In Depth: Global Supply Chain  Mastering the Complexity Challenge in the Global Supply Chain

A variety of pressures are pushing enterprises across diverse sectors to extend their supply chains around the world. But while many companies are acting globally, they are still thinking locally.

[From Supply & Demand Chain Executive, August/September 2004] How hard is it to manage a complex, global supply chain for optimal efficiency? Too hard for most companies, according to a study issued last year by consulting firm Deloitte Touche Tohmatsu.

In the study, "The Challenge of Complexity in Global Manufacturing: Critical Trends in Supply Chain Management," Deloitte reported that 57 percent of companies in a survey of 392 North American and European executives had moved production to lower-cost countries. Fifteen percent of the North American enterprises and 29 percent of European companies said they didn't even manufacture products in their home countries anymore.

The study pointed to various drivers behind this trend, with cost figuring prominently. "In a world where mega-retailers like Wal-Mart and Carrefour have amassed enormous buying power, cost pressures for manufacturers in most industries are immense," the study's authors wrote. Other reasons cited in the study included a desire to reduce taxes, duties and tariffs, or to take advantage of various investment incentives, by establishing a presence in a foreign market.

(Almost) All Optimization Is Local

But despite companies' international aspirations, Deloitte found that most manufacturers are not taking a more global approach to designing their supply chains and, therefore, most likely are missing out on the potential efficiencies of such an approach. "Manufacturers are spreading supply chain operations across the world," the consultants reported. "Yet, most still appear to be optimizing their supply chains on a 'local' basis