If the mantra of the real estate industry is “Location, Location, Location”, the new mantra of supply chain executives is fast becoming “Collaboration, Collaboration, Collaboration”. Why? If the events of the past few months have taught us anything, the ability to create and sustain collaborative processes with global supply chain partners is crucial to properly manage, and in some cases, capitalize on complexity.
Take for example the BRIC nations and the impact this region has across the global economy. China surpassed Japan in 2010 as the world’s second largest economy, and the IMF predict it could exceed the U.S. by 2016. In fact, all of the BRIC countries are now in the top 10 economies, with Brazil at 9, Russia at 6, India at 4 and China 2nd. And all are predicted to move up the rankings by 2020.
As a result, more companies are investing heavily in countries like China and Brazil. Secondary markets like Vietnam and Turkey are also getting more attention. But these “emerging markets” are no longer dependable “low cost producers” anymore. This past summer in China, for example, labor disputes—and a spate of worker suicides—contributed to overnight wage increases of 20 percent or more in some Chinese cities. Bangladesh, Cambodia, and Vietnam experienced similar wage-related strikes and walkouts.
This increased cost of supply, accompanied by increased risk of supply means logistics costs and transportation delays from these far-flung regions is causing companies to re-examine their supply chains. There are signs of many companies questioning their off-shoring decision and consider near shoring or pulling back some or all production closer to home.
Rising incomes in developing countries also make them extremely desirable markets – and not just as manufacturing hubs. New strategies and tactics must be employed to efficiently serve these markets, whether with goods and services within the country or through global sourcing and logistics.
For example, Proctor & Gamble has taken near-sourcing to heart, stating that it will spend $1 billion in China over the next five years by opening a $70 million Beijing Innovation Center to develop products specifically for the Chinese market.
And these new routes to market must be rationalized with existing structures and cost pressures. In Brazil, for example, Nestlé is experimenting with the use of supermarket barges to sell directly to low-income customers along two tributaries of the Amazon River.
How technology can help
As competition increases, supply networks become more global and more organizations turn to outsourcing, whereby networked business environments are becoming the norm. To improve performance, most businesses are strategically partnering with suppliers and other supply chain participants to collaborate and share information.
This partnering can help bring products to market quicker, reduce production and logistics costs, drive market share, and increase sales, while maximizing ROI. But to enjoy these benefits, you’ll need to ensure you can support service levels and KPIs in a much more complex, networked environment. Robust, collaborative software functionality and enhanced supply chain visibility is necessary in order to develop and maintain industry coalitions that lead to new ways to drive more value to your customers.
Let’s look at some examples…
Collaborating with Contract Manufacturers – Conair Corporation develops, manufactures, and markets health and beauty products and kitchen and other electronic appliances. The company sources the majority of its products from contract manufacturers in the Far East. By implementing the SAP Supply Network Collaboration application, Conair automated work order collaboration, gained better supply chain visibility, and reduced operating costs through increased efficiency.
Collaborating with Suppliers – Lockheed Martin Aeronautics Company is the business area at Lockheed Martin Corporation focused solely on building military aircraft. The success of its newly awarded contract to build the F-35 Joint Strike Fighter for the U.S. Department of Defense, and the future success of its vast aircraft portfolio, hinged upon its ability to integrate its programs and effectively collaborate with a wide swath of global partners. Suppliers from all corners of the world had to exchange information with Lockheed Martin’s buyers and logistics managers efficiently and quickly.
As a final bit of perspective, the famous people below made collaboration their battle cry. Will you make it yours?
“It is the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.” – Charles Darwin
”Alone we can do so little; together we can do so much.” – Helen Keller
“If everyone is moving forward together, then success takes care of itself.” – Henry Ford
”It takes two to speak the truth — one to speak, and another to hear.” – Henry David Thoreau
”If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.” – George Bernard Shaw
Editors Note: We’re pleased to introduce Richard Howells as one of our SCN Bloggers and we have now added him to our “Who Are the SCN Bloggers” and look forward to his ongoing contributions to the Supply Chain Network! Cheers! JA