Will ecology, closely linked to sustainable development, be the next factor determining the development of logistics? Will Lean Management and TQM fit into new development trends?
The United States, still a leader in introducing new logistics solutions, organized its second Green Logistics forum in February 2009, attended by industry leaders in logistics, IT, and consulting. The discussion focused on the extent to which Green Logistics concepts are already embedded in company strategies, what the consequences (positive and negative, primarily related to costs) of implementing such changes will be, and how they will alter the supply chain layout and participant cooperation. These experiences were compounded by perturbations related to the global economic collapse, although this factor affected individual regions to varying degrees.
The article points to a new area of activity (but also risk) for companies operating within supply chains and draws attention to the need to take steps to adopt a new strategy. Most American companies describe the implementation phase of these assumptions as early. However, the situation may change dynamically. If we want to participate in global supply chains, it is also necessary to prepare for the coming changes. Then we have a chance to actively influence flows within global supply chains.
Changes in the global supply chain flow
The uneven distribution of crisis phenomena in individual countries has caused significant disruptions in the global supply chain, related to the weakening or even disappearance of some links. Maintaining control over a chain that is “breaking” in various places has become very difficult, which has led to a significant increase in the risk of the existing logistics operations system collapsing and the loss of control over commodity flows and the phenomena accompanying them. Processes of “shrinking” chains and returning to activities that can be controlled (more local, based on resources close to the production site and directed at markets that are more controlled) have occurred.
Rapid growth of the internationalization of emerging markets. Changes in the directions of commodity flows have been observable for several years. Not only countries referred to as BRIC (Brazil, Russia, India, and China) have been gaining importance, but also the Arab Emirates and the African continent, especially in the context of the increasingly strong influence of the Chinese economy. However, the key in this situation is a good knowledge of the cultures of new global “commodity centers” and networks of local contacts, which allow decision-makers in the global supply chain to reduce the level of uncertainty resulting from the changes taking place.
New opportunities for resource acquisition. Both offshoring and outsourcing have so far been perceived as strategies allowing for the reduction of operating costs and the conversion of fixed costs into variable ones. However, rising labor costs and energy costs have made it necessary to increase the number of variants in order to optimally manage the entire supply chain. The process of “nearshoring,” i.e., searching for production sites or raw material sources in closer countries where the chain’s progress can be directly controlled, has gained importance. The advantage of introducing “nearshoring” will also be the reduction of transport costs, shorter delivery times, and lower risk associated with various types of operations taking place in spatially distant areas.
Increased interest in sustainable development. Both governments and customers, suppliers, and other supply chain participants are beginning to expect a higher level of environmental responsibility from the companies they work with. The fundamental problem is no longer the question of what actions companies should take to make business “greener,” but how to maximize the business benefits associated with this strategy.
The sustainable development policy, described in more detail below, is understood at the highest levels of the organization and introduced as a key factor for long-term development and brand value maintenance.
Main sources of capital. The main characteristic of a polarized environment is the rarer availability of capital in the local or regional environment. In fact, it is easier to obtain financing from Korea or the United States. These funds come primarily from private company funds, and partly from intercontinental exchange, national pension funds, or new and significant sovereign wealth funds. Practically every business must understand that advantage and risk are associated with new sources and the flow of capital. Since the focus is mainly on capital investments, the importance of the supply chain is growing. Supply chain decision-makers should understand that the main assets for a corporation are assets related to the supply chain. It is worth asking whether the cash used in production provides a high (or low) return? For example, will good use of the distribution network or a new approach to outsourcing or service division allow the company to avoid significant capital investments and ensure a higher return on that investment?
Growing importance of the African continent. Business leaders who fail to “keep pace” with China’s growth should not be surprised if economic development in many African countries exceeds their expectations. This may be a great opportunity for companies with developed marketing and flexible, scalable supply chains. Many African countries have the potential to take on the role of outsourcing call centers and conducting other business activities expected by supply chain experts.
The article comes from the magazine “Logistyka” 4/2009.