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March 3, 2008
  

New Supply Chain World Order is Upon Us, Industry Thought Leader Says

Dayton, OH -- When they write the history of supply chain management, 2007/08 will be recognized as a time when a fundamental shift occurred in global supply chain strategies and requirements, says Dan Gilmore, editor of Supply Chain Digest. Gilmore is one of the supply chain and logistics industry’s most respected commentators.

“It just isn’t about us in North America and Western Europe and more, and in a profound way, this means companies must go well beyond the huge shift we’ve already seen in offshore manufacturing over the past 10 years,’ Gilmore said. “To borrow from a political phrase, I suggest we are now entering a New Supply Chain World Order – one that is truly global, with important ramifications for all of us in the supply chain business and for a company’s overall business strategy.”

Gilmore says the recent events clearly show how dramatically the supply chain environment is changing:

  • Boeing and India’s Tata Industries have just agreed on a plan to form a joint venture that will initially include more than $500 million of annual defense-related aerospace component production work in India for export to Boeing and its international customers – a huge shift for Boeing.
  • Siemens has just announced plans for building scaled-down versions of many of its products at much lower prices to penetrate the rapidly growing markets in developing countries, where it sees a market opportunity of about $150 billion annually.
  • There is a significant economic slow down occurring in the US; under traditional circumstances, this would have already have led to reductions in oil and other commodity prices. Not any more. Commodity prices continue to go up, driven by demand from China and India.
  • Procter & Gamble is again using supply chain innovation to gain competitive advantage, but this time not in better continuous replenishment with Wal-Mart, but in micro-delivery methods to affordably get its shampoos and soaps to tiny sales channels in developing markets.
  • As never before, China’s manufacturing companies are moving from being low-cost manufacturers of labor-intensive goods to using “cost innovation” to become major competitive threats in product category after product category.
  • All the cash and liquidity right now – and likely for some time to come – is in places like Russia, China, and the Middle East, flush with commodity or export-driven riches, giving those countries enormous clout and the ability to invest in Western manufacturers or commodity resources.
  • IBM has moved its global procurement headquarters and US executive to Hong Kong; Dell is in the process of making a similar move with its logistics group to Singapore.

“We’ve recognized for some time that “The World is Flat,” as Thomas Friedman so well described, and also that there is a big difference between being “international” versus being truly global,” Gilmore added. “However, even that understanding is changing. As many companies became more global, they still viewed the world from a home-base centricity. Today, the imperative is to think and operate without any real notion of “home country” – and to recognize that building and servicing demand effectively around the world and against a new group of global competitors will require a profound change in supply chain strategy and execution.”

As a result of this seismic shift, companies will need to rethink and retune their supply chain strategies, as companies such as Procter & Gamble, Dell and Siemens are already doing. While there will be some pain in this transition, there will be even more pain for those that fail to adapt as this change “comes at them like a high speed train,” Gilmore said.

An article Mr. Gilmore recently authored on this trend is available at http://www.scdigest.com/assets/FirstThoughts/08-02-28.php. He is available for phone or video interviews on this important topic. To schedule an interview, contact Connie Venema at cvenema@scdigest.com.

 
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Contact Information
Connie Venema
cvenema@scdigest.com


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