Industry Market Trends
A Modest Proposal: 6 Supply Chain Improvements
May 13, 2008
There is no silver bullet for the challenges in today's global supply chain. Yet a higher degree of awareness and a prudent approach can go a long way in most areas of the supply chain. Companies are already recognizing the importance of global transformation. A recent Aberdeen Group survey revealed that 80 percent of companies are already transforming their international supply chains and 90 percent are transforming their domestic supply chains. Yet as companies increasingly conduct business in this global environment, their likelihood of successfully operating with a global view is imaginable at best. Among the top mistakes executives make in going global is "being unrealistic about their timelines," says World Trade Magazine (Sidebar: Rule Number One: Take Your Time!). They do not devote sufficient time up front to their partnerships; they execute too quickly and therefore haphazardly; and they do not strategize risk. The physical supply chain alone carries risks when it goes global. "Containers take an average of 11 to 23 days to travel from foreign suppliers to the United States," World Trade notes. "Whether moving goods by land, sea or air, going global means a company or its partners must adapt to existing physical infrastructure, supply chain channels and foreign regulation." In addition, the physical supply chain today is at risk of external disruptive factors that are out of the organization's hands: natural disasters that may affect port facilities; government regulations, such as new container inspection policies; problems with customs clearance due to improper paperwork; infrastructure issues that delay products from reaching shipping points; and increasingly often, political and social unrest. Organizations can only prepare themselves for these possible disruptions. Fortunately, according to AMR Research's recent top supply chain trends for 2008 (via Supply Chain Digest), managing risk not only for business continuity but also for competitive advantage will be a top priority for supply chain organizations. "Emphasis on supply chain risk mitigation will grow in 2008," the authors write. While many manufacturers have benefited from the explosion of global economic flows, oftentimes this is accompanied by increasing lead times, expanding risk and deteriorating service levels. In other words, margins have either improved or bottomed out, depending on whether companies are keeping up with worldwide developments. Other expected trends, which can be approached either as obstacles of opportunities through 2008 and beyond include the following (according to JP Morgan Chase Global Trade Services at Supply & Demand-Chain Executive):
- "Green" will continue to grow;
- New import safety initiatives for U.S. importers;
- Closer scrutiny on demonstrating and maintaining compliance with new trade laws; and
- Sourcing shifting from Asia to the Americas due to reevaluated time-to-market strategies.