The Future of the Supply Chain

April 4, 2008
Recognizing the importance of global transformation

It wasn't that long ago that we referred to the supply chain (singular). With today's globalization explosion, it is clear that companies cannot survive without recognizing and integrating a multitude of supply chains (plural). Every supplier and every customer demands nuances that force companies to be a link in any number of chains. And those chains must be viewed from a global perspective.

Human Capital
Since we are dealing with multiple supply chains -- both domestic and global -- it is important to recognize that a company's supply chain department/division/group is a cornerstone to business success. Their leaders should have "C" level authority and be welcomed at the boardroom table. With the current preponderance of mergers and acquisitions that we are seeing, and with no slow down in sight, all supply chain professionals are going to have to increase their knowledge base and expand their areas of responsibility.

Indeed, clients of our consulting practice are driving us to new outreaches in such areas as strategic sourcing, demand planning, trade management and international transportation. Diversity is the name of the game; both in the people we deal with and in the functions we oversee.

The Direction
Today's supply chains need to be bi-directional, with every link supporting the flow of not only goods but information as well. Silos must be broken down within and between trading partners if supply chain processes and costs are to be optimized. Companies should determine their core competencies, be prepared to effectively outsource where appropriate, and engage in benchmarking and best practices forums. In other words, it is necessary to strive for supply chain excellence through visibility, collaboration, synthesis and velocity.

The shift in manufacturing to off shore centers brings its own set of demands to be addressed by modern supply chain professionals. Some of the key questions to consider include:

  • What is truly the low cost country for production?
  • How should we determine the niches where maintaining North American manufacturing makes sense?
  • Do we have owned factories or outsourced?
  • Where is sourcing controlled - should it be outsourced?
  • Are all costs really being captured when calculating the landed cost of products?
  • How should quality assurance be handled? (right at the forefront of today's concerns)
  • How do we handle shipment consolidation?
  • What are the security and risk management constraints?
  • Should some value-add functions be performed in North America, and if so, which ones?

To excel, companies must establish internally or seek out externally a core competency in areas such as outsourcing -- whether it be in manufacturing, logistics, distribution, sourcing or technology. And it is wise to think globally in all aspects of business.

Some manufacturing executives ask, "So, is any of this unique to a particular country?" Certainly not. Or, "Does each country have its own set of challenges just the same?" Most definitely. Our shrinking manufacturing base in North America indicates a greater need for distribution services, which carries with it the necessity of new skills training for our labor force. It demands that our transportation infrastructure be properly maintained and updated. Better roads, more efficient rail service, and expanded port capacity must be high priority initiatives.

We each have a different set of political relationships with our trading partners that set us apart from the rest. These relationships have to be fostered and strengthened in order for any of us to remain competitive in a global market.

Conclusion: Transformation
There is no crystal ball that we can gaze in to determine the future of supply chains. But we do know that we are in store for change, growth, expansion, and more change. How should we deal with it? With flexibility, adaptability and resilience.

For instance, a recent Aberdeen Group survey revealed that 80% of companies are transforming their international supply chains and 90% are transforming their domestic supply chains. These are encouraging indicators that the message is being heard, understood and acted upon. This transformation is characterized by the globalization of supply chains in organizations, with the goal of increasing competitive advantage, creating more value-adds, and reducing costs through global sourcing. If your company is not among this group that is effectively pursuing transformation, it is time to get on board or be left behind.

Joe Sullivan is Regional Director, Canada of Tompkins Associates. A senior project manager for Tompkins Associates, Joe Sullivan has more than 30 years of experience in global supply chain planning, benchmarking and best practices, and execution of warehousing, distribution, and transportation solutions. He is also a guest lecturer at George Brown College in Toronto, Ontario, Canada

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