The Three Laws of Global Supply Chain Management

Follow the rules of global competition and optimize the global supply chain.

Global supply chain management has a short history. More than a decade ago, only a limited number of large multinational enterprises had systematically thought and strategically managed their supply chains when integrating their internal information and resources. Three years ago, McKinsey conducted a global supply chain survey. Most of the respondents realized that the supply chain of their company was difficult to achieve the corresponding strategic goals, but they did not know how to strengthen their own supply chain management and deal with the supply chain. Global trends in chains. Now, that trend has been reversed as multinational corporations spread their tentacles around the world. Terms such as bullwhip effect, supply chain alliance, and collaborative supply chain have gradually become familiar to managers.

According to data, the operating costs of suppliers usually account for 55%-85% of sales. Therefore, the improvement of procurement management, logistics and distribution and the improvement of the supply chain are of great benefit to improving corporate profits and competitiveness.

From the perspective of the entire supply chain, supply chain management refers to the business problem of how to provide products to meet customer needs in a complex and uncertain environment. Whether the supply chain itself is simpler or more complex is not the problem. Only by redesigning the supply chain model as a whole and being good at subtraction, addition and even multiplication can it operate more efficiently and enterprises can be more competitive. Rising to the level of the global supply chain, even more so.

The Law of Subtraction

Subtraction in the global supply chain is not simply to cut costs, but to reshape in all directions until the integration of upstream and downstream resources. Nike is a good example of being good at subtraction.

From March to July this year, the world-renowned sporting goods manufacturer saw a 10% decrease in orders for global delivery of sports shoes and sportswear compared to the same period last year. Following the closure of its only self-owned shoe factory in China, Nike said earlier this year that it would stop placing orders for four sports shoe factories in Asia in the next six months to one year. In addition, Nike will also terminate its partnership with several Asian apparel foundries.

To reduce costs, Nike conducts a comprehensive audit, including streamlining the supply chain and reducing personnel expenses. Closing its own factories and stopping placing orders to multiple factories is an attempt to concentrate production on fewer production sites. It is understood that Nike may add some production lines in Fujian, gradually shift the production business in Guangdong, Jiangsu and other places to Fujian, and transfer some production lines to Southeast Asian countries.

At present, Nike has a total of 640 cooperative foundries in Asia, of which China has the most cooperative factories, reaching about 180. 35% of the world's Nike footwear is manufactured in China, and China is also an important sourcing base for Nike apparel and equipment. Besides China, Nike also has foundries in Vietnam, Indonesia, Thailand and South Korea.

In recent years, Nike shoes have gradually become functional and professional, and the technical and technological requirements of factories have also increased compared with the previous ones, which has also raised the threshold for suppliers. In order to shorten the supply chain, the sales period of a single style of Nike sports shoes has been reduced to 8 to 9 months, which is more than half less than before; the order has also changed from once every two weeks to once a week; The life cycle is shortened from the previous 5 to 6 months to about 3 months. This requires the foundry to shorten the production process. For the supplier, its role begins to change to a certain extent, that is, from a pure manufacturing enterprise to a service-oriented manufacturing industry.

It should be noted that to do a good job of subtraction means that the enterprise must have a good process planning ability, and the forging of this ability cannot be completed overnight.

The Law of Addition

Since the 1990s, with the continuous strengthening of global economic integration, the competition between enterprises has gradually turned into the competition between supply chains. If an enterprise wants to survive and develop in the fierce business competition, it must continuously reduce its transaction cost and increase its profit, otherwise it will be eliminated by the ruthless market. As a result, in the western developed countries represented by the United States, a new form of enterprise organization—Supply Chain Unions (Supply Chain Unions) is booming, and will gradually replace the position of enterprise groups and strategic alliances.

Now many companies are gaining unprecedented competitive advantages from supply chain alliances: First, a considerable number of world-renowned large companies, such as IBM, Cisco (Cisco), Dell (Dell), Wal-Mart and other companies, through Building a flexible and effective supply chain alliance greatly improves operational efficiency and consolidates or establishes its leadership position. Second, many small and medium-sized enterprises with the characteristics of "specialization" have rapidly grown their strength by joining supply chain alliances and participating in international division of labor, thus growing into "industrial giants" in a certain field in a very short period of time.

