In Depth: Global Supply Chain  Making Global Supply Chains Work

For many supply and demand chain practitioners, globalization isn't a newfound political issue; it's a reality they've been contending with for years. As companies have sought to lower their costs and expand their markets by taking a more international...


For many supply and demand chain practitioners, globalization isn't a newfound political issue; it's a reality they've been contending with for years. As companies have sought to lower their costs and expand their markets by taking a more international approach to the way they source, build and sell their products, globalization is adding new challenges and bringing new opportunities to the supply and demand chain.

[From Supply & Demand Chain Executive, August/September 2004] Lance Throneberry doesn't have any illusions about the challenges involved in building a truly global supply chain. In fact, as Throneberry, who is director of strategic sourcing and eBusiness at Denver-based Newmont Mining Corp., ticks off many of the potential pitfalls one by one, you get the idea that he's been over this list more than once. "The challenges will be culture, language, dealing with local economies and currencies, local governments," he says, before adding time differences, geographic dispersion, country-specific processes, currency risks, technology hurdles, regulatory variations, and legal risks. "And the list goes on and on," he concludes with a chuckle.

Throneberry is heading up a project to link the $3.2 billion gold producer's own divisions and its supply base around the world in a unified global supply network. Like many supply and demand chain executives these days, he has found that globalization is adding new layers of complexity to the supply chain, along with considerable opportunities for achieving efficiencies and winning new markets, as barriers to commerce fall across the world. This article will look at how Newmont, communications equipment and software company Avaya, and footwear company Wolverine World Wide are tackling these issues in their efforts to build more global supply chains, while separate articles elsewhere in this special report will examine such aspects of the global supply and demand chain as the hidden costs of offshoring and the challenge of ensuring security of supply in the lean, global supply chain.

The Global Reality

The size, scope and growth of global trade are inescapable. In hard numbers, World Trade Organization (WTO) data show that between 1993 to 2003 world merchandise exports nearly doubled, rising from $3.67 trillion to $7.27 trillion. As a percentage of the total world economy, technology consultancy Aberdeen Group, in its July 2003 "Global Trade Management Benchmark Report," cited WTO statistics indicating that "nearly 30 percent of world gross domestic product (GDP) currently crosses borders." Furthermore, Deloitte Research reported in its recent study "Mastering Complexity in Global Manufacturing," based on a survey of nearly 600 U.S. and European executives, that 80 percent of manufacturers in those regions currently purchase, or plan to purchase in the next three years, components or goods produced outside their home countries.

Mark Vigoroso, a senior analyst with Aberdeen and author of the consultancy's benchmarking report, highlighted several drivers behind this boom in cross-border commerce, including new inter-governmental treaties that have reduced trade barriers, increased outsourcing as companies look to reduce costs by shedding non-core functions or by building relationships with suppliers in lower-cost countries, and intense competition in the domestic marketplace, which is forcing many corporations to look outside their home countries to win share in new, emerging markets. On the latter point, Deloitte's survey for its "Mastering Complexity" report found that just 63 percent of North American companies and 49 percent of Western European companies planned to expand sales in their home markets, while large percentages of companies in both regions were looking to foreign markets for new sales opportunities.

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