Global Supply Chain

Last week I highlighted a study that McKinsey Quarterly published called  “Building the Supply Chain of the Future”.  Interestingly this week Bloomberg (among others) published a study called “China Will Face Crisis Within 5 Years”  http://www.businessweek.com/news/2011-01-26/china-will-face-crisis-within-5-years-investors-say.html which provides a glimpse into the future.

The McKinsey study talked about the need for having a global supply chain strategy that was agile and able to flex to the rapidly shifting global environment.  The Bloomberg report highlights a significant concern that China will face exceptional dislocations in their banking system that will reverberate around the world.  If this happens, and clearly the vast majority of the respondents to the study poll believe it will happen within 5-7 years, it begs the question, what will be the impact on supply and supply chains around the world?  At this time the question is moot.  However, if it happens, the impact on supply and supply chains will  likely be impactful and possibly devastating to some companies. The way organizations respond will greatly impact their success.  The way organizations respond will depend on the strategies they have formulated and are able to implement.

Another column appeared in Supply Chain Digest today titled “Time for More Dynamic Supply Chains” http://www.scdigest.com/assets/news/11-01-27.htm#FT.  In the article, Dan Gilmore, the publisher and a very insightful guy asks the question: “ What is of more importance for supply chain success (and agility): the trucks and the software, or the people who design and run them?”

What links all three of these articles is their focus on the need for organizations to have agile supply chains to address the unknowns that the future holds for their supply chains.

I think that the questions posed by Dan is worthy of thought and a response.  The response to this question is that they are all important, but not all equally important.

I believe that people are the foundation of any organization, and therefore the most critical component for creating and maintaining an agile supply chain.  An agile supply chain is ultimately about being able to respond to changing supply conditions quickly, with the least amount of disruption, and at the lowest possible cost.  People interpret information that the software (systems) provides and make the decisions that organize the trucks (physical supply chain components) to deliver the materials.  Therefore people who run the supply chain are the most important.

I would then argue that the software is next in importance for creating and executing supply chain agility.  As supply chains become more complex, the amount of information related to the planning, procuring, moving, making and distributing products to the final customer is growing geometrically, if not exponentially.  Having systems and software solutions that capture the raw information and contextualize it is a major keystone component of any successful supply chain infrastructure.  Access to the underlying supply chain information is vital to the people who are responsible for making the decisions about the design, deployment, and execution of the supply chain.   Software solutions that contextualize the information and present it in a way that is meaningful for the user is critical to supporting the decision making process that people must do on a minute-by-minute basis.

The final component addressed by Dan’s question, the trucks, are important but are the outcome of the former.  When people have meaningful information that they can then apply to their experiences they can make better decisions as relates to the physical (trucks) supply chain.  When major supply disruptions arise in the physical supply chain having visibility to the problem is critically important.  The visibility is provided by information.  It is this information, most often supported by appropriate software solutions that enable the people to make the best decisions about how to deploy the resources across the supply chain.

May 26, 2010

Blinco Systems Inc. is proud to be selected as a leading supply and demand chain solutions provider in 2010.

The Honor:

Supply & Demand Chain Executive has identified leading providers of supply chain services and technologies who are customers/clients achieve supply chain excellence and prepare their supply chains for the post-recessionary return to growth. Based on submissions to the “100″ from end users and solution providers, the editorial staff of the magazine has compiled a list of leading supply and demand chain innovators.

“Our goal with this year’s ’100,’ as in the past, is to highlight a broad range of solutions and services targeted at a variety of industries, addressing the needs of companies of varying sizes, and assisting in the transformation of a diverse mix of the functions that make up the supply chain,” added Reese.

After receiving nomination forms, the Supply & Demand Chain Executive editorial staff identified applicants that best fit the stated criteria for the “100.” Final recipients are featured in the cover story of the May/June 2010 issue of Supply & Demand Chain Executive, as well as online at www.SDCExec.com/SDCE100.

