Lean, Agile and Adaptable Global Organizations:
An Information Technology Perspective – Part 1 of 2

FACT: The globalization of the world economy is accelerating and those companies that manage it best will win the competitive wars. An Accenture study of 238 senior purchasing executives indicated that in 2005, 55% of products were purchased outside of the domestic market, and this is expected to grow to 64% in the next two to three years.

FACT: Global sourcing/distribution organizations that have implemented integrated and synchronized enterprise solutions to manage their global commerce have been able to “lean” their organizations and drive dramatic value by eliminating needless waste. Companies that have “leaned” their global commerce environment have seen operational efficiency increase from 30-300%, inventory reduction across the global supply chain of 30-50%, improvement in asset utilization of 50-200%, reductions in total landed cost compared to domestic sourced products of 15-30%, and reduction in total landed costs compared to pre-lean globally sourced products of 2-3%.

To compete in the global economy, it is critical to perform at levels that meet or exceed customers' expectations. Price, quality and service continue to be the three variables that determine a company’s competitive position. The Wal-mart and Dell affects – reasonable quality and service at the most competitive prices – are the benchmark against which businesses and consumers make their purchasing decisions.

Achieving market leadership in today’s global economy requires a global supply chain – suppliers, carriers, agents, customs and government agencies, and distribution networks – that can react quickly to changes in the global environment and adapt to longer unforeseen developments. To be a world class participant in the global economy requires supply networks that are efficient, streamlined and are able to move quickly to balance the three variables: price, quality and service, to meet consumer-driven demand. Depending on the organization, the exact configuration of the global supply network will be a shifting blend of domestic and global manufacturing and sourcing.

Creating a lean, agile and adaptable global organization that is efficient as well as effective is becoming a critical strategic imperative for many, if not most companies. Consumer goods, electronics, pharmaceuticals, food, automotive, furniture, clothing and apparel, footwear - the industries that have become truly global - is as varied as the number of industries that exist.

The concept of lean is not new when applied to manufacturing principles, but in the specific context of supply chain management and global commerce it is. However, the overriding principle of lean – the elimination of waste from a business system – applies equally to the global commerce environment. Waste manifests itself in the underutilization of physical assets, the inefficient use of financial assets, and the unproductive management and use of information.

A 2004 study by Aberdeen, “The Lean Strategies Benchmark Report,” shed some very interesting light on the adoption of lean within the manufacturing environment. The enlightened conclusion from the study is that lean is a concept more in theory than in practice in the vast majority of American organizations. Lip service is paid to the concept of lean but top management commitment falls very short of the mark in over 75% of companies surveyed by Aberdeen. Not surprisingly, the findings indicate that those companies that actually do implement lean practices, broadly and deeply in their organizations significantly outperform their counterparts and competitors. Thus far, there hasn't been a significant study of lean implementation done in the context of global commerce management.

Lean requires a dedication to continuous process improvement, skilled people, and strong supporting information systems. The Aberdeen study found that of the three cornerstones of lean the one element that was consistently downplayed was the role of information technology. However, they concluded that companies would not truly achieve lean leadership without powerful information systems supporting their people and processes.

Applying these principles to global supply chain operations is critical – and not easy, or even intuitive. But it is worth undertaking.

Part 2 of this article looks at how information and technology are critical components to establishing lean, agile and adapable global organizations.

ABOUT THE AUTHOR

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