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Poole College of Management 
Supply Chain Resource Cooperative

Organizations Continue to Expand their Global Supply Chain Footprint…But Not Without Growing Pains

September 12, 2012

Organizations in multiple sectors are continuing to pursue global growth strategies that focus on expansion into new regions.  In particular, the focal BRIC (Brazil, Russia, India, and China) represent major targets for expansion, but with them come a host of new problem which enterprises have little to now experience in dealing with in terms of logistics capabilities.  Examples of major growth strategies and the associated challenges were found in multiple industry sectors.  Some of these were driven by economic realities, currency movements, government regulations, or access to existing logistics networks.  For example:

  • Ford outlined a plan to introduce several new vehicles over the next two years, without having to invest in assembly plants there.  This reflects the increasing strength of US auto imports helped by both restructuring of Detroit and the dollar’s favorable exchange rates.  Likewise, Honda, Nissan, and Toyota also plan to use the US and Mexico increasingly as an export base as the strong yen causes them to lose money on vehicles exported from Japan.[1]
  • Wal-Mart recently acquired Massmart Holdings, one of the largest South African retail chains, after overcoming regulatory hurdles and opposition from labor groups.  The company is unrolling a domestic supplier development effort to train suppliers on how to do business the “Wal-mart way”.  South African suppliers such as Foodcorp and Premier Foods are eager to get on board, as many were left to build their own brands domestically when many companies pulled out of South Africa under the legacy of apartheid.  Wal-mart is also making efforts to improve the largely manual operations at warehouses, but is also seeking steep pricing discounts from suppliers to align with their cost-cutting culture.  Walmart believes their knowledge and experience can also cut costs in distribution and logistics.  Wal-mart has apparently learned from their costly mistakes in entering other new markets.  For example, they pulled out of Germany in 2006 after trying to transplant their U.S. culture without heeding its Germany partner’s local perspective. [2]
  • Companies such as Lenovo who once were primarily considered a Chinese brand, has moved to a number two revenue global ranking in computer sales, after taking over the IBM PC business, and growing into tablets and other mobile devices.

With globalization, the need to partner with local logistics service providers becomes an imperative.  Such providers understand domestic transportation issues, and can plan to develop long-term solutions to complex local distribution challenges.

[1] Ramsey, Mike and Rogers, Christina, “Ford Plans New Strategy in Europe”, Wall Street Journal, September 7, 2012, p. B7.

[2] Maylie, Devon, “Africa Learns the Wal-Mart Way”, Wall Street Journal, September 7, 2012, p. B1.