Global Supply Chain

Stanford University professors Warren Hausman and Hau Lee and TradeBeam associates Graham Napier and Alex Thompson released, in October 2009, a detailed study on Global Trade Management (GTM) focusing on the complexity of the global trade environment.  In the report they detail  the >100 processes related to a global transaction and the value proposition for managing the processes efficiently and effectively.  The report,  “How Enterprises and Trading Partners Gain from Global Trade Management” is chock full or process flows, charts and formula that provide extensive insight into what is actually required to affect a global trade transaction.  For any practitioner or student aspiring to excellence in the area of  GTM, this document is a must read .

Their conclusions as to the benefits – translated into % savings in annual costs and % increases in annual profits for both importers and exporters – should be enough to make any senior executive involved in Global Trade Management take note, if not immediate action.

• Dollar savings amounting to 1.7% in Annual Sales for Exporters
• Dollar savings amounting to 0.6% in Annual Sales for Importers
• Benefits amounting to 28% increase in Annual Profit for Exporters (assuming profit = 6% of sales)
• Benefits amounting to 10% increase in Annual Profit for Importers (assuming profit = 6% of sales)

The downside of mismanaged global trade management exposes a company to direct costs (such as fines for non-compliance), and hidden costs (such as greater inventory safety stock, increased product obsolescence, lower productivity, higher customs fees, lost opportunity for duty-drawbacks and supplier/logistics claims.

To achieve the annual savings and benefits, requires IT-enabled solutions that streamline the processes required to execute complex, simultaneous global trade transaction.  To streamline the import and export processes requires two (2) vital capabilities:

1. The ability to seamlessly integrate processes across the internal organization and external partners, and
2. The ability to seamlessly synchronize information between the required actors so that they can efficiently execute their work and insure that shipments move effectively through the multiple processes.

The challenge in optimizing the global trade management environment is primarily that of streamlining complex processes.  With the myriad of cross-functional and cross-company interactions necessary to execute GTM streamling processes is virtually impossible without enterprise IT-eneabled GTM support.   IT-enabled GTM support will enhance organizational effectiveness and efficiency by enabling:

• operators to execute their work efficiently with minimal reliance on outside resources for their supporting information (streamline process)
• partners to share critical information collaboratively in (near) real time – suppliers, customers, 3rd party logistics providers, warehouses, customs, and financial institutions
• seamless information sharing across internal silos,
• total visibility of product and financial transactions across the entire global supply chain,
• full total cost control,
• comprehensive compliance management – regulatory and business,
• user centric analytics and reports, and
• real-time collaborative capabilities.

Global Trade Management is a relatively new discipline.  Over the passed several years several “GTM” solutions have matured and are deployed as a Software as a Service (SaaS) offering.  However, these GTM solutions while supporting some GTM functionality, and in some instances extended GTM functionality, all are still somewhat specialized in their offerings and are dependent on larger ERP systems for the core business processes.  In order to achieve GTM excellence requires an enterprise-wide approach.   However, even with the interfacing of the current SaaS GTM offerings most of the ERP solutions do not have the robust functionality required to provide a comprehensive solution.   The journey is most often difficult and costly and the results deliver less than promised or expected.

Because of the unique orientation of enterprise Global Trade Management, there are still very few IT-enabled solutions that provide ture  enterprise capability.  The enterprise level GTM solutions are provided mostly by small and mid-size solutions providers and not the large GTM “best of breed” or enterprise solutions.  This simple reality presents the most fundamental challenge to a company achieving  GTM excellence – dealing with a small or mid-size enterprise-capable GTM  solution provider.

Edward Blinick Global Commerce Control, Uncategorized

The recent study  by American Shipper magazine and AAEI, “ISF Benchmark Study: Achieving Complaince – Against All Odds”, presents some revealing benchmarks when it comes to meeting ISF compliance requirements on January 26, 2010.

The benchmark study highlighted 5 key areas that separates winners from the general population of importers:

• Will be ISF compliant by the January 26, 2010 enforcement date.

• Have a high level of confidence that their ISF filings are timely, accurate and complete.

