Follow the demand

Narendra Mulani. Logistics Management (2002). Highland Ranch: Mar 2008. Vol. 47, Iss. 3; pg. 23, 1
pgs

Abstract (Summary)

In the multi-polar world, North American and European businesses remain strong. But the influence of
new hubs - China, India, Brazil, Eastern Europe, and others - is skyrocketing. These countries and
regions have emerged as key sources of labor and materials, but even more so as robust markets for
goods and services. The bottom line is that supply chain manuals are being updated - and even
rewritten - because of a refocused need to "follow the demand." Described here are five core tenets
that will help guide companies as they seek to capitalize on the growth opportunities that globalization
offers: 1. Focus on value, not assets. 2. Design the right organization. 3. Align and streamline decision
making. 4. Position talent strategically. 5. Insist on adaptability.

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Full Text

(792 words)
Copyright Reed Business Information, a division of Reed Elsevier, Inc. Mar 2008

Today's companies reside in a "multi-polar world," a place with new and powerful epicenters of
economic power. In the multi-polar world, North American and European businesses remain strong.
But the influence of new hubs-China, India, Brazil, Eastern Europe, and others-is skyrocketing.

The above countries and regions have emerged as key sources of labor and materials, but even more
so as robust markets for goods and services. And it's these shifts that are spawning huge changes in
supply chain management. This shouldn't be surprising, given that sales outside companies' home
markets are expected to increase by 20 percent within two years and that offshore manufacturing
operations will likely grow by 35 percent over the same period.

The bottom line is that supply chain manuals are being updated-and even rewritten-because of a
refocused need to "follow the demand." Described below are five core tenets that will help guide
companies as they seek to capitalize on the growth opportunities that globalization offers.

1. Focus on value, not assets

High performance on a global scale is more about managing value than about managing assets. Take
the pharmaceutical industry, whose pre-multi-polar mindset was that large investments in fixed assets
and infrastructure were often needed to protect intellectual property, ensure quality and maintain end-
to-end control.

These days, Big Pharma is more likely to focus on managing value (cost, quality, and service) rather
than controlling assets and operations. Toward this end, it's doing more outsourcing, developing new
shared-services capabilities, creating innovative total-cost-of-ownership models, and building
integrated planning systems that create value without the need to own assets that don't add value. By
focusing heavily on processes and collaboration, there's less need to own and manage a complex,
vertically integrated supply chain.

2. Design the right organization

Companies with highly effective global operations often globalize their entire value chain, rather than
individual functions such as procurement, logistics, or manufacturing. This allows them to develop
local, regional, and global portfolios using supply chains that are optimized for each product line or
area of business.
Because of its complexity, this is a strategy that should be implemented in bite-size pieces. Consider a
European truck manufacturer, whose global objective has been to get consistently closer to its
markets, thus allowing its products to meet local requirements more and more economically. As shown
in Figure 1, it controlled the risks and costs by moving gradually from local to regional, and regional to
global.

3. Align and streamline decision making

Related components of global high performance are accountability and balance between local and
global objectives. Some companies do this by making a single person or department accountable for
global operations. These global overseers have direct organizational ties to local or regional
leadership.

This keeps global functions from being optimized at the expense of local market products or end-
customer requirements. In fact, local presence and insight are a mandatory competency regardless of
how global operations are administered. Many decisions must evolve through collaboration; but
policies and process designs are typically enacted at the corporate level, with daily operating decisions
made locally.

4. Position talent strategically

All companies need experienced managers with good local market knowledge and strong relationships
with headquarters. But in a global supply chain context, this also means putting top people in regional
positions. General Electric, for example, often staffs country offices with high achievers from
headquarters. Over time, these individuals hire local successors to run those offices.

GE's approach is common in high-growth regions, where top corporate players are often needed to
identify and nurture local talent. This way, cultural nuances are increasingly understood and
accommodated, and vital decisions about working with local service providers (distributors and
wholesalers) are not rushed or ill-informed.

5. Insist on adaptability

Global networks and markets involve more risk than those focused on domestic markets. Political and
climatic upheavals are part of the reason, but the most influential factors are supply chain visibility,
physical distance, and the fact that long-term forecasting is largely hit or miss.

However every risk factor-from recalls to regime changes-suggests the same imperative: infusing
higher levels of adaptability into companies' supply chain strategies, processes, technologies, and
people. Across the multi-polar world, companies must be able to sense and respond flexibly to
changing demand across multiple continents and time horizons.

The above principles are neither revolutionary nor detailed enough to compose a supply chain
roadmap. But insightful companies will recognize them as a good, big-picture synopsis of the market-
oriented, supply chain capabilities they need to achieve high performance in the new multi-polar world.

[Author Affiliation]
Narendra Mulani leads Accenture's Supply Chain Management service line. He has worked across a diverse
set of retail, technology, and products clients, and continues to have responsibility for Accenture's global
relationship with Procter & Gamble. He has been with Accenture since 1997.

Indexing (document details)

Subjects: Supply chains, Emerging markets, Guidelines, Globalization,
Value chain
Classification 5160 Transportation management, 9180 International,
Codes
9150 Guidelines
Author(s): Narendra Mulani
Author Affiliation: Narendra Mulani leads Accenture's Supply Chain Management
service line. He has worked across a diverse set of retail,
technology, and products clients, and continues to have
responsibility for Accenture's global relationship with Procter &
Gamble. He has been with Accenture since 1997.
Document types: Feature
Section: Columns; Mulani on Excellence
Publication title: Logistics Management (2002). Highland Ranch: Mar
2008. Vol. 47, Iss. 3; pg. 23, 1 pgs
Source type: Periodical
ISSN: 15403890
ProQuest 1448313411
document ID:
Text Word Count 792
Document URL: http://proquest.umi.com/pqdweb?did=1448313411&sid=11&Fmt=3&clientId=78175&RQ
T=309&VName=PQD