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.

There is a huge rift in understanding and language between operations and finance people within an organization. Although both appear to deal with similar information the ability to communicate with each other is limited by common vocabulary, perspective, responsibility, and experience. This lack of commonality between these 2 groups leaves a very large gap in aligning corporate objectives. It leaves a major gap when it comes to evaluating and selecting IT solutions to help the organization achieve their objectives.

This problem exists in most companies, large and small. Best in class organizations have overcome this problem.

In my previous blog I talked about why clients often are disappointed with the results of their application solutions. Most companies still lack a cohesive solution architecture that provides integrated information flow, synchronized activity across the organization and collaboration with external partners. The IT solutions often mimic the siloed architecture of the organization making the integration and synchronization of the information network virtually impossible to maintain if it was ever a deliverable.

Compounding the situation is the inability of finance to meaningfully communicate with operations on the strategic goals of the organization and the inability of operations to explain the functions they are mandated to execute. Aggravating the communications is that operations operate at a functional level and most often don’t understand how their activity fits into the greater whole and its impact on the financial well being of the organization.

Is it realistic to expect that finance that views the organization through dollars and cents can communicate with operations that relates to organization through physical units?

A real (and repeatable) vignette sheds light on this reality. Outside of plant and equipment the 2 factors that make up the vast majority of the companies assets and expenses are inventory and people. Indeed whenever a company hits upon hard times the finance types immediately look to reduce inventory and head count. The solution to their immediate financial problem is obvious. There is almost an immediate improvement in the balance sheet and liquidity by converting inventory to cash. Head count reduction also improves the company’s income statement in the short term.

However, as important as these goals are in a crisis, they are always reactive, invoked by finance and are rarely strategic. Operations rarely have planned input and the resulting actions rarely provide long-term benefit to the organization.

In fact the decisions are almost always implemented to protect share value. This is true for both public and private companies. In the short-term these activities do deliver the expected results but rarely do they provide sustainable benefit.

If finance feels that reduction of inventory and headcount are so critical and important in a financial crisis and necessary to protect shareholder value why are these goals not strategic actionable objectives, day, after day, after day? Certainly it is not for lack of stating that optimal inventory levels and operational efficiencies are strategic goals.

In a financial crisis the lower levels of inventory and head count provide the necessary short-term cash results but are achieved at the risk of the long-term market interests of the organization. Finance’s objectives are the preservation of capital in the financial crisis not the strategic market positioning of the organization.

In best in class organizations the finance and operational groups have found ways to work together by constantly aligning the financial and operational goals to maximize the company’s long-term market and financial strength.

The critical element in aligning finance and operations is their ability to communicate and understand one another on each other’s specific goals and objectives. This ability to communicate and understand is equally critical between operational silos. The ability to communicate is based on a commonality in the language between the parties. This commonality of language within the business is based on intelligent information. Intelligent information is the enhancement of raw data into information that can be shared and understood and effectively acted upon. In order for the information to be supportive of intelligent decision-making it must be accurate, timely, and intelligible from the perspective of the person using the information.

IT solutions that don’t facilitate the communications between finance and operations fail to deliver the results that they are often expected to provide. Without proper communications between finance and operations it is virtually impossible for companies to align their short-term tactics with long-term strategy. IT solutions that are aligned provide useable information to all users in a manner that they can use to make informed decisions. However, too often this alignment in IT solutions fails because IT decisions are not made holistically. IT decisions are often driven by operational and financial silos without concern or thought on how the results may impact overall objectives. IT decisions made this way will almost inevitably lead to IT misalignment which in turn delivers misaligned information which in turn results in suboptimal communication and results.

Keeping process and information aligned is a serious problem. Business realities ultimately dictate business process. IT solutions that require companies to fit their business process to the software architecture compromise the ability of the business respond to their business realities. Maintaining alignment over time between disparate IT software and hardware solutions is probably the greatest challenge and cost to IT organizations as they constantly fight to align their IT infrastructure with the needs of the organization. (See Joshua Greenbaum’s article Software as Disservice, Managing Automation, April 2005)

Constantly aligning the business IT solutions to meet the changing business process requirements is vital to improving communications between operations and finance.

