Is your supply chain strategy dooming your globalization efforts?

What impact are globalization efforts having on American supply chains? Positive? Negative? The answer lies somewhere in between. On the positive side, U.S. businesses expect sales revenue generated outside the United States to grow to an average of 42% of their total revenue over the next three years, up from 35% today and 26% three years ago, according to an Accenture study.

On the other hand, despite the strong growth expectations, nearly half (47%) of the executives surveyed say a poorly designed or executed global operations strategy has contributed to a failure to grow market share in important new markets. Some of these failures could be related to the finding that 40% of all executives surveyed say their companies do not have a global procurement, manufacturing and distribution network that is designed to deliver products on time and at the budgeted cost.

As expected, respondents consider China as the most important emerging market (82%), followed by India (56%) and Eastern Europe (38%). Brazil (25%) and Russia (19%) also were cited frequently in the study.

The study also identified a number of best practices that successful companies have adopted within their global supply chain operations:

œ Clearly articulate customer requirements for product, channel and services.

œ Understand and specify landed cost targets that incorporate cost of goods sold (COGS), logistics requirements, quality management issues, obsolescence, lost sales due to poor service, and time-to-market considerations.

œ Develop global operations footprints that incorporate product development, sourcing, manufacturing, transportation, storage, sales and operations planning (S&OP), and the provision of after-sale services, networks and capabilities.

œ Design information flows to help ensure accurate, real-time visibility across the supply chain.

œ Create organizational models that foster a global operational culture with aligned metrics and behaviors across geographic boundaries and organizations.

œ Ensure a financial management capability to track operational effectiveness.

œ Identify and manage risks and uncertainty across increasingly complex supply chains.

œ Build sourcing, manufacturing and distribution capabilities that can react rapidly to changing customer demographics and characteristics.

Failure to effectively design a global operations strategy could lead to a decrease in margins due to expedited shipping costs. Lost opportunities in gaining and growing market share in these new markets are also a frequent casualty.

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