Bob Ferrari has some good observations over at his Supply Chain Matters blog about the impact of globalization on supply chain management.  His observations come from the Supply Chain World North America event.  He has three posts on it – here, here and here.

At one point, Bob states; “of greater and timelier interest is the finding that companies with extended global supply chains performed significantly worse than companies with a regional supply chain footprint, on customer-facing metrics such as perfect order performance, but slightly better on internal metrics such as cost-of-goods sold as a percentage of revenue, or total SCM costs.  As an example, globally based supply chains experienced 20% worse than their counterpart regional supply chains in on-time delivery, 28% worse in perfect order fulfillment.”

Most of our customers and prospects have outsourced a substantial and growing percentage of their business.  They’ve done so to gain focus, geographic presence/reach and cost advantages.  But, as Bob accurately notes, with globalization comes supply chain management challenges.  I’ve heard first hand and seen research that shows that the majority of companies that outsource also experience a loss of control over key processes that they are still accountable for – things like order promising, inventory liability, etc.

Because brand owners do remain accountable for quality, customer satisfaction and operating performance even when they outsource, they need to rethink their supply chain management practices.  They can not move to a passive mode.  They must continue to remain actively engaged and proactively coordinate effective response to change when it happens.  The key to competitive success today is very much a function of how you deal with the unexpected, and only the brand owner knows what the right course corrections and tradeoffs are to deal with these unplanned situations.  Front line decision makers must be armed with tools for risk tradeoff and response to act.

We’ve seen that when companies take this mindset and develop processes supported by tools to empower their front-line people to deal with these events, they can realize the benefits of globalization while delivering high customer satisfaction and strong operating performance.

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