I had a talk with Larry Lapide at the Council of Logistics Management convention in Chicago about the perceived risk by many companies, large and small, in buying software solutions from small and medium sized software vendors. His comments were extremely interesting.

Larry said that he is advising students and industry execs that the risk factor of doing business with “smallish” firms that have longevity in business and good client references is significantly lower than doing business with medium size or larger firms that are relatively new to the business area, have few if any referenceable clients in the business area, and have no longterm track record for profitability.

So who is Larry Lapide and why should what he says matter. Larry currently research director at the MIT Center for Transportation & Logistics. Prior to joining MIT he had a career and reputation as a leading analyst in the supply chain practice at AMR. Larry has not always held this position, but upon reflection and experience over these past 10 years, concluded that size, although a factor, must be looked at critically when assessing risk in the selection of software solutions.

Larry’s point is particularly important when evaluating solutions to manage your global commerce. The past seven or so years have seen many small/medium sized software solution providers in the area of global commerce come and go. In fact there are very few solutions providers, large or small, that exist in this area.

This point would seem to support the contention of small companies are at risk of not surviving long term and therefore not being able to support the clients that invested in their solutions. However, a review of the industry will reveal that the companies that failed to survive did so not because they were small but because their business concept was wrong for the market, the market was too small, and their business plan was ill-conceived. Most of these solutions providers built their business plan around an IPO supported with large VC investments.

Companies that have littered the global solutions software landscape – Syntra, Celerex, Open Harbor, IMC, Rockport, Vastera are among the few that come to mind. Each focused on growth at the expense of managing their business based on market size reality. They all had revenue streams from solid clients. But each failed to build a business to support its base and chased after the growth and the potential IPO … the mantra of the industry.

This reality is not only that of small companies. One only need look at other players in the Supply Chain or ERP area to realize that failure to pay attention to matching revenue with expenses can lead to failure. I2 and Manugistics are clearly poster children for companies that have large customer bases, relatively large revenues, and are on the brink of going out of business.

In the space of global commerce management there are relatively few players that have a proven track record of delivering successful solutions over the long term. Up until recently it can be argued that the market has been uninteresting to a large number of companies – large, medium or small. The percentage of a company’s business that was dedicated to global sourcing or sales was often less than 10% of their overall business and didn’t warrant the attention of senior management.

The Wal-Mart factor has changed all this. With the drive for lower prices across all industries and markets, companies have been forced to go off-shore for raw matierals, semi-finished and finished product. No longer can they sit back and pass on prices to customers and consumers without risking competitive disadvantage. The need to globalize is driven by the need to constantly maintain low cost operations.

Managing the global landscape is now gaining “C” level attention. Over the past 18 months there is a dramatic increase in the number of executives with the word “global” in their titles; Chief Global Supply Chain Office, V.P. Global Supply Chain, Director Global Supply Chain, V.P. Global Sourcing, etc. The large ERP solution providers (SAP) and Microsoft (Axapta) and the large TMS (Trade Management Solutions) providers (Red Prairie, Manhattan Associates, Catalyst) have not been slow to recognize that this is an area that is potentially huge and they are all trying to carve their niche in this space.

There are also some new global solutions providers that have started up with significant Venture Capital backing. Over the past 3-4 years TradeBeam has been on an acquisition binge supported by about $35 million in 1st and 2nd round VC money. Their method has been to buy the assets of failed global solutions companies and try to provide one integrated solution. In November they announced another $18 million in 3rd round VC financing. This model is one that SSA is also pursuing.

Then there are the smaller companies that have been providing global commerce management solutions successfully for over 10 years. They have focused on this area and built up significant global commerce expertise, highly robust solutions, strong client relationships and references and solid business models. They are small but deep with experience and expertise in the area.

