Sourcing/Procurement Trends
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Guest Column: Crossing the Digital Divide
Multinationals are leveraging Internet technology to build bridges to suppliers in developing economies
For years, large multinational corporations have adopted an effective strategy of offshoring key operations to countries with advantageous labor environments to remain competitive in international markets. In doing this, many of these companies have been forced to "surrender" the world-class supply chain practices they've implemented, or aspire to implement, throughout the rest of their enterprises.
These large multinational companies have gained access to the developing world's labor pool and successfully transitioned and enlarged their supply chain community without sacrificing quality, surety of supply or customer loyalty. But there has been an unintended consequence. They have created a digital divide.
Bridging the Gap
On one side of the divide is the ability to implement world-class operational systems and processes that require the engagement of trading partners. On the other side are the sustainable development requirements and licenses-to-operate practices necessary to sustain the low-cost country operations, which are dependent upon local suppliers and service providers. As these large companies focus on Six Sigma activities to drive competitive differentiation and advantage, the greater the divide grows because their local partners struggle to keep pace with the level of process and technology sophistication. Inherent in this "divide" is the gap in infrastructure, knowledge and business cultural barriers.
But now the Internet, along with advances in software and services, is enabling local companies to become proficient in the digital world and bridge this gap. Technology and the Internet are providing opportunities to drive world-class business processes out to local entities in developing countries.
There are several identifiable benefits for large companies that engage and support exemplary business processes with their local partners. Streamlining parallel systems and processes drives clear measurable efficiencies and opens the path to higher level process engagement and economic returns. Supporting small micro-entities (SMEs) as they engage these new processes goes a long way towards fulfilling sustainable development needs and supporting local/regional license-to-operate requirements in these developing markets.
But these are not the only benefits that companies can bank on; in many cases the support and advancement of a company's local/regional supply chain partners help drive greater alignment with national governments that have demonstrated an interest in developing their SME business communities. Another added benefit is stronger, more profitable suppliers, decreasing the companies' risk of engagement and creating future opportunities for price adjudication.
These large multinational companies have gained access to the developing world's labor pool and successfully transitioned and enlarged their supply chain community without sacrificing quality, surety of supply or customer loyalty. But there has been an unintended consequence. They have created a digital divide.
Bridging the Gap
On one side of the divide is the ability to implement world-class operational systems and processes that require the engagement of trading partners. On the other side are the sustainable development requirements and licenses-to-operate practices necessary to sustain the low-cost country operations, which are dependent upon local suppliers and service providers. As these large companies focus on Six Sigma activities to drive competitive differentiation and advantage, the greater the divide grows because their local partners struggle to keep pace with the level of process and technology sophistication. Inherent in this "divide" is the gap in infrastructure, knowledge and business cultural barriers.
But now the Internet, along with advances in software and services, is enabling local companies to become proficient in the digital world and bridge this gap. Technology and the Internet are providing opportunities to drive world-class business processes out to local entities in developing countries.
There are several identifiable benefits for large companies that engage and support exemplary business processes with their local partners. Streamlining parallel systems and processes drives clear measurable efficiencies and opens the path to higher level process engagement and economic returns. Supporting small micro-entities (SMEs) as they engage these new processes goes a long way towards fulfilling sustainable development needs and supporting local/regional license-to-operate requirements in these developing markets.
But these are not the only benefits that companies can bank on; in many cases the support and advancement of a company's local/regional supply chain partners help drive greater alignment with national governments that have demonstrated an interest in developing their SME business communities. Another added benefit is stronger, more profitable suppliers, decreasing the companies' risk of engagement and creating future opportunities for price adjudication.
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