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.


Deloitte's report pointed to several factors differentiating the complexity masters from their competitors, including best practices touching the customer, products and technology. First, top performers collaborate with customers, rather than only with suppliers, and they undertake customer profiling, customer loyalty and customer segmentation initiatives. On the product side, leading companies increase performance by managing products and introducing new products, managing mass customization of parts, reducing cycle time and improving time to market. And as far as technology, the complexity masters are deploying such solutions as product lifecycle management and advanced planning systems that focus on long-term planning and forecasting, as well as more tactical technology, including warehousing management systems and transportation management systems.

Dealing with Complexity

Rick Moradian, vice president for consolidation and deconsolidation with APL Logistics, agrees that supply chains have become more complicated in recent years. "It has become far more complex," he says, pointing to the variety of potential events that can disrupt a supply chain that flows across borders. "Just one or two or three occurrences around the world whether it's a political issue, a labor issue, a port strike issue, a fuel surcharge issue, a potential terrorist act could completely alter not only the supply chain flow but also manufacturing or the final outcome of production."

In response, Moradian says that he is seeing companies change the way that they are sourcing products overseas, shifting from a purely "lowest-cost country" strategy to an emphasis on sourcing goods from more than one country "in order not to have all their eggs in one basket." And he says that frequently these days supply chain groups are working much more closely with other functions in the enterprise inventory planners, sourcing and procurement staff to ensure optimal product flow and cost minimization. "It's become a very unified and very much an integrated process," he says. "It's no longer siloed, at least for sophisticated organizations, where a buyer purchases, an inventory manager assesses the quantities and the logistics provider flows. We're seeing more and more integration between these entities."

That collaboration extends to external supply chain partners, too, particularly at the planning stages, according to Moradian. He explains: "We have a handful of very sophisticated customers who will sit in a room with us for one-, two- or three-day whiteboard sessions where we tear apart the entire supply chain, not just from a transportation or flow perspective, but from the original decision-making about where a product should be sourced and the logic behind that, including the first cost of that product, on down to the final consumption or requirements for that product from a destination perspective. We design the entire network based on analytical criteria."

A Hybrid Approach to the Global Supply Chain

Elsewhere, Greg Aimi, a research director with the supply chain practice at Boston-based technology consultancy AMR Research, says that some companies have responded to the challenges of an increasingly complex and increasingly global supply chain by bringing part of that supply chain home or at least a little closer to home to be better positioned to meet fluctuations in customer demands.

"Companies want to be able to minimize inventory of finished goods, so they want to be more nimble at producing just the right amount that is going to be consumed," Aimi says. "But when you move offshore, you introduce a fairly long lead time, and that certainly imposes a difficulty in trying to be nimble and flexible."

In response, Aimi says that AMR has seen a number of companies shifting the production of goods that have high-volatility demand or that put their entire supply chain at risk. For these goods, manufacturing is moving either "near-shore" or "onshore" that is, either close to the target market (say, in Mexico or Canada for goods destined for U.S. consumers) or in the target market.

Weaving the Supply Chain Threads

Other companies have attempted to deal with the complexity of their newly global supply chains by bringing in third parties to handle particular aspects of their operations. Peachtree Fabrics, for example, has brought in UPS Supply Chain Solutions to manage the movement of the company's goods in its supply chain even as it has extended its operations to manufacture products abroad.

Founded in Atlanta in 1947, Peachtree currently offers fabrics to customers in the residential, contract/hospitality and marine industries, as well as furniture manufacturers. The company's product list runs to more than 10,000 items, and its client list includes manufacturers, furniture refurbishers and fabric store retailers in the United States, Canada, Mexico and the Far East. Over the years, Peachtree has shifted a large portion of its manufacturing overseas in order to remain competitive in the fabric market, and the company now manufactures fabrics in China, Italy, Belgium, Korea, Turkey and India.

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