Impact of Globalization in Creating Sustainable Competitive Advantage

In this business environment, what does it take to win?


In an eight week period, the partner re-designed and built a new DVD prototype with a capacity of 500 DVDs. The two companies then worked together to quickly demonstrate and validate the manufacturability of the product. Once tests were complete, the partner ramped up production to meet a very aggressive rollout timeline with a DVD rental solution that offered a capacity increase of 400 percent.

The partnership allowed Redbox to focus on channel relationships, customer service and branding, while its partner focused on product design, manufacturing and the supply chain needs required to meet the aggressive initial marketing timeline and growth requirements.

The original production ramp was five units per week, which quickly grew to 60 units per week. Today, the partner is manufacturing more than 100 units per week. Redbox has been a tremendous success and expects to surpass Blockbuster Video in the number or rental outlets in 2007. The two companies continue to work together to develop next-generation designs with added functionality and increased capacity.

Speeding Manufacturing and Supply Chain Performance

Another issue is improving supply chain performance to reduce lead times to meet market requirements.

One example is Ericsson. Not long ago, the company was under pressure from customers to reduce lead time for its high-end network switches from six weeks to one week while meeting a significant increase in demand. These highly complex, custom-ordered, just-in-time deliveries had more than 5,000 different configurations. The products consisted of more than 2,000 different parts from 150 suppliers around the globe.

Together, a supply chain solutions provider and Ericsson re-engineered the technology company's supply chain and reduced the lead-time 75 percent and achieved ship-to-request performance of 99 percent — a dramatic improvement from previous levels. If Ericsson had not been able to meet this aggressive lead-time reduction, it would have lost sales to a competitor. Instead, Ericsson began to take market share based on the competitiveness of their supply chain.

A Lean Supply Chain

While effectively managing non-core business processes such as collaborative design, manufacturing and aftermarket services is essential, partners must also demonstrate a consistent track record of operational innovation to ensure that a company's supply chain will continue to outperform competitors for years to come.

One vital factor in improving competitiveness is a shift from forecast-based supply chains to demand-driven supply chains — no easy task. Sales forecasts, based on detailed research and analysis of customer buying patterns, are almost obsolete the moment they are created.

The most effective companies are moving from a push model to a pull model. And the results of this kind of operational innovation are tangible — faster time-to-market, improved quality and reduced inventory, waste and cost. A key element in how customers shift from a push to a pull model is the successful deployment of Lean Six Sigma manufacturing. The next frontier in Lean is moving outside the four walls of a manufacturing facility and collaborating with all members of the supply chain to create an end-to-end Lean supply chain.

Leveraging Every Advantage for Supply Chain Excellence

These examples illustrate both the challenge and the potential of globalization. Business is moving at a dizzying pace. Success requires focus on product innovation to strengthen the brand while outsourcing non-core operations. Optimizing the supply chain to reduce lead times and achieve the lowest total landed cost is critical, but truly competitive supply chains assimilate the entire product life — from product development to end-of-life — into an integrated solution that out-innovates, out-performs and out-serves the competition. Navigating the rapid changes of globalization is treacherous at best. Sustainable competitive advantage and business success depends on speed, innovation and a focus on core expertise to meet customer demand, capture new markets and beat the competition.

About the Author: Doug Britt is executive vice president at Solectron, a provider of Electronics Manufacturing Services. Solectron is being acquired by Flextronics. Britt joined Solectron in 2000 as vice president of global supply chain operations, focused on material planning and supply chain management. Currently, Britt serves as executive vice president, leading Solectron's worldwide business development, account management and marketing organization.

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