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...


Leaving aside the debates over the impact of "offshoring" on the domestic employment market, "free trade" versus "fair trade," and the inevitability or desirability of globalization, the potential bottom-line benefits that can accrue when companies take a more global approach to their supply chain appear to be significant, both for those individual firms and for the economy as a whole. For example, respondents to a recent survey by the 400-member National Electrical Manufacturers Association revealed that the cost to source a product in China and get it shipped to its ultimate destination was 27 percent less than what it would cost to manufacture the same product in the United States. As Malcolm O'Hagan, NEMA president, put it in testimony before a congressional hearing on China's role in the global economy, "Having commodity products manufactured in China allows our companies to offer these products to consumers at attractive prices."

Indeed, Catherine Mann, a senior fellow at the Institute for International Economics, wrote last December in a policy brief entitled "Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth" that increasing use of global suppliers for components in the technology industry probably accounted for 10 to 30 percent of the significant drop in information technology (IT) hardware prices in the 1990s, leading to higher productivity growth and an additional $230 billion in GDP for the United States from 1995 to 2002. Not chump change by any means.

Mining Gold from the Global Supply Chain at Newmont

If any company is likely to strike gold by extracting value from its global supply chain, surely it is Lance Throneberry's employer. After all, Newmont Mining Corp., where Throneberry is director of strategic sourcing and eBusiness, positions itself these days as "The Gold Company," a justifiable claim considering that Newmont is the world's largest gold producer, accounting for about 9 percent of the global mine supply in 2003.

Founded in 1921 in New York but currently headquartered in Denver, Newmont certainly is a global company today, with 14,000 employees working on five continents around the world, including at mines in Peru, Indonesia, Uzbekistan, Australia and Nevada. According to Throneberry, the company has recently embarked on a multi-year initiative to drive consistency across its supply chain by applying a global strategy to the way that it works with its supply base, with the goals of not only reducing costs but also creating a global supply network that will link the gold producer's own divisions and its supply base around the world.

To lead the process, the company's executive management at the corporate and operating unit level formed a supply council that included the supply directors from each of the major units around the world. The council is not empowered with unilateral authority to make decisions regarding Newmont's supply chain, and sign-off remains with senior-level executives, but the council nevertheless acts as a governance body for the supply chain initiative and provides a global perspective that would otherwise not be possible if the project were led solely by the U.S. unit.

The key tool that Newmont is using to realize its global supply chain ambitions is e-business. In fact, when the company first conceived of the project, it began by setting up a project management office called just that, "e-Business," as a standalone technology group reporting neither to IT nor to supply chain within the company. However, that soon changed because the specific solutions that the group looked to implement, such as e-procurement and an e-marketplace, affected sourcing and other supply chain functions at the company. "We found that we were having a tremendous impact on supply chain," says Throneberry, who subsequently was brought into Newmont's supply chain group.

Processes and Technology

The roadmap that Newmont's e-Business group laid down for achieving its goal of creating a unified supply network included business process and technology components. The former comprised supplier enablement to connect the company electronically with its key suppliers; business process redesigns to ensure that the company avoided the pitfall of e-enabling inefficient processes; proven change management techniques; key performance indicators (KPIs), combined with milestones and monthly reports, to ensure the project stayed on track; and a monthly newsletter, eUpdate, to keep all the stakeholders informed of progress and highlight successes.

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