Companies should focus supply-chain efforts on globalisation, according to the Economist Intelligence Unit

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2007-12-12 08:48

Hong Kong--(뉴스와이어)--As new sourcing options become available across the globe, companies can greatly benefit from low-cost supplies and the ability to make their supply chains more flexible by sourcing from a number of different vendors around the world. But with these new opportunities come greater logistical hurdles, according to Global supply chains: Understanding risks and rewards, a research study from the Economist Intelligence Unit, sponsored by Oracle. These obstacles include managing trade laws, accounting for events that could derail important shipments, and ensuring that current systems are able to accommodate exchange-rate fluctuations, language differences and other issues.

To create successful global supply chains, executives need to integrate operations both vertically and horizontally, creating a centralised supply chain that gives executives insight into all parts of the chain, from product design to manufacturing and distribution. This requires improving the accuracy of product data, sharing real-time logistical information with key stakeholders, and creating greater flexibility and more accurate demand forecasting. “It’s an opportunity and a challenge,” says Debra D’Agostino, senior technology editor at the Economist Intelligence Unit. “Many companies’ supply-chain systems are designed for domestic sourcing, and they will need to make fundamental changes in operations and organisational structure to remain competitive.”

Global supply chains can reduce risks as well. For example, some US-based firms struggled for weeks to recover in the aftermath of Hurricane Katrina, the storm that ravaged the US Gulf Coast in 2005. Thanks to its worldwide supply chain, Dow Chemical suffered only 14 days of downtime. “We make the same product in different parts of the world, so if we’re going to be out for several weeks in one location, we can get product from a different site,” says Jim Varilek, vice-president of supply chain for the US$50bn chemical company.

Other key steps companies should take in planning a global supply-chain strategy include:

· Creating centralised supply-chain management operations that are integrated vertically and horizontally, in a matrix, throughout all business processes·from product design through sourcing and procurement to manufacturing and distribution.

· Improving the quality, quantity and visibility of product data all along the supply chain, starting with customers and including suppliers, logistics and transportation service providers, distributors, retailers and others. Thorough and accurate demand planning is extremely important.

· Building flexible supply chains with diversified sources of supply and logistics, but with strong, mutually beneficial relationships with suppliers.

· Regularly evaluating and testing contingency plans for dealing with events that could disrupt supply lines.

· Maintaining connections to alternative sources of key supplies, and creating a broad enough transportation and logistics network to circumvent local problems.

“Cost effective outsourcing and global sourcing has become the new core competency required of every business and of every supply chain executive,” says Oracle Vice President Product Strategy, Jon Chorley. “This research outlines the requirements and rewards of creating a successful global supply chain.”

Global supply chains: Understanding risks and rewards is available free of charge at: www.eiu.com/sponsor/oracle/globalsupplychain

About the report

The research is based on desk research and in-depth interviews with executives from around the world about the challenges and opportunities they face with regard to global supply-chain management.

About the Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit provides geopolitical, economist and business analysis on more than 200 countries, as well as strategic intelligence on key industries and management practices. With over 300 full-time professionals in 40 offices around the world, supported by a global network of more than 650 contributing analysts, the Economist Intelligence Unit is widely known for its unparalleled coverage of major and emerging markets. More information about the Economist Intelligence Unit can be found at www.eiu.com.

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