Growth in Mainland China’s Supply Chain Sector Could Mean Bad News for Candidates

Published on 2018-01-09

As Mainland China’s economy continues its relative slowdown, companies in all areas of the industry are facing pressure to discover ways of maintaining profit margins and are turning to supply chain to reduce costs.

This is leading to expansion in various aspects of the industry, however this does not necessarily spell good news for candidates looking to improve their positions, according to Simon Lance, Managing Director of Hays Greater China.

The main trend in Mainland China’s supply chain is ‘increasing efficiency’, though domestic and multi-national companies are pursuing this aim via differing strategies. While local companies are focusing on creating and developing a fully-fledged supply chain function, foreign businesses are setting their hopes on economies of scale and delocalisation.

“Domestic companies are becoming increasingly interested in the supply chain function and are trying to bring structure and efficiency by building a well-organised supply chain function,” explains Simon. “To this end they are imitating the tactic that was so successfully implemented by the IT and finance industries in the past by hiring candidates from foreign companies and utilising their expertise.”

With many of the foreign based companies already having supply chain functions in place, they are instead looking to the creation of shared service centres as well as delocalisation towards cheaper locations.

“By relocating sourcing and procurement functions to Mainland China, and with the development of shared service centres covering the entire region, multi-national companies can reduce not only employment costs,” says Simon. “Through sourcing, they are also hoping to find suppliers that can provide the same quality of raw materials at a much lower price.”

With regards to employment expenditure, both domestic and MNCs are looking to relocate from the main cities to tier two and three cities, something that is proving challenging for candidates within the industry who may be expected to move.

“Mobility is becoming increasingly important for candidates at the moment. Companies are looking for people with strong experience in sourcing based in the lower tiered cities. Candidates must be energetic, results driven and good negotiators.”

With English-speaking also an advantage for candidates looking to work for MNCs, companies are finding it difficult to find the perfect fits for roles, but rather than showing flexibility themselves, they are expecting it instead of candidates.

“Most importantly, candidates must be amenable, not only in their working practices but also in their willingness to relocate. Companies are under such pressure with financial results that high salary increases are not viable, and that means locations outside of the more expensive cities. Companies are negotiating harder than ever before,” Simon says.

“And as the market is otherwise comparatively slow, it is the companies that have the power. This means that for all but a very few senior candidates at local companies, on the whole candidates are looking at low levels of salary increase and pressure to relocate to a lower tiered city. It could be a case of either taking that option or risk losing their job.”

An overview of what other trends have been observed in Mainland China’s supply chain sector can be viewed below.

  • The Chinese government has recognised the rise in importance of supply chain and has released guidelines on promoting innovation in the sector, marking an intention in becoming the leading global provider of supply chain services by 2020.
  • Companies needing to implement the supply chain structure are looking for candidates who can hit the ground running, something that is especially noticeable in companies in the manufacturing operations industry, with 52 per cent citing high levels of technical knowledge as the prime candidate requirement.
  • For those companies in manufacturing that are willing to train new staff, it is for the most part being done through a combination of internal and external programs.
  • Companies in supply chain show, for the most part, no requirement for expatriate hires, with 69 per cent of manufacturing companies and 63 per cent of general companies showing no preference for foreigners.
  • It is only in the purchasing function where the implementation of anti-bribery and corruption practices are of highest importance that expatriates are requested. However, due to the unlikelihood of the lower tier cities having international schools and an expatriate community, most candidates are proving unwilling to move.
  • Automation in the supply chain is a growing trend with robotics being more effective and cost efficient, while also reducing risk of both industrial accidents and petty theft.
  • 32 per cent of candidates looking for new opportunities are doing so in order to seek professional development.

To read the full Inside Story report of Supply Chain, please click here