So where does the greater risk lie? With companies that are large but have no significant expertise in delivering solutions in the area of global commerce but see this as an opportunistic area of growth OR with companies that are small or medium size but have a proven track record of successfully delivering and deploying solutions with clients over many years.

If the market doesn’t provide the size and revenue opportunities that these large ERP and TMS companies envision will they continue to invest in the area? Will they limit their involvement in the area if this proves to be less financially rewarding? Do they have the expertise and experience to deliver integrated solutions that provide the real value proposition?

What is absolutely clear is that companies that have been involved in this space over many years, have a solid business model and good strong clients will be there for the foreseeable future – whether they are large or small.

Large firms have almost always opted for large size solution providers because it gives them comfort. However, in the area of global commerce management the level of expertise in the area and the ability to develop, deliver and deploy proven solutions that deliver value is where the real risk lies.

I would argue that in this area size is significantly less important than expertise and past performance. Global commerce is new to many companies. In the United States understanding of this area is relatively limited and the expert resources are a scarce commodity. The number of solutions providers with proven deliverables and value is relatively few.

The risk for clients lies in not taking the time to understand what is required to deliver successful solutions in the area of global commerce management. Size may matter…but not the way one generally thinks.

Ned

Yesterday I had an interesting experience. I received a telephone call from a consultant who advised me that because of our firm’s size his client had not selected us for consideration. He agreed that the application had a great functional fit. The client’s concern with our size was that in dealing with us (or other small software suppliers) they were at more risk than dealing with a larger solutions provider.

Clearly, on the surface this “gut” reaction to small size appears logical and reasonable. Clearly the vast majority of IT professionals subscribe to it in there selection process.

However, I just couldn’t get my head around the conclusion. It’s true that we are not a large vendor, neither in size nor number of installs so what I have to say may appear as rationalization. But I got to thinking about why companies looking for IT solutions are at such a disadvantage and why so often the results of their software technology decisions are so unsatisfactory.

Fundamentally, there are prejudices that exist in the IT solution selection process. Size is just one. Non-traditional development and implementation methodology is another. Vertical experience vs. domain experience is yet another. There are others. These prejudices are based on preconceived, generally accepted ideas about what is necessary to insure a successful selection and implementation of an IT solution.

I think that the solutions provider community (developers, service providers, analysts, consultants, media) has been masterful in establishing the rules by which software licenses and OnDemand service is provided and supported. It appears to me that almost everything has been skewed in favor of the solutions provider. Most importantly the client community has bought into and heartily endorsed the business model.

For the most part the solution provider, whether a software development company or provider of OnDemand services, creates supposedly low-cost, easy-to-use “packages” of software solutions that incorporate what they determine is “best of breed” functionality that can supposedly be configured to the client’s requirements. However, more often than not this does not happen.

ü What does a package solution mean? Do packaged solutions benefit the software provider of the client? Clearly the package is what the software provider has decided is the best solution that fits most of the needs of his client market. If the client needs customized modifications to support its unique business process, chances are the software solutions provider won’t be structured to provide it and the client will have to go to a 3^rd party consultant or integrator. When that happens does the low cost, relative ease case goes out the window? Who supports the solution going forward? From our experience any company of reasonable size is constantly going through business and process change. It is important for the client that the software solution be flexible enough to be able to form to the changing needs of the business.

ü What is “best of breed” and who is defining it? The software or solution provider has decided what are the services that are to be incorporated into its solution and defines them as “best of breed”. True the solution provider might incorporate functionality from world class clients, but does that functionality necessarily reflect the way the client does its business. Whether a specific client requires the “best of breed” functionality is secondary to the fact that it is easier for the software provider to support applications if they are in control of the functionality rather than taking responsibility and delivering solutions that support the client’s specific requirements. The accepted wisdom is that if it is good for a “world class” client it must be good for all clients. The flip side of the argument is that if functionality is not considered to be of significant interest to many clients then it can’t be best of breed and therefore should not be deployed.