• Keep total cost of ISF compliance below $100K per year.

• Pay <$25 per filing.

• Make amendments to contracts and service agreements to incorporate ISF compliance.

The ability to meet CBP ISF compliance is predicated on several key elements:

1. Having a system in place that helps the importer assure the suppliers are providing the ISF information in a timely manner that does not delay shipment cycle time.  The survey highlighted that delay in shipment cycle time due to ISF information reporting was a major concern for importers with the implied additional cost associated with a delay.

2. Being able to capture ISF supplier information electronically or through an electronic facsimile.  The ability to easily validate information and where necessary request amendments or updated ISF information quickly.

3. Preparing the ISF filing without, or with minimal, manual intervention.

4. Submitting the filing electronically to Customs or a Customs Broker.

5. Monitoring ISF filings status to insure CBP compliance.

To be a winner requires the ability to manage the entire process efficiently and economically.  Winners have software  solutions that streamline process and integrate information flow to ensure   data flows from suppliers and is convertedto meaningful information without significant manual intervention.  The system is able to validate the information to insure that all required data elements are recieved.  The solutions provide alerts if there is incomplete information requiring attention.  Finally, the system should automate the conversion to the ISF details for electronic transmission to the defined filing system.

However, achieving winner status is not likely achievable without a supporting IT infrastructure that provides  supplier PO shipment planning and execution visibility and the ability to monitor ISF information submissions.

Blinco Systems has implemented 3 systems with clients that are considered large (and approaching mega) filers by CBP.  Each client had their ISF solution implemented within 60-90 days and have achieved >99% accuracy on their filings within the time constraints required to comply with CBP.  Furthermore, with full visibility into their suppliers’ shipment schedules and ISF filing performance, they have experienced virtually no degradation in shipment cycle time due to the information flow.  Finally, and most importantly our clients have been able to fully automate the ISF process and reduce costs dramatically (<$5.00 per entry).

Edward Blinick Global Commerce Control, Global Logistics, Visibility

A quick slice of news from Procurement Leaders in the article “Experts warn firms losing sight of operations due to supply chain outsourcing” highlights the “Rule of Unintended Consequences”.  In this case, the outsourcing of either or both manufacturing and supply chain activities to 3rd parties was intended to increase efficiency and reduce total cost across the supply chain while relieving the company of supposedly non-core competencies and streamline operations.  In theory this works well.  However, as many organizations are discovering, without adequate systems in place to provide the capability to command and control an outsourced environment, the unintended consequences often lead to a significant lack of responsiveness and a meaningful increase in inventory and cost across the supply chain.

Outsourcing supply chain activities does not mean outsourcing responsibility for supply chain performance.  The issue of visibility is an important (but not the only critical) element in gaining control over the supply chain.  However, visibility into outsourced operations is more difficult than it might first appear because of the number of participants that must be monitored and the shear breadth and differences of activities  that must be executed across the supply chain.

It is important to realize that in the context of supply chain management, visibility is an outcome of information.  Because of the complexity of all but the most simple supply chains, it is virtually impossible to maintain a manual system and achieve a reliable and  meaningful level of supply chain visibility. Therefore, it is imperative to have systems in place that can capture the information from all the required sources and put it into a context that is meaningful to the user.

While I fully agree with Andre Pino, Marketing Director of Acsis, that “… new automated data collection and collaboration technologies can provide visibility and restore the management control over their demand-supply networks and minimise disruptions and operational errors”, the effort to achieve world class capability is not simple.  To achieve the results that he alludes to implies the ability to:

• collect and validate the information from all participants across the supply chain,
• distribute it seamlessly and make it visibile to the individuals who are responsible for monitoring and managing the supply chain,
• enable real-time collaboration with all required parties (both internal and external) for information sharing and problem resolution,
• and support action as required

True operational visibility across an outsourced supply chain will only be achieved if the organization has systems in place that synchronize information from multiple sources.

