Posted by: Christian Verstraete | November 23, 2009

Operate a Global Supply Chain during a Recession


For nearly one year, we keep hearing the term recession. The fundamental question is whether it’s over or not. Not many of us are looking how to manage our supply chains during this period, trying to do the best under these circumstances.

Last week I was in Kuala Lumpur and Singapore and had the opportunity to discuss this subject with several Asian CIO’s. Most of them had gone through a rough year where budgets have been cut due to reduced business. Top of their agenda were three objectives, reduce costs, increase revenues (which in a downturn means taking market share away from the competition) and mitigate risk.

As Martin Christopher from Cranfield pointed out a number of years ago, “Companies are no longer competing with companies, but supply chains with supply chains”. Looking at the end-to-end supply chain is critical to address those three objectives. I argued companies need four key elements to truly operate an effective supply chain: visibility, responsiveness, collaboration, and risk management. I’d like to address these points in a series of blogs I hope to post over the next couple weeks, but before that I’d like to emphasis the importance of operating as an integrated supply chain.

Let me take a practical example. The Japanese invented the concept of “lean”, and worked a lot at making their factories and operations lean. But in their traditional, collaborative manner, they worked at the same time to help their suppliers and partners to also become lean. While having the end-to-end supply chain in mind, they also look at developing a collaborative relationship with their partners. The whole supply chain quickly became lean, despite the fact each company was focused on its own operations. I believe this to be one of the key reasons of the success of companies such as Toyota and others.

European and American companies have taken a different approach. Yes they have been working hard at making their factories and operations lean. They learned all about it from the book “The Machine that changed the World”,  but they often became lean through pushing the “waste” up and down the supply chain. Unfortunately, we, as the end consumer have to pay for the waste, regardless of where that waste is along the supply chain. The lack of close relationships with their suppliers, and of visibility of what happens across the supply chain, did not allow them to spot the problem. They keep asking themselves why they cannot make a given product at the same price point as their Japanese counterparts. To solve the problem, they outsource manufacturing to Asia, to take advantage of the lower labour costs, but do not realize they have not solved the real problem. As manufacturing costs increase in Asia, they will be confronted with the same issue, except if they take notice, and change their approach.

I used this argument in the discussion and was actually surprised how much agreement I got from the audience. To me this sounds obvious, but it seems many companies have not thought about it, nor have they looked at how they could address the issue and improve their competitiveness.

In the next post I will discuss the importance of a win-win collaboration for the success of the relationship.

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Responses

  1. […] This post was mentioned on Twitter by MedienStiftung FMS, green film. green film said: Operate a Global Supply Chain during a Recession « Supply Chain …: Interesting experience not originally planned 2 day http://url4.eu/oIPK […]

  2. […] a previous post, I talked about the need increased partnerships with suppliers, particularly in times of recession. […]


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