So you need a new game plan for your distribution operation, because you are planning to go global and your current game plan for your distribution operation looks like this…
then this post will give you a high-level introduction into global supply chain management as I discuss stages, operations, characteristics, strategies and challenges.
Stages: Let’s huddle and discuss
The stages of logistics that management must focus on are exports/imports, local presence, and globally integrated enterprises.
As a manager your primary focus is to increase revenues while reducing cost, nothing special here, just business as usual. Aside from that, I want to point out 2 key factors that’ll bite you in the *cough* I mean cause you to fumble if you don’t have a heads-up. First, please take the time to study the foreign government’s policies and restrictions where you plan to do business. This will help you avoid surprises such as geographical zoning laws for foreign firms, staffing and organizations you may be forced to do business with. The second factor is to understand cultural differences and how day-to-day business is “really” handled, and I’m talking about “facilitating payments”. Know the difference between facilitating payments and brides. A facilitating payment goes toward speeding up a process for an outcome that is already predetermined, otherwise it’s a bribe.
Next is to establish a local presence. You must establish a local operation base in the country you are doing business in. This includes the development of different marketing strategies and dealing with geographic restrictions and positioning. No big deal here just business as usual.
Globally integrated enterprises is the last stage to discuss. As a manager you’ll need to focus on integrated information systems, adapting to different technologies, and embrace local brands even though your first impression of the local brands may not wow you and in some cases appear to be dull. Just remember that these brands are tailored to the culture. Also take the time to evaluate the skill level of the local population. This will help you understand what type of systems you’ll need to put in place and how you’ll need to run your operations.
Operations: First and 10
Logistical operations requires the use of multiple languages for the purpose of documentation and products. Although English is the common language, some countries require documentation in their own language. Logistical will also require unique national accommodations. Performance features, technical characteristics, environmental considerations and safety requirements are all unique national accommodations that must be considered for operating in a global environment. Additional considerations consist of the amount of documentation needed for contents, transportation, financing and government control. Lastly, high incidence of countertrade and duty drawback found in some international situations as many companies prefer cash, while others may use countertrade.
The characteristics of your firm moving towards a globally integrated enterprise is to first determine if you are going to operate directly or indirectly. Having an effective logistics system will increase the success of your global sourcing, manufacturing, and marketing. This will increase the uncertainty with distance, demand, diversity and documentation.
To move your firm forward these key aspects must be recognized.
- Understand the total delivery cost; management need to analyze budgets and predict the supply chain source of cost to the final distribution.
- Understand the logistics process; firms must strive to develop a better approach to continuous improvements.
- Know end to end visibility; be able to track the information from transportation, purchase, and inventory at a timeliness matter. Using the current data and technology for tracking real-time information.
- Having supplier portals and ASN capabilities; this gives firms the ability to track and know exactly what items being shipped with proper label the ASN goods.
- The product identification and regulatory compliance; with increase concern of terrorism, companies has established procedures of purchase or acceptance, production status updates, quality checks, barcode labeling of items, and shipment routing of all items moving to the many destination.
- Work to integrate international and domestic workflow together; with today’s technology and software linking the final characteristic is the financial of the cash flow. This will maintain the flow of goods in at a timely manner. This entire characteristic has a part of the key elements for firms to move its resources to the international market.
The best strategy a firm could take in my opinion is to consider investing in a global supply chain integration plan, specifically focusing on transportation and information systems integration. For transportation itself the planning should focus along 2 areas, understanding of the multitude of government restrictions and regulations tied to the country’s firms are shipping to and second utilization of carrier privatization. Historically, regulatory restrictions regarding international transportation ownership and rights was a big part of what caused logistical nightmares for firms. The removal of multimodal ownership restrictions, especially in the US, has truly helped to facilitate better efficient integrated movement. Which leads to my second point, carrier privatization so your firm can take advantage of carriers like FedEx and UPS to handle logistics of your products would serve a to great cost and time saver in most cases. Firms are at the advantage of an ever increasingly competitive market for pricing and efficiency has increased greatly over years.
The increased need for global competitiveness has driven many firms to identify and establish relationships with suppliers in low cost countries such as China and India. When considering global sourcing a number of justifications become apparent.
- Sourcing from countries with low wage rates typically reduces manufacturing cost.
- Seeking out suppliers in low cost countries can increase the number of possible sources and increase competitive pressure on domestic sources.
- Lowcountry cost sourcing can increase a firm’s exposure to state-of-the-art product and process technology.
- The need to establish a local presence in the international country.
Challenges when working to develop low-cost-country-sourcing of raw materials.
- Lowcountry-cost sourcing is to identify sources capable of producing materials in the quantity and quality required to be used as raw materials for the end product.
- The need to protect the firm’s intellectual property. Measures should be taken to protect product designs and trade secrets.
- Understand export/import compliance regulations. It is important to know specifics regarding import duties as well as foreign sourcing restrictions.
- Communications with suppliers and transportation companies. Complexities arise when carriers, freight forwarders and government customs are dealing with time zone, language and technological barriers.
- The need to guarantee the security of the product while in transit.
- The concern of inventory and obsolescence with extended transit times.
- The need to understand the difference between piece price and total cost.