Global Logistics and Supply Chain Strategies - May 2008 - (Page 53)

evaluate the entire supply chain without getting bogged down in decisions between port pairs, or between full containers and consolidated loads. By getting too immersed in analytics, they risk not making sound decisions at a strategic level. Even if they feel comfortable producing in an emerging economy, companies would be wise to consider alternative sources for parts and finished goods. One PwC client suffered a year-long labor strike at a supplier’s facility, barring access to its tooling for that period. Bilsback says executives need to balance their desire for lean supply chains with a well-considered risk management program. A manufacturer might not always have the luxury of sourcing product or parts from multiple locations. It could be constrained by issues of cost, supplier quality or the availability of raw materials. But a single-source strategy requires even greater diligence, says Jon Chorley, vice president of supply chain management product strategy with Oracle Corp. “You need to understand more about the supplier,” he says. “You exchange one set of challenges for another.” Engoian recommends that OEMs consider labor-hedging strategies that account for the nature of individual products. Some of Accenture’s U.S.-based clients rely on overseas sources, possibly in developing countries, for basic items that can support longer and more predictable lead times. For complex goods with more volatile demand, they will source domestically, or across the border in Mexico. The split might be 70 percent overseas, where product is cheaper, and 30 percent in closer locations. Rising wages in China, along with the greater likelihood of product damage on longer routes, are additional factors that are prompting some companies to shift at least some of their production back to the Americas, Engoian says. Companies sourcing in emerging economies will typically approach the issue of risk mitigation in one of three ways, according to Jin Whang, professor at Stanford University’s Graduate School of Business and co-director of the school’s Global Supply Chain Management Forum. The easiest solution is to create redundancy in the supply chain. That takes the form of extra inventory, sourcing locations, vendors or nodes in the communications network. But that approach is also the most expensive to implement. The second technique is to prepare for disaster by learning from “near misses,” Whang says. Airlines are experts in this area, but other industries can adopt the practice as well. They can look at incidents where damage to the supply chain was either avoided or contained, then apply those lessons to everyday operating strategies. Examples include a labor strike that was threatened but called off, a traffic accident in which the contents of a truck didn’t escape, or a natural disaster that skirted the relevant area. The third and most effective technique, says Whang, is to streamline the entire supply chain so that the possibility of glitches is minimized. Instead of trying to deal with problems only after they happen, he says, companies should be applying quality precepts to various stages of the chain. In the process, they will come to understand why variability arises in the first place. Planners can also anticipate problems through strategic network modeling. Oracle is among the vendors to offer a tool for testing out various hedging strategies and assessing their impact on price and product availability, Chorley says. The software also helps companies to decide in advance how they will cope with disruptions such as sup- plier failure, congestion and natural disaster. In the end, manufacturers may have no choice but to go on seeking the lowest-cost sources of production around the world. But they’ll need every scrap of available information to succeed in those countries. “Most industries today are global, and most companies are outsourcing all or at least some of it to somewhere,” says Morris Cohen, chairman of MCA Solutions. “The ability to manage those pieces in an integrated fashion is still a challenge.” To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Resource Links Accenture, www.accenture.com Deloitte, www.deloitte.com International Asset Systems, www.interasset.com JPMorgan Global Trade Services, www.jpmorgan.com MCA Solutions, www.mcasolutions.com Menlo Worldwide Logistics, www.menloworldwide.com Oracle Corp., www.oracle.com PricewaterhouseCoopers, www.pwc.com Savi Networks, www.savi.com Stanford Global Supply Chain Management Forum, www.stanford.edu/group/scforum www.SupplyChainBrain.com GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES 53 http://www.SupplyChainBrain.com http://www.accenture.com http://www.deloitte.com http://www.interasset.com http://www.jpmorgan.com http://www.mcasolutions.com http://www.menloworldwide.com http://www.oracle.com http://www.pwc.com http://www.savi.com http://www.stanford.edu/group/scforum http://www.SupplyChainBrain.com

Table of Contents Feed for the Digital Edition of Global Logistics and Supply Chain Strategies - May 2008

Global Logistics and Supply Chain Strategies - May 2008 Contents Editorial GL and SCS Exclusive Fast Forward Up Front Cover Story: 'Be Prepared Is Motto that All Companies Should Follow When It Comes to Recalls Here and There 1+1=One Opinion Can't Happen Here Industry Voices

Global Logistics and Supply Chain Strategies - May 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.