ü The software provider defines “best of breed” functionality and provides it as part of his packaged solution or as an upgrade. What happens if the client doesn’t want or like the functionality? Is the software provider flexible enough to support a client’s unique business requirements and processes if they fall outside of the package version and upgrade path? If the answer is yes isn’t the solution now a custom solution? Will the standard Service and Maintenance agreement cover the off-package solution? How will the customized functionality be supported going forward as new versions of the “package” are released. What will the cost of the specialized maintenance be?

ü The package solution is supposedly easy and less costly to maintain because the cost of maintenance is spread over the user base and does not fall to the individual user. This works in theory. However, in practice as soon as clients required specialized functionality the cost of service and maintenance increases because the client needs dedicated services.

There are probably other factors that have weighted the odds in the software or solutions providers’ side of the ledger. What is amazing is how the client side have bought into it. The analysts and consultants will all say that “packaged license solutions” are necessary in order for solutions to be economically deployed and maintained. These same analysts and consultants will tell you that the OnDemand model is an excellent alternative to the license model because it will be more responsive to client needs. Why? Because the OnDemand provider will need to service the client or the client will withdraw its business because the cost of entry and exit is purported to be low (transaction based). The arguments in favor of “packages” or OnDemand solutions are valid to a point. However, they are also designed to support the historical premises that the industry is based on.

I believe that the model is broken. There are viable alternatives. The client community just needs to have some courage and initiative to look for suppliers that have developed client centered business practices. Maybe its wishful thinking. But those clients that have had the courage to pursue these relationships with smaller client focused solutions providers are gaining major benefits that their less aggressive competitors.

Certainly there are people that will disagree with me. Please feel free to comment – pro or con. I would like to hear experiences –good and bad- from solutions providers and clients.

Ned

In the arena of the global economy there is a lot of talk about outsourcing mission critical business activities to 3^rd party providers in the name of better effectiveness and efficiency. The argument that an activity that is mission critical but not a “core competency” should be outsourced to companies that specialize in that specific area is compelling particularly if the internal capabilities don’t exist to manage it.. This is even more attractive if the service providers can provide visibility through on-demand information in support of the activities. From manufacturing to sourcing to logistics to distribution the new hype is about the benefits of outsourcing non-core activities and receiving on-demand information.

Clearly, the internet coupled with new technology makes the outsourcing model more practical than in the past. Service providers are able to provide information resulting from physical world activity, on-demand, 24 x7. The internet has created access and visibility to information that was impossible before the technology became ubiquitous in the late 90s.

In the 70’s we had time-sharing of financial information. In the late 90’s we had the ASP model. Now we have on-demand service providers.

In the prior instances the solutions were touted to be a panacea. For companies that couldn’t afford individual systems, didn’t have the internal capabilities to run their own programs, or saw the economies of outsourcing rather than insourcing the activities, these solutions were seen as a cure for all their woes.

As history relates, these models didn’t survive for a variety of reasons. Technology costs fell for supporting hardware and software and organizations could economically take the process in house. Companies found that by outsourcing critical activities they generally did not get the information or service levels that their internal IT group provided. The business model for the service-provider eventually proved uneconomical and they went our of business.

Certainly, the technology has improved to support the outsourcing model. The internet supports collaboration of ideas and the exchange of technical information in near real time. It allows for information to be accessed on-line on-demand, and in many cases the information can be integrated with full workflow that supports exception-based alerting.

However, do the on-demand suppliers really provide the value being touted or hyped? Is on-demand the next in the cycle of these outsourcing models that seem to have significant value and then deliver less than the promise? Is the on-demand model just another transient phase in the pursuit of that fully integrated enterprise world? If companies can economically insource these activities will the on-demand service provider prove economically sustainable?