Edward Blinick Global Commerce Control, Visibility

Narendra Mulani who heads up the Accenture Supply Chain Management service line wrote in the August edition of Logistics Management on Operational and Technical Excellence in the supply chain.   He highlighted six (6) areas where supply chain masters excel:

• Order Capture enabling a fulfillment team to view the status of available inventory (on the floor and incoming) to support order scheduling and fulfillment
• Inventory Management which provides insight into inventory availability and supports the allocation and reallocation of inventory to optimize order fulfillment and customer relations
• Warehouse and Transportation Management that automates warehouse processes and supports automated management of rate quoting, equipment constraints and lead-times with carriers
• Reverse logistics and Returns management to improve faulty products and services
• Technology and Data Integration to leverage information across the entire fulfillment system, and
• Analytic tools that support sophisticated collection and analysis of information and improve decision-making.

Today, with the available technologies there is little excuse for companies not achieving operational and technical excellence.  There are small, medium and large software providers of sophisticated integrated fulfillment solutions at solutions at almost all price points that bring supply chain excellence capability to virtually any organization that wants to see their business excel.  The benefits to achieving excellence can be readily supported with a return on investment analysis.

The journey to achieve operational and technical excellence in the supply chain might appear daunting but with the right partner and commitment to the outcome the results are very achievable and the rewards exceptional.

Edward Blinick Global Commerce Control, Global Logistics, Inventory, Purchasing

David Brousell, the editor of Managing Automation, in his July/august editorial A Walk in the Clouds challenges the hype surrounding cloud computing and the significant benefits it supposedly delivers.  After presenting several commonly understood benefits of cloud computing he warns to reader against simply accepting these benefits as truths.

Cloud computing, SaaS models, and other forms of 3rd party solutions for IT solutions have a significant amount of hype liberally sprinkled among the real facts.

The major motivation for going down the path for the 3rd party solutions exists for several reasons.  Firstly, operations has found that it is often easier and faster to get a solutions they require by subscribing to a 3rd party solution rather than waiting for their IT group, who may or may not be able to get the project funded or have the resources to execute it.  Secondly, operations and IT have found that 3rd party subscriptions are an off-balance sheet expense and therefore often escape the regorous scrutinity of the finance group.  Thirdly, operations believes that the best of breed cloud or SaaS solution will be an easier implementation.  Fourthly, operations and IT often mistakenly believe that they can easily enter or exit from a cloud supplier relationship.

Like you intimate, the deliverable is often less than the expectation.  Depending on the requirement of the client, the benefit of the lower cost and complexity of entry for cloud or SaaS computing is often exceeded within 2 years of implementation.  The supposed ease of exit from a supplier is often more complex and inflexible that the contractual terms might imply.

The challenge for the client is to fully understand their requirements and commitments before entering into a cloud or SaaS relationship.  Unfortunately, most clients during the acquisition phase will often maximize the obvious short term benefits and minimize the long term costs.

Edward Blinick cloud computing cloud computing, David Brousell, SaaS

The next wave in global commerce will integrate and synchronize the supporting technologies, people and processes to create a comprehensive platform that responds quickly to the dynamics of the global environment whenever meaningful change occurs. Command and control over global commerce will mature as visualization, collaboration and execution competencies evolve and are tightly integrated to provide one version of the truth through multiple user-defined views. The integration of these three components enable management, operators and strategic partners to quickly view both the activity and financial impact of global supply chain events, draw the appropriate inferences from the information, collaborate with each other for optimal decisions, and implement action to resolve the issues.
1. Visualization tools provide the personalized views needed by all involved actors as to what is happening across the global supply network, ranging from event monitoring, workflow and exception-based alerting to highly sophisticated BI and Reporting tools. The more simple visualization tools provide the operator or manager insight into statuses but limited context. More sophisticated reporting and BI tools add the layers of increasing contextualization to the information with the value-add of dynamic orientation.
2. Collaboration tools built on web 2.0 structures, allow users to create teams/communities on-demand, around specific issues or projects that are contextualized by the integrated visualization components. The collaboration tools will go beyond traditional document sharing to enable virtual meetings among knowledge holders and actors that drive solutions that will optimize results across the entire supply chain.
3. Execution management refinement will continue to drive and streamline global commerce. The newer global commerce management execution tools bring together the vital components of global sourcing and distribution, global trade management, global financial management, trade compliance, global logistics, and total cost management in a tightly integrated and synchronized environment insuring full organizational control.
Today, many of these tools exist in one state or another. The visualization tools are maturing quickly with strong capabilities to view and contextualize information through sophisticated analytics, dashboards and scenario capabilities. Collaboration tools are still relatively immature, and their adoption has been limited. Execution tools while highly developed are mostly fragmented among many offerings and don’t provide one control-centric platform. In only a few cases are these three components tightly integrated and synchronized to provide the optimum value proposition.
The next wave in global commerce management will bring together these three basic components to insure many views (visualization) of one truth (standardized information) can be quickly shared among an authorized community of stakeholders (collaboration) to deliver solutions for the timely action required for optimal resolution. When visualization, collaboration and execution capabilities are tightly integrated and synchronized, organizations will achieve full command and control of their global activities and drive the promised values.

