Global supply chains: in the business world, they can be your best friend or your worst nightmare. Just ask Fergus Groundwater.
In 2002, Mr. Groundwater was an executive of an advanced Canadian manufacturing company selling sophisticated custom machinery to blue chip clients around the world.
Then, the Canadian dollar began to rise, reducing the company’s inherent price advantage. Before long, an increasing number of foreign competitors were vying for the firm’s top clients.
“We needed to adapt,” says Mr. Groundwater. “We realized that if we managed it properly we could potentially incorporate foreign supply into our offering and bring down our price points and expand our capacity, while retaining critical R&D, engineering and value-added production domestically.”
By developing and integrating a global supply chain network that included foreign-sourced components and subassemblies, Mr. Groundwater says the company not only staved off competition, its business grew more than 400 per cent.
“If you manage your supply chain effectively, you can make yourself incredibly effective, lower your price points and be more competitive. Procurement can become a profit centre on its own.”
Engaged by Export Development Canada in 2006, Mr. Groundwater has since played a key role in developing EDC’s Global Trade Management Centre of Innovation, an internal consulting and R&D team focused on building global supply chain-focused market intelligence and relationships.
“The more I look at the marketplace, the less I see truly unique products and services. An organization’s ability to differentiate itself on IP alone is becoming more rare,” he says. “Today, it’s about execution – supply chain and business models that get you to market more quickly, more reliably than your competition.”
Mr. Groundwater cautions, however, “A global supply chain isn’t just about buying and selling. It’s what I’m going to buy and where I’m going to buy it; it’s about location from a business perspective: where do I need to build relationships, so I can best serve my customers?”
Fundamentally, he says leveraging global supply chains is about strategic choices. “How do I structure my business to achieve my objectives? What changes are occurring in the marketplace that we need to prepare for? Where do we want to be, and how do we add value?”
Answering questions like these will likely lead enlightened executives to a more comprehensive understanding of where the business’s value resides and how the company can best apply itself. “Managers discover how they can bring their services to market more reliably, more efficiently – in ways their customers want and at a market competitive price.”
Of course, as with any business activity, getting involved in global supply chains comes with risks.
Perhaps never before have such risks been more apparent than in the aftermath of Japan’s recent tsunami. In that case, manufacturers, including major automakers, that prided themselves on ultra lean manufacturing processes, sole-source supply relationships and just-in-time networks faced global disruptions due to a lack of resiliency in the very systems and suppliers on which they had built their global strength.
“You want supply chains to be lean, but they must also be configured to respond to and mitigate periodic disruptions,” says Mr. Groundwater, noting that many companies are seeking to “re-shore” aspects of their operations to gain better control of the supply chain, mitigate risks and manage the rising costs of offshore production.
Building a sophisticated supply chain starts with talent and a full-time commitment to the mission, says Mr. Groundwater.
If you don’t hire a supply chain expert, qualified people with a cross-functional skill set that spans finance and production through to procurement and marketing make good candidates.
“With the right training and tools, experienced individuals who understand the organization end to end are a good fit,” says Mr. Groundwater. “There are many avenues where you can acquire knowledge.”
Beyond EDC’s Trade Advisory Services, which provides supply chain education and advisory services, trade groups including Supply Chain & Logistics Canada and the Purchase Management Association of Canada are good sources of information. As well, the U.S.-based Supply Chain Council’s SCOR model is valuable, says Mr. Groundwater. “It offers guidance on how to plan, source, make, deliver and return goods from end to end.”
Essential tools such as performance benchmarks are also available “off the shelf” for a relatively small fee, he says.
The bottom line, says Mr. Groundwater, is “supply chain management is a major backbone for business. Senior management must recognize its value and give the persons responsible a voice at the table.”