The rise of the non-traditional competition

Over lunch with senior manager for performance improvement in PricewaterhouseCoopers Andreas Wettstein was when I first caught a glimpse of what transportation in China looked like 10 years ago.

Imagine this: you’re a supply chain manager and on a rainy weekend, you receive a call saying your shipment of sugar has arrived – in an open container.

Horrified? I sure was.

But that was 10 years ago. China has since transformed their logistics sector to one that now causes their European competition to shake in their shoes.

“The average Chinese competitor of 10 years ago and one of today is very different,” says Wettstein. “Non-traditional companies are now big competition to European companies.”

Clearly, the competitive landscape is changing. Armed with cheap labour and raw materials, local Chinese competition is slowly but surely matching their might to the big boys.

How to gain a competitive edge? Get your supply chain right, Wettstein said.

International MNCs can now ill afford to view local Chinese competition as anything but significant, he said. Asia as a collective is now both a source and a market, so “the importance of getting your supply chain right cannot be compromised.”

And not just in terms of getting the goods to the end consumer on time, but also the method in which goods and raw materials are transported will be increasingly important in the years to come, especially when end consumers are beginning to pledge their loyalty (and money) to companies with greener, more ethical supply chains.

Which means no child labour, no slavery and no raw materials subjected to the elements during transportation.

Personally I think the Chinese government is more than ready to set those wheels in motion. Once they do, local Chinese businesses, or what was previously termed non-traditional competition, will move out of the non-traditional realm and evolve into formidable players in the global business platform.

The iPhone supply chain loophole

It was recently widely reported that Apple is limiting iPhone sales to only 2 per customer, for fear of “illegal trafficking” and to “preserve stock” for the Christmas crush – reports I read with slight amusement.

Is it just me, or are Apple’s efforts to keep its supply chain hack-free a noble yet not exactly useful act? Because I personally know of a few friends on our sunny island who are already using the iPhone, which they bought from a famous IT building somewhere in the Little India region.

According to one such consumer (who has asked for anonymity), the AT&T function has been disabled and a new software has been put in place so that it works with local telco operators.

In the midst of the software upgrade, users in Singapore will also apparently only be allowed to use iTunes 7 and no other updates.

While consumers admit the phone is still rather “buggy”, waiting for a second generation, or worse, waiting for the iPhone to be launched officially in Asia next year is hardly an option.

“Consumers (in Singapore) change their mobile phones almost every year or year and a half,” said another iPhone user. “By the time the iPhone launches here, the hype is over and we’re on to the next new gadget.”

At first glance, it seems the Singaporean consumers’ “kiasuism” (first to everything) will affect sales of the iPhone here once it is officially launched in Asia next year. But I was proven wrong.

A quick telephone call to a good friend (and MacHead, we call him behind his back) later, I learned there are other consumers out there who would skip the unlocked phones and wait for the iPhone to be officially launched in Singapore before getting one.

According to him, this had nothing to do with staying true to the brand, neither has it to do with the iPhone’s superior functions (which are arguably lacking when compared to other smartphones). Rather, he advises consumers not to buy unlocked products, which will make them incompatible to official software upgrades. In addition, Microsoft functions may not be added or may not work as well with the unlocked phones, and they are most likely not covered by warranty.

So will consumers still take a bite out of the Apple iPhone when it comes here? Or will Apple lose out to resellers who’ve already claimed a piece of the iPhone pie with their unlocked versions? I suppose we’ll find out.

Important announcement

Here’s a very important blogpost to announce that Procurement magazine has gone…

Off to the printers!

As I type this, my very talented designers are laying out the last few pages, making sure everything’s set when we go to the printers – tonight.

If you have subscribed to the magazine via our website be prepared to receive a copy on your desks really soon. If you haven’t, well, what are you waiting for?

Finally, when you guys (and many of you guys do) call me to ask when the magazine will arrive, I have an answer for you.

