Challenges for Today’s Global Supply Chain: Cost, Profitability and Personalization
When market research firm PWC put out its Global Supply Study in 2013, the concerns of the 500 surveyed executives were mostly what one would expect: profitability, cost management, and customer satisfaction. A fourth concern, however, indicates a shift in global supply chain realities. PWC’s study participants are worried about flexibility – and they should be.
That’s because globalization is changing the way companies view and use their supply chains to compete and gain market share. Global companies are managing multiple supply chains, and they’re counting on those operations to not only deliver goods on time, but to tailor and respond to divergent customer and supplier expectations regarding pricing and packages. To do that, supply chain operators need the capability to personalize offerings for multiple customer segments.
Among the challenges facing today’s supply chain are many that link directly to monetization. Market volatility, economic contractions and modest recovery cycles affect the way companies manage distribution, manufacturing, invoicing and materials sourcing. Expansion into new markets introduces complex taxation, invoicing and localization burdens. And dispersed market segments demand different pricing models and services. With so many critical functions in flux, enterprises need to optimize their supply chains simply to remain competitive.
Globalization and a Shifting Supply Chain Landscape
Unfortunately, many businesses are trying to apply outmoded processes and technologies to global supply chain operations. Often, existing systems are not capable of meeting modern demands. If a company needs to reroute an inbound container shipment, for example, a lack of visibility into the overall system can turn a simple decision to redirect a shipment from one port to another into a problem that ripples across the supply chain, and results in higher costs and decreased efficiency. As an organization’s logistics expand, so must its ability to quickly see the cost and service implications of every decision.
That visibility is particularly important in a time when most products have become commoditized. Gone are the days when pricing, features, and brand recognition were enough to set a business apart from its competitors. Differentiation in the global marketplace has as much to do with what happens in the supply chain as it does with product innovation. When the market dampens the payback for higher prices, businesses must instead meet their profitability goals by redesigning and enhancing their supply chains, and then use those improved operations to deliver value-added services to more sophisticated customers. Increasingly, logistics leaders are charged with delivering legacy products while also supporting the development, production, and transport of new offerings.
With an optimized global supply chain, an enterprise can address many of the pressures reported in the PWC study. Such a system delivers:
- Reduced costs. Companies that can easily access information about their suppliers make better procurement decisions. Online supplier and buyer community management is one approach businesses have taken to reduce their supplier sourcing and procurement costs.
- Increased transparency. A global business needs a single point of access for its supplier information and its buyer-supplier communities. With a global view and a transparent supply base, international supply chain operators can identify reliable suppliers anywhere in the world.
- Lower risk. An optimized supply chain allows a company to quickly assess a supplier’s ability to meet financial, legal, safety, quality, and environmental regulations and expectations. Those regulations differ based on customer and local standards, of course, so flexibility becomes essential to risk management.
- Support legacy and new products. Today’s global supply chain operators require a billing partner and a supplier settlement platform that can support existing products and adapt for new offerings. That platform needs to accommodate taxation, invoicing and other critical functions. As importantly, it must accommodate multiple and fluid business models to enable the company to reach international markets.
Solving Complex Global Supply Chain Challenges
As companies look to amplify growth and expand quickly into promising new markets, they will have to take a hard look at what their current supply chains are capable of, and whether those capabilities are enough to support global competition. Many will find that in order to support existing and future business objectives, they’ll have to reconsider their management processes in favor of more flexible practices.