The importance of the global supply chain continues to manifest itself in powerful and sometimes unexpected ways.
For instance, this story: a billion dollar division of a Fortune 200 industrial company has succeeded for decades making glass-related products for automotive, aerospace and other industries. It success was in large part based on exploitation of its manufacturing advantages – proprietary production processes, significant investment in assets, belief that it was the low cost producer – at least in the North America.
Recently, due to the increased ease of global sourcing, manufacturing quality improvements overseas, and a reduction of tariffs, market dynamics have changed substantially. In just a few short years, the company is moving from being nearly 100% in-house production to being almost entirely reliant on offshore sources.
- Its huge domestic production asset base – being shuttered
- Its manufacturing cost advantage – gone
- Its competitive advantage based on traditional production expertise and engineering – quickly eroding
We covered this ground a bit in our commentary last fall on Thomas Friedman’s best seller “The World is Flat.” That book put into powerful relief the dramatic forces being unleashed by the global economy and global supply chain – but every week there’s a new twist or story.
Yesterday, we had an excellent web seminar on “Making the Right Global Sourcing Decisions,” featuring Chris Callieri of ATKearney, and Ned Blinick of Blinco Systems. The material was great – if you missed it, and would like to hear the presentations on-demand, click here.
That session led to dialog amongst myself and presenters, as well as attendees, both before and after the webinar. One consistent and interesting thread: if you want to prosper or even survive as a company in the next decade, you better get very good at global supply chain.
Let’s take our industrial company cited above. In just a few years, it will go from being a company with significant competitive advantage based on its manufacturing skills, to one which will survive based on sales, marketing and wringing costs out off and service into of the global supply chain better than the next company, which will be using the same or similar global sources.
I don’t believe many CEOs completely get this yet. While not all examples may be as dramatic as the changes occurring at the company cited above, in most the change is happening at some level, and likely to increase.
At the always excellent Georgia Tech Executive Forum for supply chain last spring, a supply chain executive from Payless Shoe took attendees through all his company had done since the early 1990s to build a global, completely offshored (manufacturing) supply chain. It happened early in the shoe industry, and you better believe Payless understands winning is all about getting that global supply chain right.
Companies in many industries have a detailed feel for how they stack up in manufacturing cost and quality, sometimes to incredible detail. But does anyone really know how they stack up in global supply chain performance?
Quick note: based on some dialog with readers, we are slightly changing the format of our News and Views stories nearby. Each story provides a quick summary and “Impact” or “What it Means” segment at the top, to help busy readers quickly assess the content. We’ll also be releasing more of these stories – as well as supply chain blog entries – daily, so look at www.scdigest.com.
Will global supply chain excellence be perhaps the key criteria for company success over the next decade? Do company executives really understand this? How will we know whether we’re better than the competitive in this new world? Let us know your thoughts.