Managing Supply Chain Complexity

As companies pursue global business expansion, their supply chains become more complex and segmented. These companies are looking to expand their business and increase competitiveness by selling and distributing finished goods in new global markets, or may be diversifying their sourcing origins to minimize disruptions to their supply chains from natural disasters, political and social unrest or other significant events.

In many cases, these companies are still sourcing from the same origins, but instead of shipping from many origins to only a few destinations, they may be considering shipping from many origins to many destinations. China, for example, is not only a sourcing origin but also a growing consumer market for finished goods, as are other emerging markets around the globe. This is creating new logistics opportunities and challenges for companies.

In the case of China, a business may have an established outbound logistics operation, but with a new view to distribute in-country, this same company needs new logistics solutions and options for moving goods into inland China. How does the logistics department of a growing company deal with the challenges and opportunities arising from global expansion and the accompanying supply chain complexity? 

Consider the fictitious women’s apparel retailer Glam, with stores in the U.S. and Europe, that has plans to expand by opening new stores in South Africa and Chile. Can Glam’s logistics operations in established markets, such as the U.S. and Europe, be duplicated for South Africa and Chile? Is it a one-size-fits-all situation?  Certainly not.

There is a need to evaluate these new markets starting with a location analysis to determine supply and demand points; infrastructure of the area including accessibility and availability of port, rail and road resources; operating procedures such as labor, compliance, security, documentation and systems; and end-to-end visibility resources.

Because the Glam retail logistics team is inexperienced when it comes to South Africa and Chile market logistics, they can choose to start from square one and do a time-consuming, costly evaluation of market conditions or they can outsource this function to knowledgeable global logistics companies with broad-based global market knowledge and resources to help Glam quickly and efficiently expand in these new locations.

There are specific resources and capabilities companies should look for in a logistics partner when expanding globally. They should consider whether the logistics service provider is positioned to help them grow their business now and in the future. Does the logistics service provider have an established global infrastructure and local resources including personnel on the ground, along with vendor partners, with insight and knowledge of the market? Through collaboration with local partners, a global LSP delivers greater resources and flexibility to its customers by providing local niche services and networks that help assure the integrity of their supply chain in that new market location.

Another key enabler of global expansion is end-to-end supply chain visibility. By partnering with a global LSP with an established technological infrastructure, collaborative global network, critically important real-time supply chain data is on hand to enhance operational capabilities. Access to accurate supply and demand data will provide for better decision-making throughout the supply chain.

A global network-based solution also provides for the immediate and timely electronic transfer of all necessary shipment, customs and regulatory documents to expedite and streamline these processes in these new markets. Connected networks also allow shippers and their vendor partners to effectively access accurate supply chain data to track and manage cargo in transit to achieve timely delivery of goods and materials.

Innovative distribution and logistics management practices are being used today to effectively respond to the challenges and opportunities of supply chain complexity.  Export distribution centers, for example, are being employed to streamline the distribution of shipments directly to a wide range of markets. The export distribution center essentially operates as a warehouse that holds inventory at origin pending distribution to destination locations. Shipments are consolidated at origin and sent directly to customers in multiple countries.

EDCs eliminate multiple touch points to boost the integrity of the supply chain, align supply and demand earlier in the process, and reduce inventory days to lower costs. By creating a more responsive and flexible supply chain, backed by end-to-end visibility, shippers achieve time and cost savings, greater reliability and control over their logistics operations.

Mark Michaels is chief commercial officer at Damco. Contact him at 973-301-4804 or at mark.michaels@damco.com.

 

 

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