Rapid globalisation is stretching the supply chain

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Supply chains are losing flexibility due to rapid globalisation, causing major concern to more than 60 per cent of companies surveyed in sixth annual Global Supply Chain Trends Survey published by PRTM.

The study aims to offer insight into how leaders are responding to the challenges of globalising their supply chain operations.

PRTM spoke to more than 300 global manufacturing and service companies compiling information between December 2007 and February 2008.

More than half of participants said they do not have the internal capabilities to adequately manage their external partners. However, in spite of these challenges more than 50 per cent said they plan to move all manufacturing operations outside their home country by 2010. During the same period off-shoring of product development is expected to almost double.

The research found that 96 per cent of participating companies were not currently able to fully achieve the planned benefits of globalisation.

Average reported benefits include an 18 per cent reduction in material costs and a 26 per cent decrease in labour costs.

Management costs proved to be the hardest to reduce with only eight per cent of participants reporting lower costs in this area. More than 40 per cent of companies, however, made no benefit at all or saw an increase in management costs.

Gordon Colborn, lead director for PRTM’s UK business, said: “This is an indication of how difficult it is to globalise without having a solid operational strategy in place, and a tactical framework against which to execute.

“Even companies with significant collaboration experience are struggling to develop and cultivate the right management skills to deal with the complexity resulting from working with multiple partners around the world.”  

The study also found that by 2010 the need for greater supply chain flexibility will have overtaken product quality and customer service as the major factor for improving supply chain strategy.

In addition, the survey revealed that the majority of companies are only turning to more environmentally friendly solutions in order to comply with legislation.

Colborn added: “These findings should be of concern to any company planning to move operations to a new geography without a corresponding plan to address the resulting supply chain impact.

“The survey highlights that many companies will be unable to make the changes required to deliver their strategic objectives if they fail to evolve and develop the necessary skills and competencies to manage the complexities of global supply chains. If they are not careful, they will lose the ability to design and implement strategies that deliver competitive advantage and better business performance.”

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