Edward Blinick Global Commerce Control Global Commerce Management

The global commerce landscape is markedly different than it was only 2 to 3 years ago. Available solutions provide global trade management, visibility, track and trace, compliance and landed cost either as a SaaS, hosted or traditional licensed model. Yet, companies still struggle to fully command and control their global commerce environment to drive the exceptional values promised.

The next wave of global commerce solutions will enable the shipper or logistics’ provider to drive exceptional competitive advantage by leveraging a true command and control capability over the organization’s extended global commerce network.

Command and control is a military phrase. While command and control often connotes a top-down hierarchy for decision-making and action to achieve a defined military objective, it’s more broadly understood to be the marshalling of resources for information collection, situational clarification, decision support and action.

In true global commerce management, command and control gives seamless integration to an organization’s resources to be able to view, orient, decide and act with timely and rapid organizational effectiveness. A command and control capability enables the streamlining and synchronization of the organization’s people, processes and technology — with analytics and visibility in a highly developed collaborative environment. The results are an organization that is highly flexible and adaptable in a rapidly and ever-changing global environment.

Four fundamentals must converge for an organization to truly command and control its global business environment and achieve the values promised. Systems must:

1. capture and present the underlying information required by operations and management. This requires clean data that supports multiple user-defined views of an organization’s business in an on-demand, right-time environment.

2. provide standardized contextualization of information through analysis and visualization so that individuals responsible for task execution or decision-making can orient themselves quickly to the issues requiring resolution.

3, support on-demand collaboratiion with internal and external partners based on shared information that is contextualized across diverse partners.

4. streamline decision processes and enable timely, decisive action. Acting decisively requires the ability to collaborate with all affected partners so that full transparency and traceability exists on the final command and follow up actions.

Management of global supply networks requires three tightly integrated capabilities -– visualization, collaboration, and execution — in order to support the four basic competencies of command and control: view, orient, decide and act. While each capability is important, the real promise in delivering optimal value from the global supply network happens when a company can execute comprehensive command and control over all participants, activities and costs across its entire global business environment.

Edward Blinick Global Commerce Control

A recent Aberdeen study reported that the greatest problem for executives in global supply chain management is still visibility. In the study 79% of the executives from large companies and 41% of executives from SME that responded ranked “Lack of critical supply chain visibility” as the overall most important issue. The second greatest problem was “Uncoordinated multi-tier supply chain processes” which garnered 56% and 37% respectively from the executives responding.

The results are rather telling given the emphasis and investment that has been made by organizations to insure that they have the critical visibility required to enable their global supply chains to operate efficiently.

Are the results really surprising? The answer is Yes and No.

Yes, because it is believed that if people have visibility into where an item is within the global supply chain they are able to make optimal supply and demand decisions based on the information.

No, because the visibility solutions provided are only stop-gap solutions that provide snapshots into where an item is in the supply chain, but provide no, or very limited, visibility into the financial and compliance implications surrounding the item. With no integrated visibility into the physical, financial and compliance status of the item it is virtually impossible to have the critical view of the supply chain necessary to significantly improve supply chain performance.

