Culture- How it Affects the Success of Your China Supply Chain

1. “Company culture is the shared values, attributes, and characteristics of an organization… [I]t encompasses a variety of elements, including work environment, company mission, leadership style, values, ethics, expectations, and goals. Alternate names: Organizational culture, corporate culture, workplace culture” – Alison Doyle. “If you want to provoke a vigorous debate, start a conversation on organizational culture. While there is universal agreement that (1) it exists, and (2) that it plays a crucial role in shaping behavior in organizations, there is little consensus on what organizational culture actually is, never mind how it influences behavior and whether it is something leaders can change.” The thing about company culture is that most leaders find it very hard to define. If they publish their core values on their website and enshrine these publicly then it lacks authenticity and feels like marketing. But they ignore culture at their peril: a company without culture is unmoored, it is very difficult to govern, and it usually does not last long.

2. nMost people will agree that successful companies have a good culture. One thing is for sure: company culture exists, it is about people, about leadership, and it matters. Culture is when a company encounters unexpected problems and employees pitch in because they notice and they care. So, in the long run, culture facilitates resiliency. It is also clear that culture becomes more challenging – and more important – when a company has more people and operates in more regions. Many sub- cultures then often emerge and the challenge increases. Multinationals notoriously struggle with this issue. In a supply chain, there is a dynamism of mutual dependency, both buyers and sellers benefit from a stream of repeat orders. The leader is the buyer. She sets the terms, specifies the product details, and determines whether to repeat the process and place more orders. The seller endeavors to meet, and often tries to exceed the buyer’s expectations. We have observed numerous occasions of manufacturers helping their clients with new and better ideas to make the product more effectively. In that environment, appreciation, respect, and trust

3. become important factors. Cultural affinity, both corporate and individual, facilitates the process. Also, culture stimulates the intellect. A healthy culture helps employees feel more comfortable speaking their minds and sharing opinions, even if controversial. The more complex the product, the more important the timeliness and details of execution and the intervention of thoughtful people, the more important the role of culture. In the China supply chain, buyers and sellers are confronted by a different culture, and the execution of contracts, especially long-term, repetitive contracts, becomes more challenging. China’s culture, because of its long history, traditions, and languages, is very different from Western culture. Its corporate culture too is different. Consider Jack Ma, the well-respected leader of Alibaba. He has built what is arguably the most successful business in China with a “996” ethos, a 72-hour week (employees should work from 9 am to 9 pm 6 days a week). So how does one integrate their shared Western human experience with their China supply chain? Must you learn Chinese? Must you make your China suppliers conform to your values and attributes? In practice, most successful importers find a way to align their culture with that of key suppliers, even if they do not specifically identify culture as a concern. They do this in two main ways: by personally building rapport with the manufacturer and by interacting with them through trusted intermediaries. The first is obvious, if interaction among leaders does not build trust, there is a good chance the sourcing process will not last long. The second is perhaps even more important: once a buyer/supplier relationship is in place, the momentum

4. must be maintained. For a successful relationship to last years, the cross- cultural functionality must be resilient in time and able to withstand the inevitable challenges of the sourcing process, and this is often made possible through experienced intermediaries on site. Trusted intermediaries tend to be employees who are responsible for a company’s sourcing – people in your company that are familiar with both your culture and that of your Chinese supplier and know how to bridge the culture gap between Western buyers and China suppliers. These might be Procurement Managers, Sourcing Directors, or Buyers. There can be many layers of such intermediaries depending on the size and complexity of your supply chain: one based in your home office, one based in your China sourcing office, and perhaps a trusted intermediary from the supplier. Trusted intermediaries nearly always add value to the buyer by coming up with fresh new ideas or different perspectives on how to achieve results. They can anticipate and prevent problems as long as a strong culture binds the trusted intermediaries to the buyer. Culture here is a prerequisite. Management of that subtle but important element of the supplier relationship does not get easier. With Covid 19, travel is much harder, and decision-makers cannot easily meet with suppliers. Buyers and sellers have to navigate new and different political currents and Corporate Social Responsibility (CSR) demands closer attention to a number of new ESG (Environmental, Social, and Governance) factors in an increasingly sensitive world. Acquiring the cultural affinity to manage this successfully is not given to everyone. The holy grail is to have a China team that is fully versed in Chinese culture, that knows intimately what works and what does not and, at the same time, one that can fully relate to your own culture, vision, and objectives. CPG

5. bridges this culture gap every day, and it does it through the complex interaction of its China team with suppliers, and its US-based Client Success Management who interacts mostly with the client. So yes, culture, this invisible glue that binds the fabric of your organization, also matters in your supply chain. – By Michael De Clercq