Empowering Global Supply Chain Ecosystemsby Mark Millar on 2012-10-24 05:12:42
There are increasingly blurred boundaries within-and-across the complex international organisations that companies deploy in order to efficiently plan, source, make and deliver their products - such that we are now firmly in the domain of global Supply Chain Ecosystems.
On the basis that these modern-day supply chain ecosystems inevitably involve several organisations working together for a common purpose, then by nature of comprising multiple participants, modern-day supply chains must inherently involve outsourcing in one form or another.
Supply Chain Ecosystems
As a result of recent and rapid developments in worldwide commerce, we have seen supply chains evolve into complex international networks, which can no longer be adequately described using the linear concept of a ‘chain’.
The depth and breadth of complexity, connectivity and inter-dependencies involved in today’s international commerce has resulted in the emergence of ‘Supply Chain Ecosystems’ – globally inter-weaved, multi-layered networks of partners, suppliers, regulators, service providers and customers.
Within these ecosystems, each configuration is unique to the particular enterprise that owns that supply chain. The ecosystem’s chosen participants are all coupled together for the common purpose of providing an end-to-end channel of distribution - all the way from the suppliers of materials and components, extending through manufacturing processes – whether in-sourced or outsourced - to the distributor and retailer, and ultimately to the consumer.
Each commercial enterprise forms their own distinctive supply chain ecosystem, adopting a different composition of similar participants, or in several cases, particularly within industry sectors, many of the same participants.
And so it goes on, such that numerous multi-layered cross-enterprise connections generate a complex web of interdependencies, frequently spanning the globe, in order to optimise the three critical attributes that drive differentiation within the supply chain ecosystem – speed, agility and resilience.
As modern supply chains increasingly resemble complex ecosystems rather than linear chains, the suppliers, manufacturers and service providers that work together to service one client’s supply chain, may in fact be fiercely competing against each other to win business to provide services for a different client’s supply chain.
Indeed, whilst each company has their own supply chain ecosystem over which they have control, that same company will most likely be a participant in several other supply chain ecosystems, for example for its customers and suppliers.
For global businesses, the supply chain is increasingly becoming a key source of competitive advantage and differentiation. Brands need supply chains that enable and empower them to get their product to market more efficiently and faster than the competition. Businesses are now competing on the basis of their supply chain management capabilities almost as much as their product or their brand.
In this context, organisations must develop the capabilities to effectively work with multiple partners in order to successfully operate and execute their supply chain ecosystems, thus leading to an increasing trend to supply chain outsourcing.
Supply Chain Outsourcing
Defined as ‘the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees’, outsourcing is generally undertaken in order to benefit from using an external provider - typically through gaining economic advantages and leveraging specialist expertise.
In our globalised world, outsourcing is often confused with offshoring. However outsourcing is still outsourcing irrespective of where the outsourced services are actually performed – whether onshore or offshore. Offshoring refers to moving business activities out of the existing host organisation to another location in a different country – in many cases to an outsourced partner (Outsourced Offshore), but in some cases to a subsidiary division of the same company (Offshore).
Adopting the Tom Peters mantra “Do what you do best and outsource the rest”, organisations have taken the approach of focusing on their core competencies whilst seeking external partners to undertake activities that are non-core and that can be undertaken by third party service providers. Outsourcing partners typically have specialist expertise and the economies of scale that enable them to deliver the required results better and cheaper than could be achieved by the client using their own in-house resources.
These trends have led to industry sub-sectors of firms providing outsourcing services, including call centres, finance, payroll, telecommunications, computing and of course transportation and logistics.
In addition to leveraging the scale economies that result from servicing multiple clients, these focused service providers also nurture and develop specialist subject matter expertise, domain knowledge, streamlined processes and technology platforms that are above and beyond levels that any single organisation could develop in-house.
Therein the value proposition for outsourcing – contracting out your business processes to a specialist service provider that can perform those services more efficiently and more cost effectively than you could do yourself, enabling your organisation to focus its precious resources on your core competencies.
We can expect further collaborative outsourcing developments that will empower efficient and effective performance in global supply chain ecosystems.
Industry thought leader Mark Millar has been engaged by clients as Speaker, MC, Moderator or Conference Chairman at more than 240 functions in 20 countries and is recognized by the Global Institute of Logistics as “One of the most Progressive People in World Logistics”. email@example.com