First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  July 10, 2008  
     
 

Global Logistics News: Going Global - and Doing It Well

 
 

One of the most succinct concepts we printed here is simply this: “When it comes to the global supply chain, you better be good.”

We have moved with incredible speed to a stage where for most companies, their ability to manage a global supply chain effectively is a key determinant of the company’s overall success. It’s just that important.

“Global Logistics and Trade Management” is a subset of global supply chain, referring to the physical movement of goods (logistics) and being compliant (increasingly important) with the myriad of regulations and documentation regarding the buying and selling of goods, plus managing the increasingly complex financial movements that accompany those logistics flows.

Gilmore Says:
When you hear presentations from companies such as Payless Shoes, Texas Instrument and a few others on how they are managing global logistics, firms that have been doing it for two decades or more, you realize just how much there is to know.

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Global Logistics and Trade Management is therefore, I believe, both a set of functional disciplines, and a category of supply chain software, as it has come to be known, though as with most supply chain software there are lots of different solution types within that broad category.

This topic – both from a functional and technology perspective, is clearly a very hot one right now, and comes up almost everywhere I go. What has clearly happened is that for many (most?) companies, the rise of global commerce and therefore logistics requirements has simply occurred much faster than many can deal with in terms of people, process and technology.

If you are interested in this topic, and did not receive a copy in the mail of our Supply Chain Digest Letter on this topic, you can download an e-copy and access a lot of other excellent information at our Global Logistics and Trade Management resource page. Or, send us an email to request a zip file of the Letter and key resources.

Here are some thoughts that occur to me, coming out of some recent experience and research for the Letter.

  • Many companies jump into global supply chain somewhat unprepared. Understandable, in a sense, but this can cause problems. At a recent industry roundtable, a majority of companies, both large and small, said their companies had taken domestic buyers and made them global procurement managers overnight – with predictable results. We have to develop people, but I think one key is knowing what you don’t know. You’ll make fewer mistakes that way.
  • Similarly, we still have a lot of internal disconnects – I hear lots of tales of buyers notifying the logistics team that a container they knew nothing about is arriving in Long Beach – that sort of thing.
  • We still struggle with “Total Landed Cost.” As we’ve written about before and resummarized in the Letter, a recent Penn State study found none of the 6 (large) companies studied used all six elements of a jointly defined Total Landed Cost model (though one was close). Perhaps amazingly, none of the six was really comparing expected TLC with actuals, for a variety of reasons.
  • Part of the Total Landed Cost issue is terminology. Our Gene Tyndall and others argue the correct term should be “Total Delivered Cost,” arguing too many only calculate the costs to get product to a domestic port. Lately, I’ve been thinking the term needs to be “Total Supply Chain Cost.” Even though Gene and others of course include inventory and other costs in Total Delivered Cost models, those terms have a very logistics feel, which may somewhat influence what goes into them.
  • I am going to write about this more some day, but we’ve always said supply chain was about the movement of materials, information and cash. The reality is, however, that for domestic supply chains, in my opinion the cash flows are really disconnected from the material flows. Not so in global logistics, where everything from letters of credit to currency swings to tax implications needs to be part of the formula in a much stronger way.
  • Few companies can know all there is to know about global logistics. So you have to pick your battles, and where to outsource.  I think a fundamental question is where you want to invest in people and knowledge to really become good in a country/region. Do you want/need to understand internal logistics processes, regulations, costs, carriers, etc., internal to China? Or South America?  Eastern Europe? These are key questions to answer. You can outsource, of course, and that is the right answer for many company-region decisions, but as Tyndall noted in a Q&A for the Letter, “Do not outsource management. Rather, outsource logistics operations, even some planning, and even some innovation – but keep management in house where it belongs.”
  • On the technology side, the good news is that we are finally starting to see Transportation Management Systems that can handle full global through domestic in one platform. They will continue to evolve, but meeting customer demands for these capabilities has clearly been a catalyst for TMS leaders to deliver these integrated global-domestic solutions.
  • In the end, the real driver is adding complexity – times 10. I am still not sure whether the answer is to reduce complexity, or learn to master it, but many companies are somewhat overwhelmed, just keeping their heads above water.
  • Few companies in my experience have really developed a global logistics/supply chain “master plan” for strategy or technology. It has largely been reactionary.

Lots of challenges, but clearly some companies are better than others. When you hear presentations from companies such as Payless Shoes, Texas Instrument and a few others on how they are managing global logistics, firms that have been doing it for two decades or more, you realize just how much there is to know.

If this topic is of interest, think you will enjoy the Letter and Resource page. Would love to hear your perspective.

What do you see as the primary challenges of global logistics and trade management? What separates the best from the rest? What is your company doing to improve? Do you have to “pick your battles” and outsource the rest? Let us know your thoughts at the Feedback button below.

 
 
     
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