Transcript Document
East West Associates Webinar June 27, 2014 Strategic Sourcing, Process Improvement and Rationalization/Restructuring Agenda Introduction Changing China: The New Normal - Mark Plum, Senior Director – East West Associates Strategic Sourcing - Daniel E. Keefe, Vice President of Asia Sourcing – Cardinal Health Performance Improvement - Warren A. Wisnewski, China Managing Director – East West Associates Rationalization and Restructuring - Warren A. Wisnewski, China Managing Director – East West Associates Changing China: The New Normal China – A Rapidly Changing Business Landscape • Rising labor costs • Strengthening exchange rates • Slowing global export markets • High turnover of employees • Increased Chinese competition Changing China: The New Normal Changing China: The New Normal Strategic Sourcing Contemporary, effective strategic sourcing operations strive to implement many or all of the following key elements: • Coordinated implementation of Lean/Six Sigma practices at major suppliers • Extensive use of “should cost” analyses • Utilization of Supplier Management Teams to drive maximum performance • Where possible, implement direct-to-production supplier delivery Strategic Sourcing Contemporary, effective strategic sourcing operations strive to implement many or all of the following key elements: • Reverse trend of regular cost increases to year-on-year reductions • Multiple sourcing strategy for commodity items • Seeks opportunities for vendor-managed inventory • Evolution of China sourcing strategy to Pan-Asia sourcing strategy Performance Improvement For much of the past 20 years, investing in China has been like hitching a ride on an escalator: • 8-10% GDP growth/year • Large, emerging middle-class driven domestic market • Abundant labor and low costs Performance Improvement Over the past 5 years, the situation has changed: • Increased urbanization • • • • Significant labor shortages & wage increases Employee turnover rates as high as 25% Strengthening exchange rate from RMB 8.3 to 6.2/US$ Many industries have become highly fragmented and hypercompetitive • GDP growth slowing to ~7% Performance Improvement The fundamental operating model for many businesses must change • • • • Being okay no longer a sustainable formula for success “Good enough” model adds pressure to MNC competitiveness Labor intensive industries moving inland or out Significant improvements required in operational efficiency - For manufacturing operations - For back office, sales and distribution Performance Improvement Do your China operations exhibit any of the following symptoms: - Inconsistent performance with respect to quality and delivery? - Actual costs higher vs. estimated cost? - Daily “fire drills” when carrying out otherwise simple day-to-day activities? - Poor planning and inventory control? - Year-to-year supplier cost increases? - Inability to quickly resolve basic problems? - Excessive overtime required to meet basic customer requirements? - Inability to win significant repeat business from customers? - Low morale and high employee turnover? Such problems typically result in lower than expected sales growth and disappointing financial results. Performance Improvement Survivors going forward will be those who have upgraded their capabilities to reflect these changing business conditions - A thorough Operational Assessment is one of the most effective means of identifying opportunities to ensure continued success Performance Improvement East West Associates is uniquely positioned: - The ability to provide a thorough, objective Operational Assessment, plus: - The capability to provide experienced, on-the-ground resources to address the root causes of any problems or opportunities identified. East West provides a wide range of resources and solutions to drive fundamental and sustainable performance improvement, including: Operating Fundamentals: - Establishment of daily visual management systems - Rapid improvement in basic cost/quality/delivery performance - Shop floor management, planning, procurement and inventory mgt Advanced Performance Improvement: - Continuous improvement via Lean/Six Sigma methodologies Rationalization and Restructuring Contemporary conditions in China may demand more significant changes to your China business operations. Some examples: - Residential development is encroaching upon your facility’s industrial zone - Your export-oriented business is no longer cost competitive in China - Fundamental productivity improvements achieved through performance improvement initiatives have left you with more capacity than required - You have an opportunity to merge one or more operations with another to streamline operations - You have acquired a new subsidiary and intend to integrate that into an existing subsidiary Rationalization and Restructuring Relocation, Rationalization and/or Restructuring in China is complicated and can have significant negative consequences to the overall business if not handled carefully. • Requires careful and proactive coordination with local government authorities including local/zone development authorities, Customs, Tax and Labor Bureaus • Demands thorough planning and project coordination to minimize disruption of business activities • Carefully controlled and choreographed HR communication of intent to restructure • Relocation of owned property requires in-depth knowledge of government reimbursement policies to gain maximum benefit With years of restructuring management and operational experience, East West Associates can help avoid the major pitfalls of restructuring and maximize the financial benefits available through relocation or rationalization. Rationalization and Restructuring East West Associates is uniquely qualified to assist clients in reviewing their business operating situation, develop contemporary and sustainable strategies and provide implementation expertise. Conclusion China is Changing, Are You Keeping Pace? • Questions • For further discussion on how East West Associates can improve your business in China Contact: Alex Bryant President Charlotte, NC [email protected] Mobile: 1-704-807-9531 Mark Plum Director Phoenix, AZ [email protected] Mobile: 1-602-881-9254 (China) 86-13917999341 Warren Wisnewski China Managing Director Shanghai, China [email protected] Mobile: 86-13901960794