The business landscape is rapidly becoming more global. Largely due to improvements in communications, globalization is dramatically impacting the way business is managed and transacted, even on the most local levels. No area of a business is more affected by the trend to a global business environment than the supply chain. Manufacturing, distribution, sourcing of materials, invoicing and returns have all been significantly impacted by the increased integration of a global customer and supplier base, and many companies find that existing processes and technology are not flexible enough for this new business environment.
For example, historically, many companies have brought in container shipments from Asia Pacific through the ports in southern California. As the volume of container shipments has increased, all of these ports have experienced capacity issues relating to customs clearance and transshipping. As a result some companies are contemplating rerouting these inbound shipments to alternate ports. This change may seem subtle, but a shift in logistics of this magnitude has far-reaching effects on the overall cost and efficiency of the supply chain network. Dynamically repositioning the point of entry for inbound container shipments can have a positive impact on customs clearance times and access to increased transportation capacity, however, there can be a negative impact as well. Better understanding the total landed cost and service implications of alternate ports of entry can help improve supply chain costs and performance.
The right supply chain design is critical to managing the changes brought about by rapid globalization. A well thought-out supply chain network design can optimize the supply chain network and the flow of materials through the network. In doing so, network design captures the costs of the supply chain with a "total landed cost" perspective and applies advanced mathematical technology to determine optimal answers to both strategic and tactical questions.
The following are strategic questions answered by a well thought-out network design:
- Where should facilities be located?
- How many facilities should I have, and what capabilities should they have?
- What kind of capacity should they have?
- What products and services should they handle?
- Whose manufacturing and distribution orbit should they source?
- Which contract packers or contract manufacturers should I use?
- How can I achieve operations synergies through integrating acquisitions?
Trend 3 — Increased Competition and Price Pressures
Historically, price, product features and brand recognition were enough to differentiate many products in the marketplace. With the continued commoditization of many products, companies need better ways to distinguish themselves. In one case, a large global consumer goods manufacturer saw prices around some of its commodity products drop as much as 60 to 80 percent. Product innovation and brand equity no longer allowed them to command a higher price in the market. In order to continue to compete with that commoditized product the firm made significant cost improvements with supply chain redesign and technology.
Companies are looking to their supply chains in two ways to help offset this trend. First, they are looking at ways to reduce cost and are creating a more efficient value chain to remain cost competitive. Second, companies are looking at ways they can provide value-added services to meet the demands of more sophisticated customers.
Cost improvements around inventory management, logistics operations, material management and manufacturing costs, including raw material and component acquisition can be found with:
- sales and operations planning
- transportation/distribution management
- improved product lifecycle management
- improved strategic sourcing and procurement
There are a number of ways suppliers can differentiate themselves and provide value and additional services and capabilities to their customers. Here are a few:
- vendor managed inventory (VMI)
- radio frequency identification (RFID)
- labeling, packaging
- drop shipping
Companies should not only look to their supply chain to drive cost improvement, but should increase capabilities as a means for staying competitive. Streamlining processes with better design, better collaboration across networks and new services will help your company stay competitive and strengthen relationships with your customers.
Trend 4 — Outsourcing