put Your Own Senior Employees at
Outsource Suppliers
• There will be various responses based on industry
but one that applies to all is
– Putting your team at suppliers in high risk areas
• You simply cannot rely on
– Third parties,
– Annual audits
– Industry Supported Organizations standards/ surveys
– Local employees.

8. It will increase costs and take top talent
• Ex-pats in China that have high skill levels
• Authority to make decisions on the spot to
mitigate risk
• Cannot simply be auditors trained on the audit
process
• They must be there long enough to really get to
know the suppliers and the region

9. It will increase costs and take top talent
• Must have strong infrastructure support and seamless
direct communications back to headquarters.
• The recommended model is each person has primary focus
for a single major outsource supplier
• They will be based in close proximity to that supplier and
spend 50% of their time there.
• They may be assigned up to 3 other suppliers of varying
degree of risk that they will visit twice per month

10. This will drive up the cost of
outsourcing.
• Each of these representatives including salary,
benefits and operational costs will cost
$400,000 to $500,000 USD
• If you're not willing to spend the money and
resources then the prudent thing to do is to
move production from China or any other
high-risk country.

11. Summary
• Management of Outsourced Suppliers in China
and other high risk areas will demand attention
more than ever.
• Current paradigms do not work
• Take direct control of this now
• Get advise and benchmarks as prudent but only
trust your best and brightest to watch your vital
interests
• Rethink the risk, reward and total costs of
sourcing