GLOBAL TRENDS / INTERNATIONAL BUSINESS
January 5, 2013
Portions of this posting were taken from “Supply Chain Management Review”: March / April 2013.
I think we all would love to get a glimpse of what the future holds. If you own a business, this glimpse, even if ever so brief, would bring remarkable insights to facilitate planning. If that business is global in nature, this “look” would provide a great benefit. For the purposes of this post, let’s define global. Global is having a company in the United States while exporting products or services to other countries. Global is having a company headquarted in the United States but with production facilities in other countries.
According to “Supply Chain Management” Review 2012 Roundtable, there are basically four (4) major factors influencing global commerce:
I would like to give you several brief bullets that will indicate major consensus relative to the participants of the roundtable discussion.
- There is a significant and growing interest in Mexico and the Caribbean as a possible source for low-cost manufacturing of products to supply U.S. demands. Mexico has been for some time a factor in this effort but the Caribbean is now being looked upon as a “good bet” for the relocation of Asian companies doing business in the United States and Canada. One prime destination—Puerto Rico.
- Latin America is quickly emerging as an important market opportunity. One huge advantage is the stability of governments in most Latin American countries. Lead time issues in the Asia Pacific are also making South America more attractive. Generally, surface freight from Asia to the Unites Stated takes about five to six weeks, port to port. Then the products must clear customs.
- Africa is starting to emerge, particularly South Africa, where there is a more sophisticated infrastructure. Governmental stability in southern portions of Africa is no longer a real concern, thereby reducing risk factors relative to day-to-day operation.
- Fuel costs will continue to be a real issue for a long time. There, seemingly, are no new approaches to lowering these fuel costs although the more advanced supply chain managers may use options to hedge and balance risks. Global demand is at the heart of escalating fuel prices. This demand will not lessen over the next decade.
- “Near-shoring” or hybrid sourcing seems to be one solution to volatile fuel prices. It is still a matter of conjecture as to how realistic these tactics are. Different companies will approach “near-shoring” using differing methods so the result of cost-saving efforts will vary.
- One huge factor is the opening of the Panama Canal expansion in 2014. This expansion will allow longer, wider and heavier ships to pass from coast to coast. This should lessen freight expenses but, the big issue–what will be the “gate rates” for the new portion of the Canal? Those prices have not been determined and published as yet.
- Risk factors for safety and stability will need continued scrutiny. Pre-planning is an absolute MUST for successful management of “off-shore” endeavors. “State-side” companies must consult with experts on risk issues existing within specific countries. Risk factors may change over time so continued “due-diligence” is an absolute must.
- Global regulatory compliance will always be a concern. New rules change existing laws and businesses must constantly keep abreast of changing landscapes relative to current regulations. The approach to regulatory compliance should be to build sustainable performance improvement capabilities that are systemically deployed as part of practices and process capabilities—and not as reactive “stick-on”. MANUFACTURERS SHOULD BUILD PROCESS CAPABILITIES THAT ARE ADAPTABLE TO NEW REGULA TORY REQUIREMENTS THAT MAY BE INTRODUCED.
- Global sourcing encompasses all of the aforementioned factors. Buying components and assemblies from sources outside the United States presents the very same problems (or opportunities) as managing a company outside the United States. Having information on the background for sources and vendors is a must and must be a continuing effort.
In the end, communication is the key. The role of social networking and other media relationships is growing in importance when it comes to relating supply chain and business advantages. Global business is a marathon and not a sprint.