Despite world economic uncertainty it would seem that globalisation is moving ahead unabated. According to findings from PRTM’s sixth annual survey entitled ‘Global Supply Chain Trends 2008 – 2010’, globalisation is accelerating and in the process, bringing about large structural shifts for global supply chain organisations.
The primary focus of attention no longer seems to be manufacturing and assembly, it is now shifting to product development. But the key drivers for globalisation are still those of cost reduction and the need to penetrate local markets. China and India too, continue to be the main targets for globalisation, although Eastern Europe is catching up as a major off-shoring destination. But one of the most interesting trends highlighted by the survey is the emerging importance of supply chain flexibility.
The report states that “by 2010, the need for greater supply chain flexibility will overtake product quality and customer service as the major driver for improving supply chain strategy.” This growing interest in flexibility would appear to indicate a desire for greater control over expanding and more complex supply lines. Working with multiple partners across wider geographies brings a greater need for a focus on supply chain performance, and to achieve this higher performance, visibility, forecasting and flexibility in planning and execution are necessary to ensure delivery and customer service.
Whereas the survey reveals that four out of five companies plan to better integrate key suppliers – including a need to better enforce service level agreements with channel partners – surprisingly, 65 per cent of companies surveyed plan to maintain higher buffer stocks along key supply chain functions.
To me, this reflects greater insecurity in regards to the supply chain’s ability to perform. Companies may be planning to push out globalisation further, with commensurate levels of sophistication and complexity in the chain, but there is an underlying fear of supply failure, which can only be offset by either building greater flexibility into the supply chain or through the more expensive option of building in inventory.