Nowadays, in this age of globalization, there are very few solely domestic companies left. Large retailers are either directly sourcing overseas or their suppliers are. And, even if your strategy is to stay entirely domestic, your competition is coming from every area of the globe. Compared to a domestic supply chain, a global supply chain is far more complex and longer in time and distance. With a global supply chain, you're not just talking about manufacturing products overseas; you're talking about inventory that needs to be managed overseas, and goods that need to get passed through the port of export, the port authority, and customs into North America, where they finally enter the existing domestic supply chain.
There are certain elements that are required to manage any supply chain regardless of whether it's domestic or global. Things like visibility and technology are basic ingredients that need to be incorporated seamlessly in order for a supply chain to function efficiently regardless of the length of the chain. Visibility is truly key to the success of any global supply chain. You need to know where the goods are, without any blind spots. This is particularly critical in order to enable companies to manage their supply chain strategically and identify various points throughout the supply chain where goods can be held to reduce the risk of delays. When it comes to domestic North America, the supply chain industry has achieved a relatively high degree of sophistication, in terms of technology and infrastructure, which is not necessarily matched in other countries.
Take, for example, the Asia-Pacific region, which represents cultural, geographic and technical challenges. If you walk into any retail store today and see products on the shelf, the chances are that a large majority of those products were manufactured in Asia, and probably the majority of those in China. In terms of regulations and cost, it makes more sense to manufacture products in Asia. But that has raised problems for retailers. Domestically, the electronic information flow for most industries in North America has reached a high level of maturity. That's less true as you move to Europe and even less so in Asia. This means that the supply chain's information flow in developing countries is not as well established or disciplined as it is in North America.
Sourcing companies, or trading companies, play a vital role here. They work on the retailer or supplier's behalf to figure out how to work effectively with a vendor or factory in Asia directly. North American retailers and suppliers rely heavily on these sourcing companies to essentially run production of their products overseas. This allows them to not have to open an office in Asia, go through the effort of hiring local people or understand the intricacies of local culture. It also allows them to outsource the right job to the right factory instead of having to build their own factories overseas. In truth, sourcing companies run factory operations in Asia on behalf of their North American retailers/suppliers and are a powerful player in the global supply chain.
As a result, what we're seeing is that both retailers and suppliers are looking to apply what they've already done domestically to their sourcing companies and Asian fulfillment partners in an attempt to streamline the information flow and get all parties involved in fulfilling product on the same page.
Why is this happening now? The market is demanding new efficiencies. North American retailers are now requesting the same level of integration and the same amount of visibility on their import orders, which is in turn putting pressure on the sourcing companies, the factories and even expeditors and consolidators to use integration technology to get orders to the right place electronically. In addition, these trading partners are being asked to provide visibility documents like ASNs and inventory documents back to the North American retailer so those retailers have greater visibility into what's happening with their import orders.
Prior to on-demand or Software-as-a-Service (SaaS) technologies, implementing solutions that involve multiple trading partners that are frequently located in Asia or in other parts of the world has just been too daunting for more than a handful of companies to attempt to do. Fortunately, the technology that's available today has drastically lowered the barriers that allow these companies to get up and running and start participating in the global supply chain. The emergence of SaaS now makes something that was before, quite frankly, impractical to do now practical. People are beginning to recognize this fact and take advantage of the opportunity to move forward. The beauty of SaaS technology is that it is very easy to get up and running, and useful in eliminating the boundaries of time zones and language barriers. After all, what's the difference between signing someone up with SaaS service in California versus Shanghai?
At the end of the day, the sourcing company's customer is either the North American retailer or the North American manufacturer. Both of those organizations are looking to improve the amount of electronic interactions they have during the lifecycle of an order. If you're a sourcing company, this is going to put pressure on you to participate more than you have in past trading partner initiatives. SaaS can help. And if you're the North American retailer, there is nothing that should be stopping you from asking the same thing from your Asian or overseas trading partners as your domestic ones.
Source: SPS Commerce
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