Good Company

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Good Company

Monday, July 23, 2007

Reminder: International supply chains complex

Found here, a reminder:
Outsourcing has created complex supply chains spanning the globe, demanding far closer attention from logistics operators than in the past. This was the consensus of logistics company executives attending the recent Council of Supply Chain Management Professionals (CSCMP) conference in Tianjin.

"Supply chains are often much more complex than we need to see,'' said John Mentzer, professor of Logistics and Supply Chain Management at the University of Tennessee. "In today's world it is common for commodities to be designed in Singapore, made in China, shipped to Hamburg or Los Angeles, and distributed to Europe or North America. Often, garments made in China have to reflect the latest varieties, even for Turkey and India as well, in a matter of days.''

Supply chain management (SCM) represents the future trend, said Guowen Wang, China representative for the US-based CSCMP. He said SCM encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and management activities within and across borders. It also includes co-ordination and collaboration with chain partners.
Mentzer said companies face three stages of sophistication in the global supply chain. The first applies to procurement costs. He noted one US company shifted its base from the US to China to cut procurement costs.

The second stage of sophistication is total landing costs, Mentzer said. The same above mentioned US company later moved its manufacturing base from China to Mexico after counting the combined costs for procurement, transportation and inventory, he noted. The move to Mexico was made because of overcapacity and delays at US West Coast ports.

The third stage of sophistication according to Mentzer is identifying supply chain cycles. This refers to six items: Services, products, information, financial resources, demand and forecast.
The time element is important too, according to Alan Turley, vice-president of international affairs, Asia Pacific, at FedEx Express. "Today's logistics players do not count the kilometres, we count the time instead,'' he said. Some freight is delivered from Beijing to US within a certain amount of time, in disregard of the distance, he noted. "The target of FedEx is to cut down time and costs,'' he added. The company is investing heavily in the supply chain network to move air cargo from Shanghai to any destination in the world within 48 hours.
And a related warning sounded here:
Mutual marine liability insurer The North of England P&I club claims shipping is at risk of being “overwhelmed by a rising tide of inexperience”. “Unless the industry ploughs more profits from the current boom into recruiting and training new staff, the present adverse claims trend could soon reach critical levels,” says managing director Rodney Eccleston.

“The imminent shortage of experienced seafarers we’ve been forecasting is now a reality,” he says. “There are simply not enough good people out there to run the world’s much bigger fleet properly or to provide the necessary support and experience from ashore.”

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