From the team at Procurement magazine, thanks for all your enthusiasm, your time and your encouragement. I hope you enjoy the first issue.

~~~

In other unrelated news, a colleague and I went for the screening of the 11th Hour, a documentary directed by Nadia Conners and Leila Conners Petersen and narrated by Leonardo diCaprio who also wrote it. In a nutshell, the film discussed the eco-system's degeneration and how mankind's pollution was causing massive changes in the climate that will eventually impact us all.

While I didn't quite enjoy the movie, the take-home point was clear: our earth is dying at our hands. What's worse, the film pointed out that amongst others, a few of the biggest culprits remain the manufacturing and logistics businesses, who are guilty of pouring waste into streams and polluting the air with emissions.

The need to go green is intense and this is reflected in not just in the movies (like Al Gore's An Inconvenient Truth), but on the covers of magazines and emblazoned in headlines in newspapers all around the world.

Yet in our "clean and green" city, we have admitted to not being overly conscious to keeping our manufacturing, logistics and in fact the entire supply chain green. Am I wrong? Perhaps. What's holding us back from loving mother nature?

Think about this from the film: previously, only a handful of children in a classroom of about 40 are afflicted with asthma. Now, if you walk into a room full of children and asked those with asthma to raise their hands, nearly 30% of the children will have their hands raised.

There's nothing like the present to change this. What can corporations do to drive this change, what can supply chain managers do to execute it, and more importantly, why hasn't it been done yet?

Imitation – still the greatest form of flattery?

Fashion designers, electronics giants and even car manufacturers certainly don’t think so.

Just prior to the New York fashion week that started September 10, a report in the New York Times (registration required) revealed that the show was racking up viewership not just in the form of other designers and fashionista-wannabes.

Apparently, manufacturers and even retailers in the US had their tvs on too, eager to find out what people will be wearing next season… and getting a knock off design at a cheaper price to customers earlier than when it hits designer shelves.

Makers of the iPhone too undoubtedly read about a clone cousin emerging on Chinese soil a year ahead of its Asian launch. While reportedly a little buggy, it was at least compatible with local telco operators.

Automobile makers certainly weren’t spared uncanny similarities getting made in other factories. AP business news recently reported that the makers of BMW and DaimlerCrysler filed suit against Chinese automakers that produced cars too similar in design to their own.

While I’m sure their outrage echoes many other Western companies’ intent on retaining its intellectual property, (and I’m not one to dispute intellectual property) let’s take a step back and look at this from the other side of the coin.

I’m sure most consumers would love to be able to afford a cute Versace dress to match their Jimmy Choo heels and Balenciaga bag while yakking away on the latest mobile phone in the most expensive convertible, but unfortunately not everyone can be either an heiress of a large hotel chain or the adopted daughter of a 70’s R&B singer.

What do normal white-and-blue collared professionals turn to? Knock offs. And not just from China, but from places like Bangkok, sometimes affectionately known as the land of AAA quality imitation goods.

And why should Asian consumers (who are not Apple fans) wait a full year before Apple’s iPhone hits their shores when they can get one from local manufacturers at a cheaper price? Sure Mac-fans would fume at the thought (travesty!) but clearly the demand from non-Apple fans is strong enough to initiate a whole supply chain based on a copy.

Isn’t that what supply chains are about? Getting the product to the consumer just in time and at the most favourable price? Who’s to say a businessman is wrong for providing what people want and earning a few bucks along the way? Sure it might be considered stealing, but if that’s what consumers want, then that’s what consumers get… isn’t it?

An even larger headache is stopping these operations from taking place. I was in Beijing last year after reports said local police had shut down or banned shopowners from selling pirated goods (CDs, apparel, electronics etc), but I was hardly surprised when a shopkeeper waved me quietly into a little room at the back of the store to show me a treasure chest of pirated goods, telling me in mandarin to “bring my friends” next time I’m in town.

With lax laws at manufacturing sites millions of miles away from where the designer sits, coupled with competition from other more efficient supply chains, it’s definitely an uphill battle for companies battling to protect their intellectual property.

Welcome to The Beer Blog!

If you’ve ever taken a supply chain related academic course, you’ve probably played or at least heard of The Beer Game.

The game, created by a group of professors at MIT Sloan School of Management in the early 1960s, aims to teach or demonstrate the fundamentals of supply chain management.

If you haven’t played the Beer Game before, the good people at MIT have created a web version here.

The rules of the game are simple – get the beer to the customer through a multi-stage supply chain with minimal expenditure on back orders and inventory.

Now I know you’re dying to click on that nifty “comment” button below and tell me all about how wrong this beer game can be in real life, educational or not. Of course, supply chain management is hardly as straightforward as the single retailer, single supplier, concrete lead-times scenario the Beer Game puts forward.

(And if I can be honest, when I tried my hand at it on a friend’s laptop over a few at the Intercontinental Hotel I ended up cursing and swearing, but whatever.)

So in my slightly passive aggressive way I’ve named this blog The Beer Blog and making the rules of THIS game simple – The Procurement team will treat this blog as a forum on which we will chat about topics related to the supply chain regardless of industry, but in an offhand, informal manner.

Nearly everyone I’ve spoken to over the past few months has positive things to say about this magazine, believing the roles of the procurement and supply chain directors to soon take on more responsibility and have higher visibility than ever before.

It’s an exciting time for people working in supply chain and procurement, being on the cusp of change. Procurement magazine is glad to be a part of it and we welcome comments, feedback and whatever suggestions you might have.

Happy reading and stay tuned for more insights, opinions and stories in our supply-related posts!