To Tim Carroll, the difference between multinational and global is more than a question of semantics.
Carroll is vice president of worldwide operations for the Integrated Supply Chain function of IBM-surely one of the most "global" companies in existence. Or so one might think. But he prefers the term "multinational" for the way IBM did business up until about 10 years ago.
For most of its life, IBM has had operations in various parts of the world. Whether or not they were managed in a coherent, centralized fashion is another matter. Indeed, for the many companies that are now outsourcing their manufacturing and procurement to foreign locations, that's the crux of the issue. Having acted largely out of a desire to cut costs, they're now faced with the challenge of managing complex, global supply chains.
The general strategy seems to be: outsource first, figure out how to make it work later. According to Beth Enslow, senior vice president of research with the Boston, Mass.-based Aberdeen Group, international supply chains are far less automated than their domestic counterparts. Communicating across borders still involves massive amounts of paper, not to mention phone, fax and e-mail. Companies functioning in that way will find it nearly impossible to exchange accurate, critical data in anything approaching real time.
"For most companies, from an organizational structure, international logistics was its own separate group," Enslow says. "And international purchasing managers were lower on the totem pole than those on the domestic side." The latter received preference when it came to acquiring systems for enterprise resource planning (ERP), or planning and forecasting for manufacturing.
"We've seen the international supply chain surviving based on sweat and hard work," Enslow adds, "but the limits of spreadsheets have really begun to show."
Skewed budget priorities aren't the only obstacle to building global supply chains. In the case of IBM, the company was structured in such a way that centralized control over worldwide operations was difficult, if not impossible. "Ten years ago," says Carroll, "we had 30 different supply chains-and 30 chief purchasing officers." Hardly a recipe for efficiency, let alone coherence.
As part of IBM's larger supply chain overhaul, IBM's senior vice president Bob Moffat asked Carroll to come up with "the next step" in the company's quest to become a truly global entity. So Carroll revamped the IBM supply chain to revolve around two axes, one based on function and the other on brand identity.
The functional approach defined IBM's various "pillars of strength" within an end-to-end supply chain. Discrete elements include customer fulfillment, global procurement, global logistics, worldwide in-house manufacturing, worldwide engineering, business transformation and information technology, and the management of supply, demand and inventory across all hardware groups. Each function is overseen by a vice president, with logistics reporting to the chief procurement officer.
Simultaneously, Carroll created three "brand advocates," with individual vice presidents overseeing the entire supply chains related to high-end servers under the zSeries, iSeries and pSeries designations; System x (formerly xSeries) and storage products, and support for retail stores, printer systems and software. Each of those areas, responsible for its own profit-and-loss statement, draws on the various centralized functions to ensure that the company is meeting global customer expectations.
A supply chain designed around the multinational model often will have local design, research and manufacturing operations to support key customers or regions. But there is no "local production" in the new IBM. A plant in Dublin, Ireland, for example, is turning out product for customers worldwide. Likewise, customer-fulfillment centers may be located in various parts of the world, but their reach isn't limited to those areas, or even a particular brand. Which center supports a given customer depends on language, time zones and other factors.
Having gotten its own house in order, IBM is now looking to help other companies embrace a similarly global structure. The biggest obstacle? "Fear of taking the step," says Carroll. Businesses will offer all sorts of arguments about why things can't change. But unless they make a number of diverse, unrelated products, as with companies that have grown through multiple acquisitions, a global approach to supply chain management is often necessary. And that calls for dramatic restructuring throughout the organization.
Cisco Goes Demand-Driven
Another industry leader that has seen the light, and is using its experience to guide others, is Cisco Systems Inc. It is partnering with logistics consultancy D.W. Morgan to help companies create "demand-driven" supply chains on a global scale. The challenge, says Scott Westlake, Cisco's director of manufacturing industry marketing, lies in crafting consistent processes across multiple companies. Today, no global provider stands alone in serving its end customers, so good communications among supply chain partners is essential.
"The question is how well you respond to changing conditions in demand, supply and forecasting," says Westlake. In fact, he says, agile companies today rely less on traditional forecasting and more on their ability to adjust to deviations from that necessarily inaccurate tool. Issues such as environmental concerns, safety, security and border control make it more vital than ever that inventory and shipment-status information gets to all concerned parties as quickly as possible.
|"Getting data is the most important thing in helping companies to compete in the global economy."|
- Kim Autrey of D.W. Morgan
|Global Trade Management: Eight Success Stories|
|Late last year, Aberdeen Group researched companies that were realizing savings through the transformation of their global logistics operations. It selected eight as "best practice winners" in the areas of global inventory control, transportation spend management, import/export process management, and international logistics outsourcing. As listed in the "Best Practices in International Logistics Report," they were:|
• Liz Claiborne removed seven to 10 days of inventory by improving visibility and reducing delays. Vendor partner: TradeBeam.
• Black & Decker saved millions of dollars in inventory expense by employing multi-echelon optimization. Vendor partner: Optiant.
• Williams-Sonoma saved millions in ocean-freight costs by engaging in closed-loop transportation spend management. Vendor partner: GT Nexus.
• An unnamed multinational manufacturer of consumer products slashed air and ocean rates by 25 percent through bid optimization. Vendor partner: CombineNet.
• Haworth avoided $1.2m in duties by relying on automation to take better advantage of the North American Free Trade Agreement. Vendor partner: Management Dynamics.
• IBM realized $400m in logistics connectivity savings by re-engineering the import process with its brokers. The effort was internal in nature.
• Redback Networks cut logistics costs 30 percent by outsourcing. Vendor partner: D.W. Morgan.
• Royal Philips Electronics saw a 50-percent reduction in order cycles through outsourcing. Vendor partner: UPS Supply Chain Solutions.
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