Only 9% of all 1.5 million U.S. companies reported innovation in any product, service or process between 2006 and 2008.  Data source is an extensive 2010 NSF, or National Science Foundation, Business R&D and Innovation Survey.

Only 9% of U.S. companies are innovating.  Can we really call that an innovation economy?

China innovates at 0%. “China doesn’t innovate at all,” is what we tell ourselves.

For the sake of argument, let’s say it’s true, that China has no innovation prowess. Does that makes our 9% innovation rate acceptable?

Nine percent innovation across industry in a country is not an innovation economy. It leaves 91% making the same old stuff and approaching things the same old way: the same way that didn’t work the year before.  It’s a stunning statistic.  It ought to rouse a fire under our hindquarters — maybe President Obama was the only one who took note of the study, hence his current Revolutionary Ride.

Innovation and need. Recently I saw a blog post that said a greener New England is on the way, that the northeast quadrant of the US is poised to become the innovative green tech capital of the world.

The gist was that the overeducated, industrious, conservative New Englanders would bring innovation and revolution to the green tech, rather like what Silicon Valley did for the computing industry. New England wouldn’t do this out of utopian ideals. It would come to pass out of practical need.

What sort of need? The inability to afford New England heating and cooling expenses, and the New Englander ability to do something about it.

Shell Oil notes increasing demand and more difficult supply restrictions. To illustrate the need, here are two pieces of news from last week:

1. Europe is planning an 80-90% GHG reduction, or greenhouse gas reduction, by 2050. The plan, published earlier this month, aims for emissions reductions as follows: 2020 (25%), 2030 (40%), 2040 (60%) and 2050 (80-95%).
2. Simultaneously, the largest oil company in Europe, Shell Oil, announced that there will soon be an oil shortage, between tightening restrictions and increased Asian demand. “Supply will struggle to keep pace with demand,” said the report, which is oil-company-ese for “significant price hikes are somewhat inevitable.”

The logic is as follows:

1. There is monstrous expected economic growth in India and China from now through 2050,
2. There are increasingly stringent restrictions on emissions, ergo processes, transportation, and regulatory parameters, therefore
3. Meeting increased demand with more restriction will be challenging (thus expensive).

The gap of demand to supply “will have to be bridged by some combination of extraordinary demand moderation and extraordinary production acceleration,” said Shell, as reported by the Associate Press.  AP ended the article rather cheekily, but fairly, by pointing out:

Shell’s net profits last quarter were $6.79 billion.

You know what’s cooler than $6.79 million?  $6.79 billion.*

What’s cooler than $6.79 billion?  Making $6.79 billion per quarter.

Innovation as necessity. What’s cooler than cheap oil? Not needing oil and gas for heating and cooling homes, office buildings and public spaces.

I recently read something about a vision for America by 2025:  geothermal heating and cooling for every building in the country.  Maybe we should contact New England about that, was my first thought.  But really, it’s not such a bad idea.  If the cost of doing so less than $6.79 billion per quarter, we ought to get some momentum behind the idea; because we’re spending that money anyway.

Maybe that’s the kind of innovative thinking we need to get over this 9% hump.

Nine percent!

For more on the innovation survey, please see this NSF data: http://www.nsf.gov/statistics/infbrief/nsf11300/ See also: Bruce Nussbaum on America’s Innovation Policies

*Paraphrased from the film, The Social Network.

http://supply-chain-data-mgmt.blogspot.com/

Salaries for Supply Chain management in the US and China are not as different as you might expect.

In the US as of Feb. 1, the median expected salary for a typical Supply Chain Manager is $95,964, while the boss, the Chief, averages just over $200,000 per year.

In China’s booming economy, the salaries for Supply Chain management aren’t dissimilar to the US.  A Supply Chain Executive who is conversant in the three primary languages:

1. English
2. Chinese
3. Supply-Chain-ese

can expect around $120,000 per year in total compensation — and that’s in mid-sized manufacturing cities (1-5 million people) where the cost of living is so low that the average worker earns only $3,000 a year.

First let’s look at the US Supply Chain management salaries, and briefly describe the role.

The figure is based on survey data collected from thousands of companies of all sizes, industries and locations and is courtesy of a website using live data.

What does a Supply Chain Manager do, exactly? A Supply Chain Manager manages and oversees overall supply chain operations. Supply Chain Operations participation includes:

1. Purchasing and inventory of materials
2. Selection of vendors
3. Recommending ways to improve productivity, quality, and efficiency of operations
4. Coordination and resolution of (i.e., taking responsibility for) issues regarding existing and new products
5. Interacting with customers to ensure that all requirements are being met.
6. Being familiar with a variety of the field’s concepts, practices, procedures and language
7. Reliance on experience and judgment to plan and meet goals
8. Leading teams and directs others
9. Creativity, quick thinking and latitude is expected
10. Reporting to top management.

