Lean, Agile and Adaptable Global Organizations:
An Information Technology Perspective – Part 2 of 2

In our last column (http://www.scdigest.com/assets/Reps/Expert-Insight-Blinco_05-12-01.cfm) we reviewed some facts about the continued growth of global sourcing and the competitive advantage companies that develop “lean” global supply chains achieve.

Today, we’ll look at how information and technology are critical to establishing lean operations and global supply chain excellence.

Lean, agile and adaptable global organizations are dependent on information that provides absolute visibility into all aspects of the global supply chain. As a company moves further away from its basic manufacturing paradigm – both physically and geographically – visibility into and monitoring of remote its facilities, suppliers and service providers become overriding critical capabilities. In a global sourcing and distribution environment a company is dependant on information to provide insight into their supply chains. In order to become lean the information must provide upstream and downstream implications so that action can be taken when needed. To efficiently get information that is contextualized and meaningful systems have to be integrated and the data synchronized.

Without integration and synchronization of information, significant waste creeps into the business processes and decision making activities at considerable cost. Managing the global supply chain environment is labor and asset intensive without the proper processes and supporting IT systems. There are too many events to be executed and managed through the entire product life cycle process. Internal people, processes and sub-processes within sourcing, purchasing, logistics, customs management, costing, finance and compliance are all interrelated and interdependent activities. They in turn react with the external community that is remote physically, culturally and linguistically. Absent adequate automated information systems the only way to manage the entire process is through human intervention.

The reality is that many of the low-cost benefits of global sourcing are lost if the right information systems are not in place to alleviate the information overload and provide accurate visibility into execution and implications of activities. Companies that entered the global arena are finding waste manifesting itself in larger than planned infrastructure, growing inventories, greater product obsolescence, unforeseen logistics costs, increased financial cost and risk, compliance risk, reduced fulfillment capability, and lower customer service. These costs are initially hidden that add significantly to the total cost of the product.

Point solutions – Trade Management Systems, Compliance Solutions, Sourcing solutions all provide some assistance. The point solutions deliver some value to the functional area they are designed for but fail to deliver overall value because they are generally poorly integrated and synchronized and don’t deliver upstream and downstream contextual information that affects the whole supply chain value proposition. They mask the symptom but don’t address the real problem.

Traditional ERP solutions fail to deliver the full value proposition because they were not designed to support the global sourcing/distribution model. The basic design of the ERP system was to manage resources within a company’s four walls and not managing the resources outside to the organization. While some ERP solutions providers are addressing this issue they still lack a comprehensive framework to deliver extended enterprise capability for this different business model.

To be lean requires knowledgeable people and strong business processes. However, without the proper integrated information technology environment to support the vast amount of data that flows from a simple sourcing transaction most if not all the benefits of going global will be lost. Achieving an agile and adaptable organization is a function of having the right information at the right time for the right people to make important short term tactical and long term strategic decisions as relates to global commerce initiatives.

Constant change is the one constant of the global environment. One basic reason that companies are outsourcing manufacturing and logistics companies to 3rd parties is to increase their flexibility in responding to the demand environment. By entering into a global environment the choice and therefore the change opportunities are extensive. Changing suppliers requires new or adjusted supply chains. The new supply chain structures will have different financial and regulatory regimes. The design of the supply chains will change to accommodate different suppliers and transit times. The list of change elements is extensive and the change combinations geometric.

ABOUT THE AUTHOR

Ned Blinick is Vice President of Blinco Systems, a provider of integrated Global Commerce Management Solutions.