Electronics Production | May 23, 2007
"Global Supply Chains Often Aren't Global"
Nearly half (48%) of supply chain executives at multi-national companies in the chemical, consumer goods, industrial and retail sectors consider their supply chains to be global, yet operating decisions made on behalf of those supply chains would indicate otherwise.
Indeed 60% of these executives said supply chain decisions in their companies are regional or local in scope, according to a recent study conducted by BDP International's Centrx™ consulting unit and St. Joseph's University in Philadelphia. Just 35% of respondents reported their companies' supply chains are managed globally. “These results suggest that some multinational companies operate a series of what might best be described as multi-domestic rather than global supply chains," said Centrx Managing Director Yone Dewberry. “The reasons for this vary, but the unrelenting pressure to achieve per-unit cost reductions, in tandem with the emergence of true global data visibility, must hasten supply chain integration to accommodate the exigencies of international trade." The globalization of trade has brought with it a dramatic increase in companies' sourcing and delivery points, which inevitably has resulted in longer lead times and a need to improve regulatory understanding. Cited by 64% of all respondents (87% European; 55% North American), on-time delivery is the single most pressing issue facing their supply chains. However 43% of all respondents reported shorter lead times, reflecting investment by their companies in supply chain technology and management systems. These included warehouse management, ERP and TMS systems. Most of the 32% of respondents whose companies had not made such investments reported longer lead times. More than a third (35%) of all respondents' companies had not implemented advanced technology in their supply chains. The second most frequently cited supply chain issues were total landed costs and logistic costs, each noted by 39% of respondents. With the exception of respondents from the chemical and industrial sectors, most deemed landed costs an even greater challenge than on-time delivery. Interestingly, respondents from chemical companies who identified inventory management as their greatest challenge have seen their supply chain costs increase over the past two years. Among the strategies companies are pursuing to hedge against the vagaries of their far flung supply chains are increasing inventory levels, cited by 46% of study participants, and sourcing from multiple countries (43%). Also cited were increased outsourcing activity and investment in trade compliance and security. Significantly, over three-quarters of those surveyed reported increasing investment in compliance and security programs. Among respondents from consumer goods companies, 83% reported increased reliance on external compliance specialists, compared with 55% of the total survey population. “This intensified focus on complex regulatory issues reflects the diverse cultures and business climates of countries in which trade has expanded remarkably in recent years," said Michael Ford, BDP's vice president of regulatory compliance and quality. “It also reflects the need for more and better information about international shipments in today's hyper-security-conscious environment." Most respondents said regulatory compliance is even more costly than supply chain visibility or RFID technology. On-time delivery and supply chain visibility remain the most compelling supply chain issues, and respondents' companies are putting metrics in place to measure them. Most (80%) indicated they can measure on-time delivery to customers, and 69% can also measure on-time delivery from vendors. In addition, they collaborate on shipment visibility with carriers (82%), suppliers (42%) and customers (20%). The study was conducted using an online survey distributed to 220 executives with global supply chain responsibilities. The 35% rate of response included respondents from a variety of industries, companies and regions. Approximately two-thirds of the participants' companies are headquartered in North America, 20% in Europe, and 14% in Asia and the Middle East /Gulf Region. Nearly half of the companies represented have annual revenues in excess of $10 billion, and another 20% have revenues of more than $2.5 billion.
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