Over the last 20 years there has been a huge shift in Operations toward outsourcing, lead primarily by High-Tech/Electronics. This, coupled with rapid globalization not only into emerging markets, but into other developed economies too, has led to very extended and dispersed supply chains, often with competing objectives and region-specific product portfolios. While this is a well discussed topic, the diagrams below bring home the extent of the outsourcing and globalization through foreign direct investment. In 2009, the amount of foreign direct investment exceeded the inward investment by $1.2T, which is the equivalent of 7.5 Apples, 26 Ciscos, or 68 Bristol-Myers Squibbs. In other words there was a huge amount of globalization taking place worldwide. The extent of the outsourcing can be seen in the Developing Economies’ values, where the net inward investment was $2.2T in 2009 alone.
US Federal Reserve, “Offshoring Bias in U.S. Manufacturing: Implications for Productivity and Value Added”, Susan N. Houseman, Christopher J. Kurz, Paul Lengermann, Benjamin R. Mandel, Sept 2012 (page 71)
US Congress, “Outsourcing and Insourcing Jobs in the US Economy: Evidence Based upon Foreign Investment Dat”, May 10, 2012 (page 9)
One of the major consequences of both outsourcing/off-shoring and globalization is a loss of visibility to global operations, and therefore a loss of control and confidence. Many companies are desperate to regain control through visibility and alignment across functions and across trading partners. While getting back to the level of control companies had over vertically integrated companies operating locally is never going to return, at least with visibility, agility, and alignment, companies can know sooner about potential risks and opportunities, and act faster to reduce the risk or capture as much of the opportunity as possible.
Alignment is key to achieving this level of operational maturity. So I am happy that Supply Chain Insights LLC is conducting a survey on Supply Chain Alignment. This survey hopes to find out how organizations align functions (sales, marketing, finance, information technology, source, make and deliver) to realize their supply chain strategy. They are also looking to learn, ‘How well do they work together to drive opportunity?’ and ‘which pieces of the organization are better aligned?’ Of course this applies equally to vertically integrated or highly outsourced supply chains. The issue remains the same: How to best coordinate demand satisfaction in a profitable manner across the globe. The objective of this survey is to understand how different groups within manufacturing companies view their supply chain agility, team alignment and performance against functional goals. The bonus is that if you participate, Supply Chain Insights will give you an hour and share the results freely, while of course keeping you data confidential. You can participate in this study by clicking on this link.
Leave a Reply