In our last Podcast, we concluded that Globalization is huge and that Globalization is about optimizing one's North American, Europe and Asian resources to achieve a great Global Supply Chain.
The purpose of this podcast is to dig deeper into an understanding of what we mean by a Great Global Supply Chain.
Let me begin with a little reinforcement on the importance of the Supply Chain with a quote from Len Schlesinger, the Vice-Chairman of the Limited Brands,
“So you do not understand the importance of the supply chain to your business? I would love to compete with you.”
It is clear: An organization’s global supply chain can either be the strategic weapon for marketplace victory or the fatal flaw that results in an organization’s failure. Let me repeat: An organization’s global supply chain can either be the strategic weapon for marketplace victory or the fatal flaw that results in an organization’s failure.
I think there are six types of organizations in this world:
Type 1: Organizations that deliver a local service (dentist, landscaper, realtor)
Type 2: Organizations that deal with products and avoid globalization
Type 3: Organizations that deal with products and naively pursue globalization
Type 4: Organizations that deal with products and intelligently pursue globalization
Type 5: Organizations that deliver a Global service and naively pursue globalization
Type 6: Organizations that deliver a Global service and pursue globalization
I believe Type 1, Type 4 and Type 6 will be successful. So either a local service firm or a global products or service firm which intelligently pursues globalization will continue to exist.
Type 2, 3, and 5 organizations who either naively pursue globalization or who try to be in a non-global product business will cease to exist. So we are not discussing profit levels, return on investment or return on assets. We are discussing what companies will continue to flourish, versus the companies that will go out of business.
This global supply chain topic is about survival.
Organizations that get it will be around in the future. The ones who do not will fall prey to the Global Supply Chain Winners!
So, what is a Global Supply Chain? The foundation, the starting point to one's Global Supply Chain is the organization's Global Business strategy. This Global Business strategy at the most basic level is: what products should be sold into what markets.
Once this foundation is understood, then the Global Supply Chain Strategy and execution processes can be put in place. At the most basic, level the Global Supply Chain Strategy and Execution processes that must be put in place involve:
Buy
Make
Move
Store
Sell
These five steps must be pursued from an End-to-End perspective, which is to say:
From supplier’s supplier to customer’s customer
From strategy, plan, design, implementation, and integration
From best practices to information systems in material handling integration
From North America, Europe and Asia to the entire world
From concept economic justification, validation, execution, and results
So we need to do a great job of sourcing, local transport, local store, customers and duty, global transport, domestic store, domestic move, selling and operations planning, merchandizing, selling and product development.
Where product development is really not the end of the supply chain, but the beginning of the next cycle of Global Business Strategy and back into Global Supply Chain Strategy and Execution Processes.
Of course this entire process must be pursued while increasing visibility, reducing risk, increasing speed and enhanced execution management. So what are the factors that make a global supply chain the best?
1. The total delivered cost for the global buy, make, move, store, sell is best-in-class. This is delivered cost to customers, not landed cost at port of entry.
2. The total cycle time for spending money to collecting money is best-in-class. The cash-to-cash cycle is very short, maybe even negative.
3. The entire supply chain is focused on the ultimate customer satisfaction; and speed, perfect orders, on-time performance, no surprises, and continuous improvement are a part of our DNA.
4. The supply chain is agile, adaptable, and responsive to changes in the marketplace.
5. The supply chain is able to recover from disruptions, errors, and risks. The supply chain is resilient.
6. The supply chain is benchmarked against relevant supply chain performance indicators, and best practices are sought out and pursued.
These factors must be addressed while understanding:
80% of North America manufacturing companies are sourcing off-shore.
65% of North American manufacturing companies are distributing to global markets.
80% of North America manufacturing companies are outsourcing some logistics process as well as information technology, financial functions or call centers.
Most companies are concerned with the economy.
Most companies are torn between being a low-cost provider and a high-service provider.
Most CEOs are seeking cost reductions, but also looking for profitable growth.
Many companies are concerned with their lack of standardization in their processes around the world.
Most CEOs are pleased with their reduction in the piece costs, but unpleased with their increasing supply chain costs.
In brief, we live in interesting times, in very interesting times indeed. Managing and leading global supply chains have become one of the great challenges of 2008 and for years to come. The level of Global Supply Chain complexity must be matched with our emphasis of supply chain innovation.
Not stepping up to these Global Supply Chain challenges can be fatal to your company. I encourage you to step up, to transform your Global Supply Chain to truly become best-in-class.
In my next podcast I will help you sort through some of the Myths versus Facts of the role of China and fuel charges on the Global Supply Chain.
