Global supply chains can make or break businesses
September 30, 2009
By Anthony Ross
The economic crisis has forced companies to look at ways to better control their costs and renew their capabilities across their global supply chains. Leadership development in firms will be critical to ensuring businesses are capable of meeting their supply chain challenges.
Globalisation has led many firms to restructure their procurement, manufacturing, transportation, warehousing and distribution channels. Nearly all industries have been hit by the economic slowdown. This pressures firms to keep cutting costs and increase market penetration.
There are also region-specific challenges that persist. For example, Asia presents a set of unique challenges in that regulatory procedures vary widely among countries. Moreover, there is great diversity in language, culture, currency, taxes, infrastructure and other areas, between and within each country. Access to labour and information technology also impacts on the costs of doing business.
In summary, there are five key challenges now facing supply chain managers:
The lack of internal supply chain competency to manage partners;
Managing product quality and safety as corporate supply chains can span multiple countries;
Improving operational performance in the supply chain (procurement, manufacturing, distribution and post-sales customer support) while remaining flexible enough to respond to market changes;
Environmental and social sustainability initiatives;
Linking the income statement and balance sheet to supply chain performance since this is the best view between strategy and operational execution of that strategy.
In order to tackle these challenges and realise the opportunities of a global supply chain, managers globally need to have the requisite skills and knowledge. For experienced managers and senior managers preparing to make the transition into a general supply chain or logistics role, there are a number of key elements to be aware of during such a transition.
For businesses, the current economic pressures have made it imperative to trace how logistical activities directly impact financial performance.
It is vital for supply chain managers to come to grips with a strategic profit view of their firm's supply chain in the context of globalising operations - one that can map how benefits can result from logistical improvements that reduce cost on the bottom line and earn revenues on the top line.
It is also critical for supply chain managers to understand integration and collaboration in their supply chain.
Effectively integrating product development, procurement, manufacturing, and distribution processes is essential to supply chain success. Cemex and (the new) Apple Computers are examples of such success. Matching demand with supply requires enterprise-wide visibility of processes. In many markets, including emerging African markets, businesses still operate these processes with a silo-based mentality because they may be unfamiliar with what to measure and with understanding what should be measured as products and/or relationships mature.
Collaboration is essential to financial success of linked business partners. To achieve real collaboration, partnering firms must align their supply chain planning processes, along with their use of information technology to collect, process, store and transmit business data - this requires high levels of system integrity and transparency. This data should be shared precisely when it is needed by other members of the supply chain.
Also important is to remain focused on the customer. Simply put, the customer is not always right. But the customer is always powerful. That is, if companies cannot understand what customers will want tomorrow and put into place the range of product development, purchasing, manufacturing, distribution and fulfilment capabilities to continue meeting customers' needs, some other company will do so.
African businesses face the same challenges as global counterparts along with complexities associated with, in some cases, being land locked, extreme poverty, and a growing need for supply chain management capacity.
On a broader economic development scale, while facing many of the supply chain challenges of other countries on the continent, on the whole, South Africa has some of the most reliable transport infrastructure in Africa. This puts the country in a position to leverage this capacity and attract additional investment to the region - and in so doing, further position itself as the gateway to sub-Saharan Africa.
Despite this, recent incidents such as jet fuel shortages at OR Tambo International Airport in Johannesburg showed that South African firms need to step up efficiency in their supply chains. This may require taking a broader strategic view when matching capabilities with needs. Market commentators have argued that, as was the case with coal supplies relating to Eskom's electricity crisis, there appears to be a lack of synchronisation between the various players in the strategic supply chain.
If South African businesses are to improve their supply chain capacity, business schools have a major role to play in developing these skills, particularly as businesses are increasingly thinking globally, and developing or expanding their attention to the supply chain domain - this applies to product- and service-oriented firms. Recognising the challenges these managers face, the UCT Graduate School of Business has become one of the first business schools to design training for executives in this area in the form of a course on global supply chain management.
Managers who meet challenges and identify opportunities with capabilities emerging from their supply chain will help companies weather the turbulent economy.
Anthony Ross is the co-director of the UCT Graduate School of Business' new global supply chain management course. He is an associate professor of supply chain management at Eli Broad College of Business at Michigan State University
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