My new position is often related to sourcing so I will probably post more often on what I am seeing on this topic.
Our new client is a giant industrial products company (to remain unnamed). They recently brought in a new Executive Vice President for Procurement from another industry. One of his first key initiatives was to look at more direct sourcing from LCC (Low Cost Countries). So one of the first things he did was to take a look at the existing China procurement center. Now this new EVP has quite a bit of experience in China so he at least had an idea of what to look for. Sure enough he uncovered systemic endemic corruption in all parts of the supplier selection and contracting processes. Just about the entire organization is being replaced.
Why? Because the controls put into place over the Chine procurement office were both looser than what existed in the US (to compensate for "business culture differences" in China) and those controls that did exist carried within them Western assumptions. They had been designed at HQ to guide and monitor western employees through the procurement process. They do not in any way take into consideration the often very different drivers and priorities of Chinese employees. Until companies begin to tailor their controls to local conditions, their procurement operations will never improve.