The answer is not simple. There is little doubt that on-demand delivers value. However, on-demand will not deliver the exceptional value that is being hyped by those who are in the business of hyping new ideas or providing the hardware and services around those ideas. If on-demand information can’t be integrated into a synchronized data environment companies will receive tangible but marginal competitive benefit. It is this ability to integrate information into a useable and manageable environment that is often over-looked by the analysts, consultants and service providers that are providing on-demand services. However, without the integrated and synchronized global data repository companies will not be able to “slice and dice” and present information the way they need to make the proactive tactical and strategic decisions that drive real competitive advantage.

I believe that outsourcing non-core functionality is very different from outsourcing core information. Being able to access (actively or passively) information on-demand is not the same as having ownership of the information to do with it as you please, when you please. True control comes from the ability to manage your environment. The way companies see their world is through information. The ability to control their business requires managers and owners to have total visibility of mission critical information that presents a fully integrated and synchronized view of their world.

On-demand solutions more often than not do not provide this integrated, synchronized view of the world. In order to get this view organization’s need information that can accept, integrate and synchronize the information from internal systems and on-demand service providers. Then, and only then, will companies truly have an on-demand capability.

I was thinking the other day about the massive trade deficit that the United States was running and the potential problems that it can create for the economy. It has been an issue for many years now and it isn’t going away anytime soon.

The dependence of the U.S. on global trade and commerce is growing every year as a percent of the economy and it has changed the way business does business. We are outsourcing both trade and services as never before. China, Indonesia, Pakistan, Honduras and every other country vie for the opportunity of selling into this country. And we are only too happy to accommodate them.

Over the past decade the quality of both foreign wares and services have improved to meet the requirements of the American market. Foreign manufacturers and service providers have invested very heavily in infrastructure and have hung out the shingle “READY FOR BUSINESS”.

So what does this mean for business. For one, it means that prices will initially fall Companies that have not adopted a global business strategy will fall under increased margin pressure and their very existence will be compromised.

Secondly, it means that the ability to control the environment has been reduced. Time, culture, distance and government regulations make managing the entire process many times more difficult. Organizations that can bring the best controls to this environment will have distinct advantages that will translate into huge competitive advantage. Those companies that can’t manage the global process well will be marginalized or put out of business.

Looking back on the business landscape over the past 3 decades one can see the changes that have taken place. The once mighty have fallen to previously non-existent or marginal competition. Walmart, Target, Home Depot, Costco were barely noticed in retail. Dell was a basement computer manufacturer. Toyota and Honda were hardly household names. Southwest Airlines was barely flying. Their competitors, that failed to adjust quickly to the changing business landscape fell into oblivion or are severely hobbled. Kmart, Woolco, Winn-Dixie, IBM, Chrysler, GM, Delta, United don’t exist or are clearly weaker than they used to be.

The changes in the business environment that began 30 years ago continue today with globalization. The changes globalization brings to the competitive landscape is no less dramatic that what the kinds of seismic changes in manufacturing and distribution that have gone before. The art of moving sourcing and moving goods across geographies at the best possible prices is what the new globalization is all about.

I came across the following article by Eric Keller in the January issue of Manufacturing Technology Magazine (http://www.msimag.com/flipmag/0105/mbt0105_opf_files/016.html), that talks to the issue of ERP systems and their ability to provide the supporting infrastructure for global trade. If one is to believe Eric, and I certainly am in that camp, this does not bode well for traditional manufacturerees. Companies have invested so heavily with SAP and Oracle, etc. that they can scarcely consider that their ERP solution is not well-suited for the new business paradigm.

What if they don’t adjust? What if they wait for their ERP vendors to understand the environment and deliver the software necessary? What if their competitors move quickly and aggressively to put into place applications that truly manage global commerce?

History has a way of repeating itself. With globalization comes the need to manage global commerce. Without the right equipment to play the global game companies will be a significant disadvantage. The ERP weren’t designed for this purpose.

The ERP solutions just don’t cut it.