Without context it is virtually impossible for individuals responsible for managing products across complex global supply chains to make decisions that are optimal for the organization. To get context the organization requires cross-functional execution, information and financial visibility and implication analysis.

Operations areas include internal functional areas such as sourcing, purchasing, international logistics, customs, inventory management, accounting and finance. Each functional area is affected by the activity within the supply chain. However, in most instances both the operational unit and the systems supporting it are not integrated and the information is often not easily reported in a meaningful way. This lack of integration is even more evident with external partners. The result is the lack of critical supply chain visibility.

Critical supply chain visibility is not just about the location of an item in the supply chain but it includes the ability to see virtually all aspects that affect the item. Critical supply chain visibility includes views into where an item is anywhere in the cash-to-cash cycle and the views into all of financial and compliance issues that accompany the item.

It is undeniable that getting complete physical, financial and compliance visibility still does not exist in almost any organization, large or small. Which leads to the second finding of the study – uncoordinated multi-tier supply chain process. In order to deliver this level of capability and the benefits that come from it organizations must be able to capture the information at these levels, make it visible, and put that information into a comprehensive contextual picture. The two issues of visibility and coordinated processes across an organizations global supply chains are inextricably linked together. You cannot get multi-tier coordinated processes if operations is not linked to integrated and synchronized global supply chain information. This information must be visible at all levels of the supply chain and include the physical, financial, and compliance information.

Until that happens, the issue of global supply chain visibility and coordination of multi-tier issues will remain a very high ranking issue on executives minds because they will continue to lack the information required to support optimal demand and supply chain challenges.

What are your comments?

admin Visibility

Globalization – a wave to ride or a tidal wave of massive destruction?

Globalization is changing traditional business practices and for many companies the changes are of tidal wave proportions. In North America many senior managers are having nightmares of their products are drowning in a flood of low-cost import competition. The company’s or its divisions’ survival is at stake and if the company does not learn to ride the wave it will be crushed by the sheer force of the wave and render its organization uncompetitive and obsolete.

In early December 2005 I attended a supply chain summit and met with many manufacturing divisions of Fortune 500 companies that are facing the threat of globalization and the commoditization of their products. Each in its own way was experiencing a tsunami like wave in their business brought on by the rapid influx of competitive products manufactured in low-cost countries. The question that was implied but not fully articulated by each of the companies was how to respond to a competitive situation that literally turned its business on its head and threatened its very existence.

How real is their concern? Do they have time to respond or will they be swamped and weighed down by events and washed away by the influx of inexpensive products manufactured in low cost countries? What are their options? Who will survive?

The answer to these questions lies in recent history. Industries have been moving to global sourcing for years. The North American apparel and textile manufacturing industry has all but vanished in a period of 10 years. The traditional big 3 North American auto manufacturers are floundering and the historical global leader – General Motors – will in all probability lose its number one status in 2006 and has acknowledged that in order to survive it cannot continue to defend that role against its more agile and adaptable Japanese competitors – Toyota, Honda and possibly Nissan. Big steel is being overwhelmed by high quality, low cost competition from Korea, China and Japan and depends on life support by its government. Ditto the apparel, textile, footwear, electronics, consumer packaged goods, etc. industries.

Scenario: A major North American manufacturer of barbecues, located outside of Toronto, Ontario has seen its ability to compete against low-cost imports from China greatly compromised. The company’s costs relative to the imports are roughly 40% greater and their quality advantage is no longer appreciated. The market is moving rapidly to low cost imported cast-iron aluminum barbecues from the traditional domestically produced, higher cost cast iron barbecues. To make matters worse, its traditional customers have now moved to directly sourcing and importing the barbecues from China further pressuring the manufacturer. It is committed to its committed workforce and instinctively wants to resist the move to low cost sourcing of finished barbecues. Its very survival is at stake.

