Managing the Global Supply Chain in an Uncertain World

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We live in interesting times. Powerful forces are re-shaping the global business scene : financial and economic upheaval in the Far East, Latin America and Russia is creating a tidal-wave of change in the competitive environment. Organisations that once felt insulated from overseas low-priced competitors now find that they too must not only continue to constantly create new value for customers, but must do so at a lower price.

To meet the challenge of simultaneously reducing cost and enhancing customer value, requires a radically different approach to the way the business responds to marketplace demand. One of the keys to success is the creation of an agile supply chain on a worldwide scale.

The agile supply chain
There is now widespread recognition of the role that supply chain management can play in enabling organisations to compete in volatile markets. However, experience suggests that there are significant barriers both within the company and between its upstream and downstream partners in achieving the required level of responsiveness across the chain as a whole. Continuous change is a phenomenon with which the supply chains have had to cope for some time. But the rate, scale and unpredictability of change is today’s turbulent business environment is seriously challenging supply chains based on 1990s best practice. The logistics environment of the new millennium will have to contend with:- · turbulent markets that change rapidly and unpredictably

· highly fragmented ‘niche’ markets instead of mass markets · ever greater rates of technological innovation in products and processes · shorter product life-cycles
· growing demand for tailored products - ‘mass customisation’ · the delivery of complete ‘solutions’ to customers, comprising products and services.
And all of the above to be achieved at less cost!
These severe challenges mean that a new operating paradigm is needed. The key factor is agility - rapid strategic and operational adaptation to large scale, unpredictable changes in the business environment. Agility implies responsiveness from one end of the supply chain to the other. It focuses upon eliminating the barriers to quick response, be they organisational or technical. Agility should not be confused with ‘leanness’. Lean is about doing more with less and is often used in connection with lean manufacturing to imply a ‘just-intime’ approach to the business. Many companies that have adopted lean manufacturing as a business practice are anything but agile in their supply chain. It is paradoxical that many Japanese companies have exceptionally long delivery lead-times to their customers and insist that those customers provide them with firm orders often several months ahead of manufacture.

Yesterday’s world was one characterised by standard products, mass produced for generally predictable market demand. Today’s world is almost the opposite with customers demanding tailored solutions (high variety) in small quantities (low volume) with a higher degree of uncertainty.

Figure 1 suggests that whilst there will still be conditions where lean concepts are appropriate, in particular where the product is standard and volume demand is high and predictable. Increasingly however these situations are tending to become fewer as the global forces we have described lead to higher levels of market volatility.

Figure 1 - Agile or Lean
Lo Hi
“Agility” is needed in
less predictable
environments where
the demand for variety
is high.
“Lean” works best in
high volume, low
variety and predictable
A number of issues arise when global logistics strategies are being devised. One key concern is the question of the appropriate degree of centralised direction as against local autonomy.
Traditionally many companies have preferred to devolve decision-making to a local level. Yet, almost by definition, it is difficult to see how global supply chains can be...
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