Take the Embedded Inefficiencies Test

I have been absent from the blog scene for the past few months because I have been working in China with an LED light bulb manufacturer. This is an exciting, fast-paced, high growth industry under intense pressure for cost improvement and product innovation.

While working with this company, I am getting a refresher on Chinese companies and the environment in which they work. I have not worked intensely in China in over 20 years so it is interesting to see how things have evolved.

China has made tremendous progress in 20 years and their quality of life has improved dramatically; it is evident everywhere you turn.. Everyone knows that they dominate manufacturing but they are now emerging as leaders, or at least equals, in technology as well. They are taking a dominant position in many next generation industries – LED lighting is an excellent example.

I have also seen major improvements in their ability to manage. Many Chinese companies are positioned to be fierce international competitors; their leaders are world class, with competencies developed from repatriation, foreign education or internal organic growth. I’m not saying that it is utopian as China still has many embedded inefficiencies; a trip to a Chinese bank is a life lesson in lost productivity. In contrast, their high-speed train network’s operation is a model for other nations.

An interesting Best Employer Survey conducted by ChinaHR.com shows a thought provoking trend in job seekers attitudes. 10 years ago, from 2003 through 2005, 65% of the companies among the 50 best employers in China were foreign invested companies. Today, 2012 through 2014, that number has reversed to be 30%. While this is a survey on attitudes (subject to a number of real and imagined perceptions) one cannot escape the fact that state owned and indigenous Chinese companies are changing to become desirable work and career building choices. Huawei and Alibaba are early signs of competitive Chinese company emergence.

As a westerner, it would be reassuring to point out obvious Chinese inefficiencies as a reason to be optimistic about the re-emergence of western industry but it would be false hope. Embedded inefficiencies are deeply engrained here as well. We have been asleep at the switch many times before only to be taught about quality by the Japanese or to wake up in a financial crisis. The Chinese are open to learning from and copying best practices whereas we often think we know best. This is not true in all cases but true enough to be a concern. To make matters worse, our politicians are institutionalizing inefficiency through some of their law and policy implementations (too many to list).

I have written before about things that I observe in western companies; some things make me want to shout “Wake up! Don’t you see what’s happening?” Most often, I don’t. The reality is that there is new information available along with better tools and improved practices that were not available 10 years ago. What everyone does, and how they do it, needs to be re-examined in the context of today’s environment, not one’s comfort zone. What was efficient 10 years ago may not be efficient today.

If you are in a leadership role in procurement or supply chain and haven’t fundamentally rethought your approach, take this simple test:

1. How many of your initiatives have been justified by the term strategic? Can you quantify their benefits using data in terms of cost, preferred access to materials or technology, faster time to market or reduced cycle time? If not, define strategic for me.

2. How does your performance compare to your competitors or your industry?

3. How do you know your people have the necessary skills to do their jobs to 2015’s international best practice standards?

If you have to think about these, you have embedded inefficiencies. You should be doing something about them immediately. If you don’t have competitive data to prove (or disprove) your effectiveness, you are locked in a 20th century world.

Sometimes great plans fail while anemic ones succeed. Anyone surfing television channels can attest to this but, in business, with foreign competition getting stronger, companies need every competitive advantage. Embedded inefficiencies are silent killers that should not be allowed to exist.

By Ken Bradley – Lytica Inc. Founder/Chairman/CTO

2 Comments

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  1. I couldn’t refrain from commenting. Exceptionally well written!

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