Scenario: A major supplier to the automotive aftermarket located in Michigan recently sold approximately $1.0 billion of glass and paints manufactured in their North American facilities. Protected for years by high tariffs and counter-vailing duties the company was able to compete successfully against low-cost glass from China. Several years ago the dumping duties were removed and the company’s business model literally changed overnight. In order to survive the company quickly expanded its fledgling sourcing group to purchase the majority of its glass from low cost sourcing countries. The result of the tectonic shift was a complete change in its competitive environment. Its margins were quickly eroded; its quality advantage evaporated and its major competition was now import/distributors not glass manufacturers. The company recognizes that it is on steep learning and execution curve to catch up to its non-asset based import-distribution competition in order to survive. Time is of the essence for this division.

Scenario: In 2003 a leading U.S. manufacturer of home furniture located in North Carolina was manufacturing 80% of its products in the United States. By 2005 it had shifted its sourcing to low-cost producing countries and imported 80% of its product line. Although it benefited from lower costs it found that its margins had been eroded so that now it was marginally profitable. It recognizes that its business model and competitive position has changed but does not fully understand the drivers that will allow the company to return to the levels of profitability it previously experienced.

In each case the competitive environment apparently shifted in a matter of months. The competitive comfort that each company had as a manufacturer shifted dramatically and their new paradigm threatens the very existence of the organization. The new model strips their previous competitive advantage –design and manufacturing excellence – and positions them in a business environment where they have little core competency and equally deficient execution and management capability. These companies each recognize that they are in serious trouble and if they don’t respond to the new challenges that they face in global commerce execution they will go the way of the dinosaur.

Without exception each company that I met with (and there were 10) all had the same fundamental problems:
The ERP systems designed to support their manufacturing and financial business are grossly inadequate in supporting their global commerce requirements.
Their business processes are designed for manufacturing and not global sourcing/distribution.
The competency of the organization lacks the expertise and experience in the area of global sourcing, logistics and importing.
Costs visibility is immature and doesn’t provide the necessary granularity to understand the best procurement strategy or true cost of goods.
Lack of visibility into outsourced partners reduces the organization’s ability to control the supply chain and negatively impacts inventory levels.
They are making costly errors and don’t understand what is required to resolve them.

Each company is wrestling with the problems it faces and is working through their own challenges. Some are embracing the new paradigm while others resist. Some are looking strategically at globalization and others continued to respond tactically to the shifting environment.

The good news is that those companies that are moving strategically understand that their business model has switched from a four-wall centric view where manufacturing drove their strategic competitive advantage to a “four-corners of the world” approach where managing the global supply chain dominates the battle for strategic competitive advantage.

So what do companies have to do to execute an efficient global commerce strategy?

Firstly, it is critical that senior management understand the magnitude of the threat that globalization presents to their companies. Secondly, it is vital to create a sustainable strategy to respond to the threat and actively support the initiatives to develop the capabilities and infrastructure for the new paradigm. It is important to recognize that the new model is about designing lean, flexible global supply chain networks that include both domestic manufacturing and global sourcing and provide the organization the agility to move quickly in response to global conditions of supply.

Whatever the level of global competition companies are currently experiencing, creating lean global commerce organizations is critical for profitability in the new paradigm where margins are much thinner, supply chains much longer, more complex and highly risky, and mistakes much more costly and harder to correct. Finally, creating an organization that thrives on constant and accelerating change is vital because the organization is required to adapt to continuous monstrous tidal-changes in the business current as the tectonic plates underlying global commerce shift.

Globalization is a challenge and an opportunity. The options for companies that are experiencing sustainable global competition are to develop workable strategies and processes to survive and thrive or die. Being global is not an option for many companies. Developing a comprehensive global strategy is critical to remain viable.

Surf up or is it a Tsunami? In this case it all depends on how you respond to the opportunity that globalization provides.

admin Inventory

With globalization and outsourcing of manufacturing capabilities to offshore producers it is time to look at the effect this is having on inventory across the global supply chains. The analysts, Gartner, Aberdeen, ARC and AMR who have looked at the issue of inventory in the supply chain have come to the conclusion that globalization is beginning to have a major negative impact on the amount of inventory in the supply pipeline.

