Global supply chains have seen incredible amounts of disruption in the last couple of years. Supply chain leaders have been left to pick up the pieces of inconsistent supply and demand patterns, unforeseen natural disasters, and blocked ports, all while maintaining business as usual, and success has not been guaranteed. Responding to disruption as it occurs is one important aspect of managing a successful supply chain, but what would it look like to design your global supply chain in a way that proactively prepares for disruption before it happens?
What Makes an Effective Global Supply Chain?
Global supply chains are incredibly complex, with variables such as differing holidays and weather conditions likely to impact service levels throughout the year. The key to creating an effective global supply chain is starting with the right people, processes, and technology so your operations are prepared as best as possible for any unforeseen disruption. In order to operate a successful global supply chain, leaders should focus on three main areas: efficiency, resilience, and simplicity.
#1 Efficiency in the Global Supply Chain
Having efficient processes baked into your operations will not only increase service levels but also reduce cost in the process. Since one main goal of a successful supply chain network is to optimize service levels and cost, this is a really important starting point for supply chain leaders. Efficiency is especially important in regard to cycle times, transportation, operations, and forecasting and planning.
Cycle times – Analyze the time it will take to move your product and what the cost of that movement will be. Factors to consider are cost and location of inventory and potential missed sales.
Transportation – Transportation is one of the largest costs for supply chain leaders, so increasing efficiency to reduce that cost will be critical to managing a successful global supply chain.
#2 Resilience in the Global Supply Chain
Creating resilience in your global supply chain will foster a sense of flexibility in your operations. Parsing out the weak spots in your supply chain during the design process will allow you to either proactively resolve them or create contingency plans so they don’t become more dire problems down the line. When designing resilience and flexibility into your global supply chain, focus on being adaptable to disruption and have flexible inventory positioning and capacity.
Adaptability to disruption – Enable your supply chain to adapt to unforeseen disruption. This could mean being able to reroute through different ports, leverage different modes, or modify shipments.
Flexible inventory positioning – Strategically position your inventory based on supply and demand patterns, but also create flexibility in how and when you can pull from it in case of drastic supply and demand changes or extreme weather events.
Flexible capacity – Capacity is tight, so leverage it strategically. Enable your capacity to change with the seasons and adapt to carrier availability. Focus your fixed costs in areas to be more efficient and enable variable costs to adjust to supply and demand variations.
#3 Simplicity in the Global Supply Chain
Global supply chains are complex enough by nature; your supply chain design should not add to that complexity. Having strategic, yet simple, processes embedded into your design will keep things running smoothly with less overhead cost and manpower required on your end.
Design for the core – Simplify the primary volume of your network to make it easier to manage and adjust your supply and demand variations around it.
Continuous improvement program – A supply chain made too complex cannot be improved. Creating simple processes will allow for continuous audit and improvement.
Partner management process – Be strategic in partner selections and ensure they can work collaboratively and cohesively.
Visibility – With a simple supply chain design, you can see more clearly what is happening on the inside in order to anticipate and correct potential disruption before it occurs.
Pitfalls to Avoid in a Global Supply Chain
With efficiency, resilience, and simplicity baked into your global supply chain design, you will have much more success in reaching your service level and cost goals. However, even with this leg up, you still need to remain vigilant against certain hurdles to maximize the success and adaptability of your operations.
Cycle times – With overseas shipping, cycle times can often be exacerbated. Being unprepared for this can be detrimental to service levels and cost. Keep in mind port schedules and the differing cycle times and inventory needs of long tail vs. short tail products.
Key Takeaways for Your Global Supply Chain
Every supply chain is unique, especially when comparing global and domestic supply chains. While both require immense planning and strategy, there are a few extra areas that global supply chain leaders need to focus on in order to be successful in optimizing service levels and cost.
Trade zones – Global supply chains will have to deal with tariffs at free trade zones. This should be planned into the budget in advance.
Nate Rosier is senior vice president and consulting group leader at enVista. Nate has worked with over 200 companies to develop strategies to increase profitability, reduce expenses and improve their competitive position.
This article originally appeared in the 2021 International issue of PARCEL.