The focus and objectives of a Supply Chain Manager in Melbourne, Florida, for instance, was recently posted to include the following focus and objectives:

1. Responsible for the performance of the supply chain capability in timely, cost effective delivery of related materials for cross-continental program “roll outs”
2. Support the Installation Manager and other Team Leaders in driving continuous improvement
3. Work closely with Value Engineering team to refine bill of material contents, creating savings along the program’s lifecycle.

Other desirable skills include: Project Management skills, excellent teamwork, interpersonal, analytical and conceptual skills; enthusiastic attitude, positive outlook, and possession of a demonstrated ability to work with, and motivate, other people; exceptional written and verbal communication skills, experience in team development and leadership, and a keen understanding of information systems that support manufacturing operations within the position’s scope.

The Supply Chain Manager’s boss. The median expected salary for a typical Top Supply Chain Management Executive in the US is $214,431  (source: HR data as of February 2011).

This job requires the planning and directing of all aspects of an organization’s supply chain policies, objectives, and initiatives, with a significant logistics focus which includes overseeing the organization’s inventory, warehousing, distribution and transportation functions as well as exercising big-picture expertise in a variety of the field’s concepts, practices, and procedures.

Salary for Supply Chain Manager or Executive in China. Bob Liu, C.P.M., CPIM, is President of China Supply Chain Services (CSCS) , an Executive Search Partner for China Supply Chains.  The firm is based in both Fremont, CA and Shanghai, China.

Liu reported recently that a Chinese company can pay $1,000 a month or less to hire a Supply Chain Purchasing Manager with over 8 years purchasing experience.  But … this person would have minimal English skills.

Minimal English skills are fine if you’re a Chinese company with a Chinese market — but for a an international company with a broader supply chain, salaries start to look different.

You can expect $10,000/month for a Supply Chain Manager in China who can:
•    Participate in or lead English-speaking conference calls
•    Develop the supply base strategy in China
•    Manage the complete China supply chain.

So it’s suggested you don’t rely on local salary statistics, for instance, even China salary figures from the venerable South China Morning Post (SCMP).  Because often those salary stats are for local hires working for local Chinese employers.  They apply to most of the workforce but not the sub-set that a Westerner would be looking at.

Trilinguals speak Chinese, English, and Supply-Chain-ese. For Western companies, the most desirable Managers are so called “trilinguals.”  Triliguals speak English, Chinese and the unique, arguably peculiar, language of Supply Chain Management.

It’s hard enough communicating with someone from our own country who doesn’t speak Supply Chain.  We don’t want to try that in China.  Trilinguals are a rare commodity, and, therefore, worth more on the market.

In cities like Shanghai, the cost of living is high relative to the more rural parts of China, and comparable to some cities in the U.S. such as Buffalo, NY, for instance.

(Graphic courtesy numbeo’s Cost of Living calculator.)

Smaller cities near Shanghai within 100 miles include Kunshan, Taicang and Wuxi (population approx. 4.3 million).  Housing and labor are more affordable in cities like Wuxi, and so is the labor.

These “smaller” cities are often unfamiliar to Westerners, but are said to be the current manufacturing base in China.  Many China-based manufacturing facilities and distribution centers end up in such a locale as Wuxi.

In fact, these cities are not as small as they sound. For example, the greater Wuxi area has a population close to that of Washington, DC or the greater Boston area.  Not a small workforce.

We must bear in mind that over 150 cities in China have a population of over 1 million people.

For perspective, the US has 10 cities that size.

So again, it’s important to note that even in these “smaller” Chinese cities, compensation packages for high level and so-called trilingual Executives are quite competitive.  In one example, in 2009 a Supply Chain Procurement Director for a German company earned a compensation package of close to $150,000 / year.  In the same city, a local worker makes an average of $3,000 a year.

The upshot is that for a Supply Chain Executive for a Western company or who can liaise with one, the salaries are going to be comparable to the rest of the world; slightly lower but only slightly.  For more on this, may we recommend this article.

Logistics in the US. A recent Logistics Management magazine report found that supply chain professionals in the U.S. are in fact “well-compensated.”

It certainly helps that median salaries for professionals on the logistics side show a rising trend:

• $80,000 per year in 2006, 2007, 2008
• $85,000 per year in 2009
• $88,000 per year in 2010.

Some 25% of logistics workers received a raise in 2010.  Of those, the average raise was 4.8%.

