As part of our continuing series on supply chain management and sustainability, Brenda Cole from searchManufacturingERP.com recently interviewed me regarding some of the key issues companies face when they take their supply chains abroad, particularly to developing countries. We have seen this in the are of management systems as well as information systems particularly in the area of governance:
For many manufacturers, supply chain globalization is a fact of everyday life. Expanding operations into other countries is a common way to increase business, but there can be growing pains. One of the biggest challenges of running global supply chains is implementing supply chain management software in developing countries. Besides a myriad of technological obstacles, manufacturers must learn to navigate cultural waters in their new operations.
The most immediate issue is software compatibility between the home office and the new facility. According to William Newman, managing principal at Newport Consulting Group LLC, management-system governance and recordkeeping are two problems that arise with manufacturing in developing countries. “Assuming infrastructure is available, goods and services — the basic logistics — generally are not an issue,” Newman said.
“Management systems and the ability to govern those and to demonstrate a log of transactions to support what is happening can prove to be a challenge,” Newman said. “Global systems with enterprisewide governance requirements will still need to tie into headquarters and the full, transparent supply chain.”
When a manufacturer’s home office and a new facility are very far apart, handling suppliers, shipping and logistics can get extremely complicated. One approach to reducing the chaos, according to Newman, is to “truncate” the supply chain.
“ABC Company might have operations in Vietnam, but rather than own the operations, it will lease the manufacturing from a supplier who then manages the local supply chain on a tier-two level,” he explained. “This means that the internal supply chain governance and reporting requirements for ABC Company stop at the Vietnam plant, and the Vietnam plant is then responsible for the logistics, governance and reporting to and from the local supply chain into the plant. This removes many software requirements, as long as the plant can correspond to the enterprise via very traditional means, such as EDI and XML. Then ABC Company can retain the responsibility of overseeing logistics and management systems, rather than a complete internal data governance role.”
While implementing the same software across the global supply chain may seem easiest, this isn’t always the best approach. “In some scenarios, standardization is impossible,” Newman said. “In a prolific post-merger environment, a long-term roadmap to standardize software is often the best you can hope for. Many very large enterprises may focus on one target platform and have a dozen different versions of the software running on multiple instances throughout the organization. This is more the rule rather than the exception for very large, global enterprises.”
You can read the full article at searchManufacturingERP.com. Many thanks to Brenda for the opportunity to contribute to this article. For more information on program governance and design services – suitable for global SCM and ERP program oversight – please visit my firm’s website.