How human factors shake traditional sourcing models [video]

Three weeks ago, I attended the “Made in Asia” seminar organized by the French Chamber of Commerce in Hong Kong. I am going to share two videos from this event, in two different articles.

Here is the video of the panel entitled “How human factors shake traditional sourcing models”.

Here are what I considered to be the most interesting insights:

  • VF Corp. is starting, for the first time since a long time, to take decisions based on labor constraints. They have less options than before, and they don’t want to keep chasing the lowest labor cost. The challenge is to get more out of their current suppliers (how to get more efficiency, but also more attractive to good workers).
  • High wage inflation. Low-cost Asian countries are somewhere between Bangladesh (90 USD for a sewing operator) and China (450 USD for the same job).
  • VF Corp. runs about 20 factories in Mexico, making about 100 million pairs of jeans a year. The workers are paid 550 USD per month. But they produce jeans 3 to 4 times faster than the best Asian factories.
  • In many electronics factories, the employee turnover is over 10% a month. The average tenure of the young generation is 10 months. The HR department is only taking care of hiring, and not working on motivation etc.
  • In many factory jobs, a new worker can be trained in one hour. The jobs were “deskilled”, and as a result the workers are not interested in what they are doing. This is a problem in the electronics industry, much more than in the garment industry (where workers can keep learning new operations on new machines). The solution is to give multi-skill training, and to make the job content more varied (if possible, with cellular manufacturing structures).
  • A bowl of noodles in the interior of China is often the same price as in developed cities like Shenzhen. Living costs are high, also in the interior.
  • Chinese workers are paid by piece, unless South-East Asia or Bangladesh. It means China will always have bigger difficulties being compliant (in terms of social responsibility), even though other countries also deal with double books and 80+ hours a week.
  • A big limit on the growth of the manufacturing sector in Bangladesh is the lack of infrastructure. There is not enough gas, electricity, roads…

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Information about the participants:

Moderator: Adam Salzer, Managing Director, Consulting, PwC

Speakers:

  • Karen Ferguson, Executive Vice President, Human Resources, Schneider Electric
  • Veit Geise, VP Asia Sourcing, VF Asia Ltd.
  • Ian Spaulding, Managing Director, INFACT Global Partners
  • Sunny Tan, Executive Director, Luen Thai Holdings Limited

 

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