Daily Archives: April 24, 2007

The Top Three II: Sourcing Innovation’s Top Three

#3: Culture

Supply chains are global, which mean they cross not only physical country boundaries but cultural ones as well. I’m sure you’re saying that “this is not an issue – big companies have been sourcing globally for decades”, and this is true, but it hasn’t been without hiccups. A lot of effort was required to make those efforts successful, a lot had to be learned, and a lot of companies make the same initial mistakes over and over again.

And most of the problems come down to mis-communication that results not from lack of knowledge of the language, but of the culture. For example, when your Asian supplier says “yes” is he saying “yes, I can do that” or is he saying “yes, I hear you”. It is cultural in many Asian countries to acknowledge that you understand what the other person has said regularly, and in some countries, like Japan, it is considered impolite not to acknowledge every new piece of information with either a nod (of the type that signals “yes” in North American culture) or an affirmation (which translates as “yes”).

Another example is that your “problem, disagreeable” employe might actually be your best employee. In North America, it is often considered impolite to vocally disagree with a decision accepted by the rest of the team or to point out flaws with an executive-approved plan. However, in some Eastern European cultures, it is expected that you voice your disagreements and your reasons therefore and point out flaws when you find them. Furthermore, while some cultures consider it impolite to be blunt when there is a problem, others consider it impolite to be anything but when there is a problem that needs to be resolved.

Without an understanding of the large role culture has to play in your global supply chain, which relies not on IT infrastructure or equipment but people, an organization is doomed to not be all-it-could-be. The answer is to forget about the motivational seminars and drop the same-old same-old instructor-led site-based training classes. The key is to bring people from all of the global offices together on a regular basis to not only get training, but to work together on designing new processes, sourcing materials, and solving problems. By working together, your employees will begin to truly understand each other and build an organizational culture that everyone can buy into.

#2: Complexity

Your supply chain is global, and so is it’s complexity. This presents significant complexity for your supply management team. Who do you source from, when do you source it, how do you transport it, where do you store it, and how do you do it in such a way as to get the most value?

The answer to these problems is sophisticated modeling and optimization technology that allows you to capture all of your various costs and constraints and determine the best scenario to meet the organizational needs.

#1: Visibility

Where’s your stuff? Why? How are your suppliers doing? Are you sure?

In today’s global supply chains, not only do most buyers not know where their products are between the time the product leaves the supplier’s factory and reaches the buyer’s warehouse, but most buyer’s don’t know what risks their products are facing. Are they being temporarily stored at an insecure facility? Is the carrier using routes through zones at high risk of natural disasters?

However, an even bigger problem is that many suppliers don’t know very much about their suppliers beyond the quality and timeliness of goods received. What’s their financial situation? Do they use environmentally sustainable processes in the production of their goods? Do they adhere to fair labor practices? A supplier who goes bankrupt unexpectedly could shut down your production line. Suppliers who do not use sustainable processes are not only not environmentally friendly, but in danger of being uncompetitive should harsher environmental legislations be enacted. Suppliers who do not adhere to fair labor practices could cause you a media nightmare.

The solutions to these problems are supply chain visibility solutions and research before you choose a supplier or a carrier. Be sure to use a supplier risk assessment solution, such as the solution offered by Austin Tetra or Open Ratings before contracting with a new supplier for an important part.