July 2005 | Commentary | Supply Chain Technology

The Care and Feeding of Your Global Supply Chain

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When an enterprise goes global, the nature of its supply chain has to change—not once, but continually. Nationwide may be big but worldwide is much, much bigger, with more factors exponentially governing the health of an enterprise operating a complex global supply chain.

Scaling up to manage a global supply chain means dealing not just with a larger size, but infinitely greater complexity. Companies may need to reexamine, and perhaps give the bum's rush, to tried-and-true supply chain methods.

Change can be threatening, but only to those who refuse to continually plan and adapt, with intelligence. Before making any and all changes, such as going global, an enterprise should examine its supply chain's base-level processes. This means digging down into the nitty-gritty rather than making some grand, even reasoned, top-down command: "Thou shalt fix my global supply chain!"

The old rule of thumb when managing a supply chain has been: get it done faster and, if possible, cheaper. Today, however, faster and cheaper have lost some of their clout.

Faster can mean more expensive. This can be all too true in these days of outrageous fuel prices. Pretty soon gas will be as expensive as Evian water.

Cheaper, on the other hand, may not mean better, or as good, and this can adversely affect the customer. Any supply chain strategy that adversely affects the customer is a losing proposition, and risks the resounding shout of, "You're fired!" from a sneering Donald Trump.

Someone Must Suffer

In a world of collaboration and partnerships, faster and cheaper can mean high levels of dissatisfaction, particularly in a long-term business association. Getting something cheaper usually means one party suffers more than another. A party can tolerate short-term suffering if it will gain long-term benefits. But no party will tolerate long-term suffering if the benefits are only short term.

This kind of partnership or supplier relationship can, will, and does unravel. No company wants to bear the brunt of a cost reduction, particularly if the other parties are not assuming their fair share.No supply chain is an island. One enterprise's global supply chain affects another, and another, and another. Supply chains of all kinds are linkages of enterprises. And global supply chains expand out geometrically.

Mixing the Ingredients

What are the ingredients of a successful global supply chain?

First, it must be flexible. The enterprise supply chain needs to be able to flex as market changes occur over time. These market changes can be demand-driven or supply-driven, and can cause secondary reverberations, or other interactions, of their own. The flexibility must include changes on all affected levels; not just a bend in the middle like an overweight umpire dusting home plate.

Second, a global supply chain must be adaptive to changes in the competition's business strategies, in the procurement system, and in customers' needs, to name but a few challenges.

A global supply chain must also adapt to the enterprise's internal business strategy changes. These changes may result from any number of things: new product introductions; a shift in customer service focus; a new manufacturing technology, such as robotics; a shift of emphasis from traditional warehousing to distribution centers; or even a move to RFID technology (may the force be with you!).

Third, a global supply chain must be coordinated. This means that, during the change process, all partners must be congruent and properly aligned. To ensure successful coordination, companies must continually reinforce trust among their supply chain partners, and implement a seamless integration of information using the same application software.

Partnerships need to move beyond comparing prices to comparing and matching methodologies. When this level of collaboration occurs, real values are aligned, not merely jostled. A collaborative partnership can be measured by the depth and breadth of such alignments. Partners may have different functions, but if they are not all aimed in the same and right direction they are of little value.

Where do you start on the process of tuning and trimming your global supply chain? There are a thousand first steps, but it's best to start simply.

One good way to start is by listing all the problem areas in your supply chain. This list will probably be long, with too many problems to fix right away.

The next step is culling down the list to those problems that make the most difference to the bottom line, have the lowest cost to fix, and yet fulfill the conditions of successfully adapting to change. It's a continual process.

Put the Customer First

Another way to cut down the list is to identify those functions that most affect the customer, and get to them post-haste. It makes no sense to change or fix items that have little or no impact on the customer. As some wag has said, it does not help to dust the Pompeii furniture when Vesuvius is erupting.

A healthy global supply chain depends upon continual monitoring and change management that has as its primary objectives flexibility, adaptability, and coordination of its multiple parts, functions, and strategies. This is best accomplished through a process of customer-focused improvements that subsequently benefit the enterprise.

Renewing your global supply chain is a bottoms-up process that looks at basic cause and effect, and is not accomplished by a hierarchical management edict.

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