October 2004 | Commentary | Checking In

The Question? Globalization. The Answer? SCM

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Mention globalization to a group of Inbound Logisticsreaders and be prepared to get an earful, as we did at a recent logistics conference.

Globalization challenges vary based on company, trading partners, and markets, but many readers share key areas of convergent concern. Their top three globalization issues are:

China. Capacity and infrastructure issues top the list here, with readers citing port capacity at Shanghai and air cargo lift out of other areas.

In addition, the long-term availability of IT and logistics infrastructure—including skilled mainland logistics partners and a good middle-management labor pool able to administrate complex supply chain and visibility strategies—have many logistics practitioners concerned.

Business continuity, especially as it relates to international lines of supply and ocean transportation. Container security poses a real threat, both in terms of the exposure to catastrophe, and the concomitant business and trade disruption. Compliance, securing long lines of supply, and related information security drives many companies to increase investment in inventory or risk losing sales.

Global partners/alliances. When changing sources, expanding into new markets, or embarking on a program of business continuity risk management, going it alone is sometimes not the best route. The rapidly changing logistics landscape drives many to rely more than ever on forwarders, 3PLs, and transportation partners.

One important and growing practice to help deal with globalization challenges—especially to those who practice inbound logistics—is pre-distribution at the point of origin, or offshore consolidation, which takes control of material sourcing further up in the supply chain.

According to industry experts, a greater percentage of product is being controlled closer to the point of origin than three years ago, and this practice is expected to grow continually over the next few years.

This strategy helps companies in several key areas: business continuity issues such as infrastructure constraints at the point of origin; the efficient purchase of ocean and air transport services; and aligning logistics processes toward demand signals from customers. It also helps with infrastructure issues at destination ports, and with destination intermodal and/or trucking capacity issues.

When offshore consolidation techniques are used, product gets to the North American market and is distributed seamlessly, resulting in less capacity strain on the destination infrastructure.

This is especially beneficial for logistics professionals who have spent the last few years reducing logistics infrastructure to modernize, cut costs, or speed and reduce inventory, but whose growth has remained constant. The last thing they want to do is rebuild destination infrastructure.

Practicing inbound logistics by consolidating or pre-distributing offshore is one way to keep product flow moving quickly without adding destination warehouses and inventory.

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