Chengdu. The three challenges and solutions.
Challenge 1 - Different Seasonality
Commodity-driven seasonality and the inability to ‘switch on’ new staff only over the peak meant that a distributed branch set-up required more staff across the year than would the the case had all staff been located in a single location with the ability to share the workload.
Challenge 2 - Process Adherence
Across 15 branch offices significant efforts were made to standardise the processes to provide international customers such as Nike, Walmart, Macy’s, and Marks & Spencer with uniform quality across the locations handling their Chinese export volumes.
Challenge 3 - Raising Coastal Costs
Though China often have been considered a low wage country there were significant differences between larger coastal cities and inland locations such as Wuhan, Chongqing, and Chengdu. In addition, significant incentives were available in the inland cities.
Solution
The work that physically did not have to take place in the coastal cities was consolidated into a single location, Chengdu. 25% of the existing coastal staff was transferred to Chengdu, initially on two year contracts. The balance 75% were hired in Chengdu, trained and developed to independently manage their responsibility.
Customer specific teams were created, managing the processes in one location across any coastal city where the customers’ goods would flow through. In addition to the customers, the shippers were handled by the very same team. With weekly engagement with the destination customer in Europe and USA, strong ties emerged between the Chengdu customer teams and their respective accounts. A very high number of the customers handled from Chengdu made regular visits to their Chengdu origin teams, further contributing to the significant improvement in all key metrics measured across the customers.
From the initial 1,000 staff the service center in the first 12 months achieved significant advances in the delivered quality as well as in the productivity. The team over time was reduced by 40% (on comparable basis), enabling addition of additional customers and activities.
A key result from the engagement with the shippers was a substantial increase in their satisfaction, a result achieved by turning shippers into customers of value added services. In fact, early indications suggested that about 15% of the total supply chain management revenue originated from the shippers.