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The New Supply Chain Paradigm

By: Simon Kaye
Posted: January 24, 2012, from the January 2012 issue of GCI Magazine.

Global sourcing is driven by far more than a search for low cost. It is a long-term systemic trend that necessitates a completely new thought process to structure supply chains from the ground up. Architecting a supply chain for today’s sourcing requires a quantum leap from past shipping practices. The supply chain paradigm is dramatically changing, and the most successful companies integrate constant awareness of those changes into their strategic planning process.

The transformation of global sourcing, transportation and distribution networks has stretched the resources of all but the largest multinational corporations. Demanding service levels and high costs (for everything from fuel to regulatory compliance) make supply chain management a top priority in the tough competitive conditions that beauty companies face. Producers that have made cutbacks in their own organizations to reduce costs may lack adequate logistics infrastructure, capable decision support tools, necessary capital and operating scale.

Planning and Preparation

In the world of global sourcing, speed depends on planning and preparation. Inadequate preparation, reflecting incomplete information about supplier and carrier reliability, as well as customs and shipping requirements, is the most preventable and most costly problem when it comes to inefficiencies in global sourcing. Advance planning for all the contingencies that impact global sourcing—customs and security regimes, sustainability concerns, technology requirements, contract terms and  more—is essential. No longer can the logistics process be an afterthought.

The industry must realize that advance planning and information control are essential to creating an efficient global supply chain accurate and instantaneous information supports efficient global logistics. Through structured logistics system development and sophisticated electronic tracking, an efficient supply chain will use cutting-edge electronic systems for sourcing that improves both fuel efficiency and cost effectiveness, because it eliminates the guesswork and backtracking to find misplaced shipments and affords maximum flexibility in route and load planning. By taking these factors into account from the start of logistics integration, there is saving in fuel, energy, resources and time.

There is much discussion today about green or sustainable global supply chains. Sustainability, efficiency and cost-effectiveness are virtually synonymous when it comes to global supply chain planning. The key factors that shape today’ global supply chain processes, and thus global logistics costs, has demonstrated that proposition. Customs, security, technology and processing concerns all have been transformed in less than a decade. The company that is not transforming its global sourcing logistics processes to accommodate them will have a dysfunctional sourcing and shipping effort that is a competitive disadvantage.