Much has been written on the value proposition of managing inventory across the supply chain. In most instances the issue of inventory control is discussed in terms of domestic supply chains. This perspective is understandable because until recently most companies were not participating in global sourcing and therefore the need to understand supply chains from a global perspective was not of much interest. However, this view of inventory pre-supposes relatively short supply chains that are reasonably forgiving. The literature generally focuses on the ability of organizations to position their raw material and semi-finished products to meet their tight manufacturing or distribution environments.

Companies like the automobile manufacturers, computer manufacturers (Dell comes immediately to mind), and others have been able to lean their supply chain by working with their suppliers to have supplier inventory pods close to their facilities to meet their demanding manufacturing schedules. True, they collaborate with their suppliers, to a greater of lesser extent, and share demand information so that suppliers can adjust their production and distribution schedules. But the reality is OEMs have been able to “lean” their supply chains by pushing the inventory back onto their tier one, tier two and tertiary suppliers.

Research has shown that over the past 10 years the amount of inventory in the supply chain has declined very little. I am hearing from these same analysts that their research is beginning to show that with globalization and the outsourcing of manufacturing to off-shore companies the amount of inventory across the supply chain is beginning to swell and this is a hidden component that most domestic manufacturers are as yet unaware of and ill prepared to address.

There are 3 major strategic areas that a manufacturer must address if it truly wants to take advantage of globalization. Firstly, it must understand whether its business model is still fundamentally a manufacturing model or has shifted to that of a brand-marketing model. Secondly, it must recognize that if its model has changed the skills required of some key people in the company are fundamentally different from those that have been employed. Thirdly, it needs to understand that the way to manage outsourced manufacturers and the logistics providers requires extremely different tools than are currently being offered by their ERP suppliers.

Without understanding the impact in the change in the supply model because of globalization, companies will not begin to take the required action to address the opportunities that are promised. There are many solutions that are being offered that address elements of the global supply chain. Global Track and Trace, Global Customs Compliance, Total Landed Cost calculators, and the 3PL phenomenon are several that immediately come to mind that are designed to extend ERP systems and make them adaptable to the global sourcing environment.

While each of these solutions is of value by themselves, they are limited constrained in truly helping companies manage their global supply chains. Our experience shows that track and trace solutions that are currently supplied by software ASPs or 3PLs and focus on global shipments (purchase order and shipping information) are really limiting. In truth one of the areas that is most offered as a solution but is most controlled in the global supply chain is the shipping/logistics component. Carriers have very tight schedules and barring major disruptions due to congestion compounded by security issues goods that are prepared for shipment will most likely be laded and arrive at the port of receipt as planned.

The areas of the supply chain that are the most difficult to monitor and control are:

• the performance of the suppliers in preparing products to meet shipping schedules
• the tracking of raw materials, semi-finished parts and components, and packaging materials from primary and secondary global sources to suppliers
• the ability to manage costs in a complex multi-level outsourced contract supply chain environment
• the managing of compliance at multiple levels – country, supplier, service provider, product, customs, security, etc.

To create a complete global supply chain solution requires strong ERP functionality where owned manufacturing capability is a strong component and equally powerful global supply chain management functionality to manage the global outsourced contract manufacturing environment. Both systems must be integrated and synchronized and provide a global view of the entire supply chain. Without integrating full ERP and full global supply chain functionality into one seamless environment information will be maintained in disparate systems and provide limited actionable information.

ERP systems are fundamentally designed to manage within the four walls of the organization. In many instances large organizations have multiple ERP solutions or multiple instances of the ERP solution. The corporate information environment is far from homogeneous and getting a view of the entire organization is virtually impossible. ERP solutions are augmented with additional business intelligence systems that are intended to collect and normalize information and provide it in a manner that is actionable.

This business environment is now made more complex with globalization. A global supply environment requires different tools and skill-sets than are currently available within the organization. To build a complete environment to support direct manufacturing and outsourced supply chains requires a comprehensive strategic view of the entire supply demand environment. Companies that understand this will have a powerful advantage over their competitors.

Companies are going global but there are very few that understand what the real benefits are and fewer still have a plan of how to achieve them. Those companies that build the infrastructure to take advantage of global sourcing will have significant competitive advantage that delivers dramatic and continuous value across the entire organization.

admin Inventory