Supply Chain Professionals in general did well in 2009, according to ISM’s annual report (June 2010).

• $71,348 experienced Supply Management Professional (without Manager title or higher)
• $50,506 entry-Level Supply Management Professional (without Manager title or higher).

ISM’s report is for the 2009 calendar year, in US dollars.

We hope this helps you in your work, research, market evaluations and Supply Chain Management.  Please let us know if it does!

http://www.actio.net/default/index.cfm/actio-blog/salaries-for-supply-chain-managers-2011-us-and-china/

Divya Sharma reported via Reuters from Asia that manufacturers of electrical products forecast strong 2011 revenue growth.  This comes on the heels of strong fourth quarter results in the sector.

Ametek, a global manufacturer of electronic instruments and electromechanical devices ($2.5 billion in annual sales) cited growth in demand from industrial, oil & gas, power and aerospace customers.

Reuters also reported that Teledyne, the electronic components maker, posted a higher quarterly profit, boosted by higher sales at its electronics and communication unit. Teledyne also said it would “focus on its core electronics, instrumentation and engineering businesses after selling its aviation products business to an unnamed international buyer.”  Interesting on a few levels, not the least of which is that the company sold its aviation products business.  This was announced on Dec. 14:  Teledyne would sell its general aviation piston engine business to Technify Motor (USA) Ltd., a subsidiary of AVIC International, for $186 million in cash.

Headquartered in Beijing, In 2009, AVIC International has consolidated annual sales of approximately $6 billion. AVIC was formerly known as CATIC International Holdings. It’s an investment holding company. AVIC aviation customers include Boeing, Airbus, Snecma and Honeywell, says its press, but then, everyone’s customer base includes Boeing, Airbus, Snecma and Honeywell to some degree so that doesn’t really tell us much. (I don’t mean to be cynical, just realistic: those are the most comprehensive supply chains out there.)

AVIC being a China-based holdings company is also interesting.  We should get used to seeing that. China is more economy than e-waste these days.  The electronics aspect of this is the tip of the iceberg.

In a video recently circulated by a manufacturing magazine Economist Martin Jacques discussed China’s likelihood of taking over as the world’s dominant economy by 2050.

(source: http://www.mbtmag.com/Content.aspx?id=1899)

Jacques showed that Goldman-Sachs said that by 2027 China’s economy would be twice that of the United States.  But then he said that this projection has been adjusted, due to the recent global economic tumble.

Now, says Jacques, updated forecasts indicate that China’s economy will be larger than that of the United States by 2020.  That’s less than 10 years from now.  That kind of thing can improve your posture quickly.

China from the inside out
The video is worth watching.  Jacques goes on to identify three “building blocks” to understanding Chinese culture and how it is different from our own culture.  He also says that contrary to popular belief, Chinese culture will not become more like Western culture as it becomes more modernized and successful.  In fact, we need to become educated quickly on how their culture ticks so we can more accurately predict and understand market behavior.

According to Martin Jacques, Chinese thought is critically different from Western thought in the Chinese firm notions of:

1. Culture: one unified civilization with many different systems within it.
2. Race: where nationality and race are almost synonymous.
3. State: where state is not a meddler, it’s a family member, a patriarch.

Jacques’ point is that we’d better start understanding Chinese culture now because they’re going to be boss soon. He wrote a book about it called “When China Rules the World: The End of the Western World and the Birth of a New Global Order.” A good read if this sort of thing interests readers as much as it does this blogger. (Do we have a choice but to be interested?)

A very informed review of the book in the New York Times provides this perspective:

As China finds its own path economically, it is unlikely to look west for political advice, Jacques suggests. Its ruling Communist Party, having largely set aside its socialist ideology, has become a modern version of an imperial dynasty. China’s Communist leaders have flirted with reviving Confucianist thought, positioning themselves as protectors of Chinese unity, the state’s traditional role. Many Chinese see that mission as sacred. Jacques argues, credibly, that most Chinese will back their leaders, with or without democratic reforms, as long as the country keeps getting stronger.

So how might the world work under Pax Sinica?  Jacques ventures some fascinating guesses: The United States often promotes democracy within nations. China insists on democracy among nations. If the power of countries in the international arena were determined by how many people they represent, China would have more clout than all the Western democracies combined. (source: Joseph Kahn, former Beijing bureau chief and deputy foreign editor, The New York Times)

So when Reuters reports on the elevating electronics market – and immediately we’re talking about Chinese holding companies – it really should come as no surprise at all.

As the next few years tick by, we’ll want to understand what’s happening in China more from the inside out. Which is why voices like Jacques, Kahn and others are so very important to the manufacturing industry and supply chain management, starting right now.