IBM’s procurement operations in China

IBM has done a sort of report on how its procurements operation is going in China. Some highlights with important phrases highlighted in bold type:

The supply base for goods is very robust in China.  As most procurement professionals know China has become the manufacturing center of world, with a growing trend towards innovation and technology specialization versus its prior focus on purely labor intensive manufacturing.

In the electronics supply chain sector quality and reliability is on track to equaling world-class status from utilizing advanced equipment in large scale manufacturing.

The supply base for services (technical skills, complementary workforce, computer programming, etc.) is still relatively small/medium scale with regional focus, as compared to the high-volume focus of the goods sector. Services supplier locations are typically found in the larger cities such as Shanghai, Beijing, Shenzhen, Chengdu, etc.

The trend is for these suppliers to become more global in focus by increasing their management skills and capabilities as compared to a few years ago. However, strong support for these suppliers and/or even equity investment is needed in order to leverage their advantages and grow them into global suppliers.

An example of the problems that are arising would be the rising costs of labor in the coastal cities driven by the continued expansion of the manufacturing sector. We are seeing the beginnings of the manufacturing sector looking to spread further inland to the center and west of China to better balance development across this large country.

So extra attention is needed to ensure logistics flow smoothly during peak times of the year when multiple sectors (electronic, apparel, toys, etc) are all vying to move product outbound at the same time.

The are many well known challenges associated with doing business in China. Some of the ones receiving a lot of attention recently center on supply chain responsibility, supply chain security, environmental controls, disaster readiness (Asian Flu, Pandemic, etc), and business ethics. Clearly, these are issues which need attention and must be acknowledged by any company seeking to conduct business in China.

Without a doubt, China is one of the most vibrant economies in the world and with that comes the reality that extra attention is needed to aspects of procurement which may be taken for granted in other more mature markets.

Source: Purchasing.com