gLOCALization?
“In God we trust; all others bring data.” ~ W. Edwards Deming
Another great article on the 2020 Acceleration. PwC Mid-East Publication discusses the move from globalization to “gLOCALisation.” Opening quote, “COVID-19 has forced manufacturers worldwide to conduct emergency reviews of their supply chains. As entire economies locked down overnight, companies suddenly faced national and international markets where they could no longer reliably source components, manufacture products or distribute their goods to customers. In addition, the crisis hit when global supply chains were already under pressure from new tariffs and restrictions resulting from trade disputes.”
PwC’s three drivers:
1 – Digitalization and automation enable companies to go more local by taking labor out of the supply chain.
2 – Pre-COVID supply chain approaches that are focused on cost efficiency need to be broadened. Flexibility, resiliency and customer experience can create differentiation and result in improved revenue growth.
3 – COVID encourages supply chain and operational collaboration between companies, which when combined with automation helps solve bottlenecks rapidly.
Before we deal with each “driver” in turn, let’s look at an underlying assumption. This report assumes that the option is between the existing distant supply chain and a more local supply chain. I disagree… The options available are much broader. If your current suppliers are in China, build a second supply chain. India, Vietnam, Brazil, Mexico, Eastern Europe, all offer resources for your company’s second or third supply chain. It isn’t a binary choice between local and far afield.
Let’s deal with PwC’s drivers. The ability to take local labor out of your supply chain via automation will be limited. The types of labor you would be removing, low skilled/low paid labor is disappearing rapidly here in the US. As I write this (2/21/2021) the COVID relief package being debated in Congress includes a $15 per hour minimum wage nationwide. Larger companies (Amazon, Walmart, etc.) have already adopted this minimum wage and Congressional leaders are already looking to end small businesses that pay less. Also, under consideration is the “Pro Act” a national initiative to eliminate both the gig economy and many freelancers.
The second driver from PwC’s research is absolutely correct. Cost efficiency means little if you cannot get product. Better, more flexible, resilient supply chains will drive availability at a small increase in costs. Dependable suppliers will earn stronger brand identity and be able to command premium pricing.
Finally, we get to greater collaboration solving bottlenecks rapidly. I look at this statement and it seems obvious, even without the 2020 pandemic. Tim Cook is the master of operational efficiency and as CEO at Apple has created an amazing integrated supplier network. But in 2021 and beyond, it is clear that the ability to collaborate is as important as the ability to produce your product. This goes beyond the traditional systems integration that Walmart is famous for. It means a whole new level of collaboration at every level (people, systems, shipping/distribution, etc.). It must be part of your diligence when evaluating suppliers.
As I have said before, 2020 will be known as much for being the great accelerator as the pandemic.
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4 年That's a great summary Michael - 2020 did inspire many companies to ACCELERATE and pivot within few months that would normally take 10 years!
Michael, Great write-up and points you outline here. On your perspective on a "far away" and "local" secondary supply chain resources may not be as straightforward. This secondary option is dependent on the resources the company has to be able to establish and nurture this secondary supply chain option. To be clear, I am in agreement that this is a true viable option for companies and mitigates risk longer-term. But, I believe this is company specific as to whether they are "ready" to take on this endeavor. For a good majority of smaller businesses, this is a challenging and involved process unless there are additional resources in the business to navigate any potential options. At a minimum, this need to be an intermediate solution for the company. This is where bringing in a resource similar to yourself would help. I love this topic. Thanks for sharing. -Chris
Co-Founder & Chief Operating Officer MobileWalla
4 年That's a good one.... Time to get everyone back to work!