Five "Not so Easy" Pieces: Globalizing the Industrial Supply Chain

This summer we kicked off a new research project being sponsored by for BVL International entitled “Trends and Strategies in SCM/Logistics”.  BVL International is a non-profit neutral platform to promote an awareness logistics and supply chain management in industry, science and the public sphere, to systematically document logistical problem definitions, and to develop methods and processes to solve these problems on an interdisciplinary and sector-focused basis.  The research is being completed by Supply Chain Resource Cooperative at North Carolina State University, with the Technical University of Berlin, FDC of Brazil, Chartered Institute of Supply Professionals, and Shanxi University as research partners.

Part of this research involves interviews with global supply chain executives to learn more about key issues and trends they are facing in the next five years.  Today I interviewed the most senior procurement and supply chain executive at one of the largest global Tier 1 automotive suppliers.  This individual shared with me five key challenges their organization is experiencing int he global supply chain, based on the ever-expanding global footprint present in this industry and many others today.

One of the trends is a growing shift to Asian markets – no big surprise here.  There is a growing middle class in Asia, and for this company (like others), they are also seeing their largest growth in China, but recently their footprint in North America is starting to grow.  “We are seeing double digit growth in North America, but after currency effects in China, it is only single digit growth”.  But with increased globalization, “we are seeing increasing competition from emerging markets, and the emerging markets are getting another type of value from us.  Our strategy is to produce in the region of the customer FOR the customer.  The big surprise here is Brazil, where we are seeing minus 7 percent growth.”

What’s happening there?  “In Brazil – there was a recession at the end of last year – and people thought it would be over now – but it is NOT the case.   The government was dependent on direct investment of based on oil and energy – but now there is a big change and the industrialization has stopped.  And the government is intervening to drive companies to internal sources through imposition of high import taxes – and it is now very artificial to try to maintain the current level of growth.”

“Utilization is the second important trend – the increased volatility of demand is an increased coping point, with increased risk emerging from incidents such as terrorism and Fukashima and Thailand.  We are faster to understand the role of global supply chain disruptions, and those value streams in detail for Tier 1, 2, 3, 4 suppliers.  We did this before financially – but now we are going through other issues to ensure that we have this type of risk management on a worldwide basis and understand upfront and have an agile supply chain.”

“A third one is logistics to differentiate the value proposition .  This is the only way to reduce non-necessary stocks in the supply chain and internally, and to differentiate the value proposition. Increased utilization of products can be handled by improved logistics and is becoming a differentiating factor.  We need to apply our logistics experience in emerging companies to meet increasing, higher service expectations for availability and ease of use.  There is increasingly a higher expectation of security of supply from our customers and customs.”

“A fourth trend is higher frequency of bottlenecks in raw materials and warehouses .  Many are also driven by governments who create barriers in ensuring entrance and delivery and security of our supplies in different places in the world.  Another bottleneck is standardization – and especially with merger activities, to get the same level and same systems, and managing transportation with incrasing volume.”

“A fifth key trend is transparency in cooperation with partners outside our company borders.  Customers require information availability of order delivery and transport, and disruptive events across the entire supply chain.   We are challenged to increase connections to meet cutomer requirements for product and logistics services, and there is more of a trend to drive logsitcis processes by Web 2.0.”

As we proceed with this research, we are pulling in content analytic tools, on-going interviews, and literature reviews to better understand and consolidate these insights into a research report later this year.  I expect that initial results will be shared at the upcoming Supply Chain Resource Cooperative meeting on December 3-4, 2012.