Achieving Total Visibility, Mitigating Risks through a Global Supply Chain Network

Managing a successful global supply chain can deliver unprecedented results and propel companies to become industry leaders

Without question, companies today conduct business in a global environment. Whether or not companies truly operate with a global view, however, becomes a much murkier issue. Many large companies are labeled as global businesses — internally as well as externally — because they have offices, factories, customers and products offerings around the world. Yet too frequently, they operate as a series of independent, geographically dispersed divisions, often as a result of expanding their global presence and their product portfolios through acquisitions and mergers. Consequently, even as their supply chains grow in complexity, their demand management, distribution planning and production planning processes remain fragmented, with little if any integration.

For example, a company with recognizable worldwide brands, comprised of multiple divisional units and regional offices in Asia-Pacific, Eastern Europe, Western Europe, South Africa and Latin America, is considered global even though each division and region typically operates independent supply chains in which synergies are minimal. In contrast, a company that has a global view of customer demand, leverages global procurement buying power, understands its worldwide production capacities and inventories, and optimizes distribution and logistics across a global multi-tier network, can focus on building an integrated supply chain network. This approach promotes cost, supply and customer service synergies through efficiencies of scale, thus delivering a measurable competitive edge.

Success in today's fiercely competitive environment begins with developing a customer-driven consensus demand management practice across the global extended supply chain. The challenge then becomes transforming this new view of customer preferences and behaviors by market into actionable, coordinated supply chain strategies that mitigate risk and strengthen the bottom line.

With a single source of visibility across the extended supply chain, companies can identify opportunities, analyze potential synergies across geographies, lines-of-business and distribution channels, and leverage the flexibility of their entire supply chain instead of making isolated and potentially costly decisions at divisional or regional levels. Modeling, analyzing and optimizing the utilization of assets such as manufacturing plants, distribution centers and labor across the supply chain can reduce costs and boost responsiveness. For instance, a seasonally driven business that views its supply chain globally will take advantage of the fact that winter in parts of the Southern Hemisphere coincides with summer in parts of the northern hemisphere, enabling it to leverage underutilized assets in one part of the world to compensate for capacity limitations in another. By balancing its total capabilities, the company can provide better value and higher quality service to customers with a lower overall cost — wherever it is located.

Companies with an integrated global supply chain network can also capitalize on efficiencies of scale for all aspects of the business from raw materials procurement to distribution of manufactured products. Companies may determine it is cheaper to purchase certain raw materials from China, Indonesia or Latin America, and then manufacture the product in domestic plants. Or, it may make financial sense for multiple lines of business of a global company to consolidate a diverse line of products from multiple manufacturing plants or suppliers in a single port for distribution across the globe, eliminating the need to negotiate multiple shipping contracts. At the same time, a consolidated contract with a shipper strengthens negotiating power and can lead to more favorable freight rates.

A word of caution, however: A global supply chain network does not mean one size fits all. The differences and idiosyncrasies of the customers and markets being served across regions and divisions must be taken into account. As a result, customized supply chains need to be created within the larger global supply chain. The different channels of business, the varying size of customers and vastly different levels of sophistication that exist in each market served by a manufacturer, will certainly require that customized production processes, tailored packaging and varying distribution flows be developed to support the individual customer and market needs. For example, how a manufacturer supports a large retail channel master in a mature market like North America will be very different from how they serve a small food service distributor in an emerging market like Russia.

The need to understand and satisfy widely varied customer demand in a flexible and connected supply chain further reinforces the importance of achieving global visibility in order to remain focused on providing maximum value and responsiveness to every customer. The right technology, used properly, can play a key role in making this goal a reality. Not surprisingly, research by the Aberdeen Group found that best-in-class companies have turned technology developments into a competitive asset. Rather than simply using technology to monitor supply chain events, these companies strategically leverage visibility information and software tools to identify trends and opportunities, as well as to improve their understanding of how to maximize their return on capital invested by "flexing" their global supply chains (See "A View from Above: Global Supply Chain Visibility in a World Gone Flat," Aberdeen Group, September 2007).

Too many manufacturers, wholesalers and retailers continue to sub-optimize their operations within divisional units, regional offices and functional silos. In these cases, technology merely serves to automate inefficient decisions rather than to facilitate holistic optimization by addressing the complexities and challenges of a global supply chain. Utilizing technology and re-architecting processes that focus on advanced global network modeling capabilities, holistic optimizations, accurate and timely data, and collaborative planning can profoundly change the way companies manage and capitalize on their global supply chain. By stepping back and taking a truly global approach, a company can transform its supply chain into a powerful competitive advantage.

Companies seeking to sharpen their competitive edge in today's cutthroat world, where 47-70 percent of shoppers purchase a competitor's product if their first choice is unavailable, can no longer afford to be global in name only (See Gartner's "Retail IAS Consumer Survey," August 2004, and the AMR Research report "Out of Stocks Happen; How You Deal with Them is Up to You," December 2006.). Companies need to take full advantage of technology with the proven functionality to help them identify and optimize their processes across their extended supply chain, ensuring that they can deliver the products and value consumers demand — when and where they want it. In other words, to paraphrase a familiar bumper sticker maxim, it's time to think globally and act globally.