A third influencer is outsourcing. Similar to M&A, Japan is a relative latecomer to outsourcing. However, tighter margins and tough competition are changing its perspective. For companies in all countries, outsourcing typically helps reduce costs, avoid future capital expenditures and increase the predictability of financial outlays. However, there is much evidence to support other outsourcing motives on the part of Japanese companies. For example, many are looking for wider pools of process expertise. Increased M&A also is seen as a driver of outsourcing in Japan because the post-merger integration of large companies is a good time to transfer management of one or several supply chain processes.
The environment and safety/security might also be seen as drivers of supply chain change and innovation in Japan. The country is particularly committed to environmental responsibility, and this has become a key influencer of companies' supply chain policies. And like most highly industrialized countries, Japan has found itself obligated to establish new supply chain guidelines for protecting people and products on a worldwide basis.
Key Challenges and Barriers
Globalization, M&A, outsourcing and other trends have clearly affected the supply chain actions and strategies of Japanese, as well as other, companies. However, Japanese organizations also face a variety of challenges and barriers that are more or less unique to their country. Many of these challenges relate to flexibility. Japanese companies tend to be less far along with their establishment of standardized global operating models, often because their supply chain processes are tightly defined by the enterprise technologies they have implemented. The net effect is that broadening or changing their supply chain reach becomes more complicated, and thus they are less well equipped to address emerging markets.
Technology limitations are a Japan-specific barrier in another way. A recent survey by Japan's Ministry of Posts and Telecommunications found that, while 78 percent of Japanese businesses use the Internet, only 25 percent conduct online business-to-consumer sales activities. This places them significantly behind the United States and Germany, where, respectively, about 75 percent and 68 percent of businesses have an online presence.
Flexibility issues relate to people as well as technology. Mobility is more limited in Japan than in many other countries. Lifetime employment often works against global trends that emphasize leaner workforces and frequent retraining. One might assume that this demonstrates a less-enlightened view of diversity in general: Japanese businesses do not reject alternative views or approaches, but they cannot totally buck centuries of tradition. They are part of a culture that values compliance, conformity and homogeneity. This influence of culture on global supply chain management and innovation cannot be overstated. Take the results of a recent Accenture survey of more than 900 C-suite executives in the United States, United Kingdom, France, Germany, Italy, Spain, Japan, Canada and China. Asked to identify the greatest challenges to building global enterprises, respondents' top concern was the ability to maintain a common corporate culture around the world — to inculcate their core values and corporate identity across many countries. According to survey results, nearly 25 percent of respondents said their organizations are poorly equipped to succeed as global enterprises. And among them, Japanese executives ranked lowest in feeling that their businesses have become more global in terms of employees, suppliers and customers.
A final challenge is risk management. Following a 2006 research effort, Accenture found that 73 percent of organizations have experienced a significant disruption in the past five years. Of those, nearly 32 percent required more than one month to recover, and another 36 percent took between one week and one month. The ability to meet the needs of customers and constituents was compromised in 94 percent of these situations. Statistics like these have prompted more and more western companies to install a Chief Risk Officer (CRO) whose job is to develop and implement corporate strategies for identifying and categorizing risks, monitoring threats, fabricating potential responses, accelerating recovery, and measuring performance, and developing metrics to ensure continuous improvement. Japanese companies, on the other hand, have been less aggressive about developing formal positions and processes for managing supply chain risk. Their focus on risk is limited largely to finance.
Opportunities for International Companies