Back in May, Jaume Ferrer and Johan Karlberg of Accenture published Supply Chain Management: How to Build a Successful Global Operations Model in the Accenture Outlook Journal where they noted that despite the facts that 93% of respondents to a recent survey reported global operations to be a central component to their business strategy and 97% were attempting to upgrade their global operations, only 50% of respondents reported successful implementation of critical capabilities. (The results were based on 305 online interviews with sales, marketing, and supply chain executives and almost equally split between the United States and Europe, and are thus statistically significant.)
According to the article, the reason for the lack of success was that most companies have been attempting to establish a global footprint by working through functional or regional silos when they should be taking an integrated, global approach. Brining together the worlds of product, market growth and operations strategy is a prerequisite to success in both new and existing markets. Companies that attempt to penetrate new markets without a specific product portfolio redesign and without rethinking channel approaches, make-or-buy strategies and back-office capabilities are in for a rough time.
In addition, the article notes that although there is non one-size-fits-all approach to global supply chain management success, there are six key capabilities that are required at the foundation level.
- An effective global, integrated sales and operations planning process for key markets to ensure customer service, time-to-market, inventory and cost objectives.
- A procurement, manufacturing, distribution and R&D network designed to deliver a quality product, in the scheduled time frame, at a target cost-of-goods sold and time-to-market objectives.
- Tight links with customers and suppliers to enable improved demand visibility, customer service, and reduced working capital and cost-of-goods sold.
- Logistics partnerships to ensure efficient and time-effective low-cost-market sourcing and penetration.
- Effective supplier recruitment, certification and alignment programs to ensure quality and service objectives in addition to cost.
- A go-to-market strategy (product portfolio, channel, network, make or buy) for emerging markets.
In brief, integrated sales and operations planning, procurement-based manufacturing and distribution R&D network, tight-linkages with partners up and down the chain, logistics partnerships, effective supplier management programs, and a go-to market strategy. It certainly sounds like it covers all of the bases, right?
Not really. Although each and every one of these elements is necessary for a successful global supply chain, just like each and every one of these elements is necessary for a successful regional, or even local, supply chain, there is one implicit, core foundation, element that is missing.
Understand your supply chain.
Before you begin any transformation process, you should fully understand your supply chain. And by this I mean that you should have your supply chain fully mapped out from sources (suppliers) through to sinks (retailers and customers) at multiple levels of detail and from multiple viewpoints. For example, you should have a distribution map that maps the primary routes and transportation methods from your suppliers to your plants and from your plants to your customers. You should have a process map that maps the flow of materials as they enter your facilities to finished products. Etc. The distribution map should detail the third party logistics carriers used and usual transportation times. The process map should detail the equipment used, the business units involved, and the process times.
This way, you can fully determine the ramifications of a potential change before you make it and insure that every affected party is appropriately dealt with. For example, before you switch to a new supplier, you could determine that production is going to need more lead time, you are going to have to find a new third party carrier, and the impact on your cost models. You could get change specific feedback from sales and marketing with respect to the expected lifetime of the product. You can much more easily work out the impacts and required changes with respect to the six core elements of success outlined in the Accenture article. After all, they key to reaching your destination efficiently is to know where you are starting from.