Managing Global Supply Chains – Striking a Strategic Balance

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Global supply chains are facing difficult times as the marketplace shifts to a more global environment. Companies want to enter new markets with lower costs and better speed. However, many executives are struggling to meet goals in the face of new challenges.

Factors such as higher transportation and energy costs are enough to throw a wrench into a company’s supply chain. Building a strong strategic plan can assist executives in achieving their goals.

Evaluate Higher Transportation Costs

It’s no surprise that energy and transportation costs have experienced a sharp increase. Companies are scrambling to balance these costs while staying competitive in current market conditions. Striking the right balance can add up to increased efficiency and profit gains.

Manage Product Lead Time

Although producing oversees offers less expensive labor, this may also result in longer lead time. This slows down the process of bringing a new product to market. These factors need to be carefully considered when planning production.

Review Exchange Rates and Tariffs

Tariff and exchange rate challenges are introduced when a company manufactures overseas. Senior managers should carefully evaluate these components and identify opportunities to increase efficiencies.

Manage Complex Products Closely

Consumers are demanding more sophisticated products. Companies are working creatively to meet these needs, but sometimes production gets left in a lurch. Producing more complex products can slow down production, leaving the supply chain out of balance.

The solution to this issue is forming strong communication channels between marketing and operations. Working closely will provide a synergy between launching a new product and meeting production demands.

The Challenge of Reducing Costs

Senior mangers are always evaluating strategies to increase efficiencies and lower costs. Managing global supply chains in this demanding market requires strategic oversight. Leaders from all business units need to come together to create strategic goals that are measurable and realistic. A systematic way to measure these goals should be established so results can be tracked.

Evaluating Ways to Get Products to Market Quicker

Once a company discovers an innovative product, marketing and sales push hard to bring the item to market. Operations is the business unit that can best provide knowledge on capacity to produce a product while maintaining a high level of customer service. If production is slammed with orders, angry customers will surface, creating a lasting affect on a business’ reputation.

A strategic plan for getting products to market in the most efficient way should be created. Senior managers should meet regularly to strike a balance between bringing a product to market while persevering production and customer service. Discovering this balance will positively affect the global supply chain.

Find Communication Efficiencies in Manufacturing

Companies serving a global marketplace may have manufacturing facilities spread out all over the world. The communication flow across such a large area may become challenging for some businesses. This can be addressed by creating formal procedures for sharing information across all locations. The results of making this change are improved consistency and performance.

Examine the Benefits of Centralization

Many companies are moving away from local management to a centralized model. The manufacturing may be accomplished overseas, while the home office is charged will managing those tasks.

Retaining Employees in a Global Marketplace

As your company goes abroad, attracting and retaining talented employees may be challenging. Spend time and resources on creating an attractive work environment for employees. The time and effort invested initially will payoff with a decreased turnover ratio.

Managing Compatibility Issues

Managing technical infrastructure can be challenging enough in the local market. But once you introduce vendors from around the world, the issue becomes more complex.

Spend time working with vendors to ensure technology works seamlessly across all channels. Frontloading your investment will minimize issues down the road. This will also improve your efficiency and profit potential.

Acknowledge the Environmental Effect on the Global Supply Chain

Consumers are becoming more aware of their carbon footprint. Companies are facing the challenge of finding a balance between being environmentally responsible and maintaining profitability. Working with leaders in your company to discover a harmonious solution will impact your business positively in the global marketplace. You’ll benefit from an environmentally conscious image, while preserving profits.

Forming a Partnership between Operations and Marketing

Executives from marketing and operations need to meet regularly to review goals. They need to form a partnership to improve the global supply chain process. This will enable a quicker response to change when working to bring products to market.

Most company executives agree that global supply chains have room for improvement. While facing economic changes and rising fuel costs, there will be opportunities to review processes and maximize efficiencies. Investing time and resources into maximizing the efficiency will preserve and grow your profits.


July 2008 McKinsey Quarterly Survey on Global Supply Chains

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