Knowledge Center: Article
Supply Chain and Operations Officers
Supply Chain Talents in the Emerging markets6/4/2014
The shift of manufacturing hubs from East Asia to the newly emerging markets of Southeast Asia has created an unprecedented demand for supply chain professionals that the existing talent pool has not been able to meet.
Most senior regional supply chain executives tend to congregate in the Tier 1 locations like Hong Kong, Singapore or Shanghai. In the increasingly important emerging economies like Thailand, however, finding best-in-class talent is very challenging.
First, the regional integration and economic development from foreign trade and FDI has led to the emergence of complex supply chains. While in the past central Thailand has been the main platform for distribution, the opening up of Tier 2 and Tier 3 cities has added another layer of complexity. This supply chain complexity has grown much faster than the talent pool to manage it.
A second factor is that companies have long neglected the supply chain function, dedicating few resources to develop local talent. As a result, the skill sets needed to manage these supply chains frequently exceed those of the talent that is currently available. Countries such as Thailand, Vietnam, Indonesia and the Philippines have huge supply chain needs that are only going to get larger as the Asean Economic Community (AEC) comes online and consumerism grows.
The size and scale of the supply chain and distribution networks in this part of the world requires best-in-class talent that is in very short supply or simply not available. Companies have traditionally dealt with the shortage by using expatriates to both manage supply chains and act as mentors to local talent.
Only recently, have companies begun to realize that supply chain executives can have an immediate impact on bottom line EBITDA. The scope of responsibility has grown, and often this position is now reporting directly to the CEO - whereas in the past it was reporting to a COO.
Countries such as Thailand, Vietnam, Indonesia and Philippines are emerging but have huge supply chain needs moving into the era of AEC and increased consumerism in their respective countries and regions. Where do they get the talent?
One emerging market that has developed quite quickly is the Philippines, with annual GDP growth of 7% over the last 2 years - the strongest performance since the 1950s. Sustained optimism in manufacturing and retail consumption continues to drive change in the supply chain landscape, which already requires a very challenging model due to the complex geographical challenges it faces. The development and retail boom has created some talented supply chain professionals, supported with universities and institutional bodies that offer dedicated diplomas, training courses, and recognition on this subject.
While the supply of supply chain professionals in the Philippines alleviates some of the talent shortage issue in other Southeast Asian countries, there is still a big gap to fill. Filipinos are mobile, but they won’t work in all markets – such as in Thailand, where there are cultural issues that do arise. But we have witnessed successful cases of placing Filipino ex-pats in Vietnam and Indonesia. This level of talent versatility will bode well for the Philippines in the long run.
Companies are going to have to embrace the AEC supply chain environment and look farther beyond their borders for the requisite supply chain talent. They may have to post AEC ex-pats into these emerging markets and groom local talent in order for supply to catch up with demand.
Getting the supply chain talent – the Thailand way
With Thailand the second largest emerging market in ASEAN and a prime target for investment, the Thai government implemented an ambitious plan to reduce logistics costs and increase efficiency of industrial logistic performance by 2016. The plan has three key defining points: 1) Develop logistics management professionals in the industry 2) Promote collaboration and linkages across all parties in the manufacturing supply chain 3) Support enabling factors that raise national supply chain effectiveness and competitiveness. Over thirty projects will be implemented, aimed at over 500 business operators with the goal of logistics cost reduction of 3.5bn baht, training of 7,500 supply chain and logistics professionals and linkage improvement of 30 supply chains.
While this can be a solution to address the shortage of junior to middle management supply chain professionals in a mid to long term, in the meantime we believe organizations need to play an important role to develop globally competitive Supply Chain professionals by:
- Utilizing seasoned expatriates to transfer their global skillsets and groom local talent. The success of the Philippines can be traced to implementing this strategy, which both satisfies the economy’s immediate need for experienced talent and also induces skills transfer to local talent. Eventually, knowledge transfer reaches a critical threshold and the supply chain can become locally self-sustaining.
- Encouraging local talent to embrace potential overseas postings.. This has proved challenging with Thai executives and foreign MNC’s based in Thailand. They have the least interest in leaving their hometown to advance their career elsewhere, compared with their counterparts in neighboring countries. Promoting regional mobility in young managers is one strategy to ensure companies leverage opportunities across the AEC.
The need to address this issue is urgent with the AEC era looming. In the race to develop the region’s economy, a large number of talented supply chain managers are needed to realize their respective country’s ambitions and prevent a bottleneck to economic growth.