There are some global demographic trends that are already underway and their impact is already being felt so this is not a prediction but an acknowledgement of reality. At a high level, countries like Japan, China, Germany etc. have a shrinking work force while the growth will be in Africa, Middle East, India (higher than China by 2030 in total) etc. Globally we were adding 70 million workers in 2005 and will be down to 30 million annually by 2030 so this is happening now! This has a profound, global impact that crosses borders. There are the obvious social impacts like far fewer workers to support retirees in these economies, less overall production, less overall demand (Look at China’s vast empty “cities” which have been paid for by large public debt which is now due). A small part of various countries’ posture on immigrants currently is probably driven by this recognition? By the way, TMG alumni will quickly classify this as Predictable & Inevitable because it’s not like this just happened overnight.
The implications for your company are also quite significant because according to Morgan Stanley and London School of Economics, Labour (proper English 🙂 ) will become increasingly scarce which means labour cost will rise everywhere. Every single part of your business that depends on any form of labour including your budget for salaries etc. is impacted. Now let’s talk about all those supplier contracts because depending on where your supplier is getting their labour, those costs are shifting and will continue to shift. And by the way, labour also includes all those high skilled, highly educated resources in other countries that might be part of those outsourced deals (try hiring anyone from any of the top Business or Engineering schools in India – they’re hard to afford!). And before we think that we can just move those manufacturing contracts from China to India, they now probably come with the added “cost” of Environmental impact regardless of location and the labour arbitrage may be negligible. And if the labour arbitrage is also negligible in those high skilled, highly educated resources, then might we want to take another look at bringing some of that outsourced work in-house to reduce the risk? Other parts of the world may still need added infrastructure and in some areas social unrest risk also has to be incorporated. All of these are relevant as it relates to your suppliers AND your suppliers’ suppliers because all of these risks are also being absorbed by you. In addition, if what you create and deliver to your customers is heavily dependent directly on your suppliers, then this risk is also being absorbed by your sales organization and contracts.
Therefore, you could frame this at many levels. This has an impact on your company’s own labour cost structure – especially if you are in more than one location in the world. It also has an impact on your Strategic Workforce Planning, especially around critical resources like Engineering, Technology, and Supply Chain etc. depending on your needs. It has an impact on all of your supplier contracts, especially those with high labour content. It also has an impact on your outsourced contracts for professional services as the labour cost arbitrage may be gone, necessitating a relook at the original decision to outsource.
All these issues and challenges impact every single one of your C-Suite stakeholders and the leaders in their organizations. If you identify what each of their Stakeholder Desired Outcomes (SDOs) are and tie them into each of these issues and challenges, it would make a great research note to send around. Additionally, any of you engaged in managing of any type of Professional Services categories could incorporate analysis like this to get even more support from Stakeholders and Sponsors. Collaborate with your critical suppliers to understand how they have incorporated these risks into their supply chain. Help Sales and sales contracting educate your customers and incorporate these issues in the discussions. This is the kind of role our Stakeholders and Sponsors are expecting if we expect a seat at the proverbial table. This is how to impact Stakeholder Desired Outcomes (SDOs) and add Strategic Value.
Latest posts by Dalip Raheja (see all)
- Why Should You Mark Nov. 7 on Your Calendar Right Now? - October 11, 2018
- Difference Between Sourcing and Category Management: What Do You Do When Your Leverage Fundamentally Shifts to Your Suppliers? - September 27, 2018
- Women Will Save This world – Men Have Messed it Up Long Enough? - September 13, 2018