The quest for global payback continues

Supply chain executives are still struggling to make global initiatives pay off for their companies. That's one of the conclusions of an annual study of global supply chain trends conducted by PRTM Management Consultants. The consulting firm polled more than 300 manufacturing and service companies in Asia, North America, and Europe about the state of their global supply chains.

Researchers concluded that globalization is accelerating, and that future globalization initiatives will focus on product and technology development in addition to manufacturing and assembly. The primary drivers of accelerated globalization are the twin pressures to reduce costs and penetrate local markets.

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Although globalization initiatives brought down overall costs by an average of 17 percent, internal barriers are preventing many companies from realizing the expected savings in the area of management. For example, respondents said that global supply chain programs brought about a 26percent cost reduction in labor and an 18-percent reduction in material cost, but they achieved only an 8-percent drop in management and overhead costs. Globalization didn't cut costs for all respondents, however. Many reported that global operations actually increased their companies' costs because of the complexity of coordinating domestic and international activities.

The most important concerns right now for companies that are expanding their supply chains globally are product quality and safety, as well as delivery and security. Companies also consider environmental sustainability when planning future globalization strategies, but that's mostly because of the need for regulatory compliance and the desire to satisfy customer demand. A "green" supply chain is not yet a strategic differentiator, the researchers said.

Among the barriers to globalization cited by respondents are limited supply chain flexibility and the lack of internal competency to manage partners. Accordingly, PRTM predicts that within two years, supply chain flexibility will eclipse product quality and customer service as the main reasons for improving global supply chain strategies. Internal training in how to manage global supply chains, meanwhile, would help to prepare companies to better manage supply chain partners. In addition, companies still have not mastered the technology necessary to achieve worldwide visibility.

[Source: Global Supply Chain Trends 2008-2010: Driving Global Supply Chain Flexibility Through Innovation, PRTM Management Consultants, June 2008]