In this Video, Jonathan Zhang of Logistics Bureau talks about the Global Economy and the impact on Sourcing Strategy.
“In the past few years, global sourcing has been more economic as well as a political agenda to many large corporates. As time goes by, more and more companies agree that the supply chain issues associated with an outsourcing program have often been underestimated. The cause of the problem is that many seemingly smart outsourcing decisions were based on low acquisition costs rather than total supply chain costs. Here, I want to share eight key challenges that we’re facing in today’s global sourcing world:
1. Low level supply chain responsiveness is often observed when goods and services are purchased from remote countries. Supply chain executives need to analyse from skill, experience, observation, and a cultural perspectives to determine what process, procedure, and system to be put in place to deploy an agile supply chain.
2. High logistics costs often reduces the benefit from low cost purchasing. Costly global transportation and excessive global inventory often cripple the company’s confidence in sourcing from remote countries. The good on theory of the total cost of ownership should always prevail.
3. How many of us have experienced supply disturbance as a result of increase in buying competition and increase in material and energy cost in the common supply markets? Developing supply alternatives should be a continuous task to procurement managers.
4. We, as buying companies often overlook the importance of introducing stringent control and audit mechanism at remote supply sites to ensure high quality and environmentally sound products and services being purchased.
5. Failure in providing supply chain visibility can give detrimental effects to outsourcing program. Today’s supply chain planning and execution tests are heavily IT driven. We often ask ourselves if we’re dragging the system or the system is dragging us. We can’t employ a perfect ERP or a vast planning system today or we can never guarantee that it solves the supply chain coordination issues tomorrow. While we’re designing our IT platform, let’s not forget the basics. Today’s supply chain issues are still largely people and process issues.
6. How shall we coordinate along the supply chain? Internally, the interaction across the demand planning, purchasing, R&D, manufacturing operations, warehousing distribution, and out of logistics function determines the systemic healthiness of your supply chain. Externally, the connectivity to your suppliers and your customers to certain degree determines your confidence to supply chain efficiency.
7. Cross-enterprise collaboration between you and your suppliers is going to be vitally important to your success at a global scale. A true partnership comes with honesty, integrity, understanding and transparency. It is often easy to say but hard to do.
8. Companies can often be overwhelmed by the number of performance measurement matrix that external consultants give them. But selecting a set of KPIs that makes sense to key supply chain stockholders is not an easy task. Consistently measuring a suitable and a balanced set of KPIs is going to give a long term and a sustainable benefit to your organization.
We believe that a proper management of all these challenges will help your company to contain and improve your total cost of supply chain.
Please feel free to contact us to discuss your global sourcing issues. We’re here to wish your company a happy journey in a globalized economy.”