Cisco is a company that excels at managing global supply chains, which has become a major competitive advantage of Cisco. In this year's Top 25 Supply Chain Global 25 list selected by AMR, a research institute specializing in supply chain assessment, Cisco ranked fifth. The comments given by AMR analysts are that Cisco's supply chain management concept is far-sighted, strong in execution, and commendable for its in-depth cooperation with customers and suppliers.

At the just-concluded Cisco China Fiscal Year 2010 Partner Summit, Digital China was awarded the "Best Supply Chain Partner Award in FY09" by Cisco. Cisco is determined to establish long-term strategic relationships with upstream and downstream entities in the supply chain. As Cisco's largest IT distributor in China and one of Cisco's three general agents in China, Digital China has always maintained close ties with Cisco. Cisco provides R&D and product development, while Digital China provides customers with product and solution matching and logistics, as well as planning order management, product deployment and service support. Through the integration of the supply chain, the two parties can more accurately understand and respond to customer needs, reduce inventory and capital pressure, save costs, improve operational efficiency, profitability and business flexibility, and improve the ability to respond to changes. At the same time, through cooperation with Cisco, Digital China has achieved a rapid response to demand, formulated a more favorable price positioning, and avoided selling excess inventory at a discounted price.

Complete supply chain management brings win-win for Digital China and Cisco. A good supply chain partnership has greatly reduced costs, shortened response time, and created more market value for Digital China and Cisco.

It can be seen that only as Cisco is good at doing additions and forming supply chain alliances on a global scale, can companies turn their partners' expertise into their own, turn their partners' resources into their own resources, and gather partners The advantages of the whole supply chain are formed into a competitive advantage.

The Law of Multiplication

Although supply chain alliances can improve the efficiency of the entire supply chain, in many cases, due to various factors such as geographical constraints, information cannot be smoothly transmitted throughout the supply chain. Thus, a higher form of managing global supply chains—the collaborative supply chain—has emerged. Collaborative Supply Chain is referred to as CPFR, and they are the acronyms of the following words: Collaboration, Planning, Forecasting, and Replenishment. CPFR is generally considered to be pioneered by the daily necessities manufacturer Procter & Gamble and the retail leader Wal-Mart.

In the 1980s, a Wal-Mart store in St. Louis, Missouri, found that Pampers baby diapers were so popular that they were often out of stock. They contacted Procter & Gamble in Cincinnati, Ohio, and hoped that the new stock would be automatically replenished as soon as the shelves were sold out, instead of having to go through the order process every time, but a monthly payment check. The two companies experimentally linked their computers to make a system that automatically refills diapers. Since then, P&G's diaper merchandise turnover in Walmart stores has increased by 70%, corresponding to a 50% increase in P&G diaper sales to $3 billion.

In 1987, Ralph Drayer, then vice president of Procter & Gamble, felt that the upstream and downstream transactions in the retail industry were generally too cumbersome, time-consuming, labor-intensive, and costly. Decided to expand the diaper system model to cover all their downstream distributors and commodity sellers. Procter & Gamble and Wal-Mart established a production and marketing alliance, and completely broke the dual-link-based multi-link circulation system that dominated the US circulation field at that time. The cooperation of automatic delivery was born, and at the same time the concept of "continuous replenishment" came into being.

Before the introduction of CPFR, the cooperation model of supply chain partners was limited to Aggregate Forecast and Replenishment (AFR), Jointly Managed Inventory (JMI) and Vendor Managed Inventory (VMI). They all lack an integrated supply chain plan to effectively avoid high inventory or low order fill rates, and they cannot solve the problem of high maintenance costs. CPFR can do everything from transmitting sales data to co-constructing collaborative planning, forecasting and replenishment processes, to global data synchronization.

Specifically, the staff of Procter & Gamble and Wal-Mart jointly developed an electronic data interchange connection system. Through this system, P&G can collect its product sales data from various Walmart retail stores, and then deliver the right amount of P&G products from the factory to the store in a timely manner. P&G even abolished the sales department and set up a customer business development department, turning multiple back-end support departments such as finance, logistics, and marketing into front-line departments to achieve information sharing with strategic alliance partners. In this way, Procter & Gamble and Wal-Mart have changed from the original only in the sales link to the current all-round docking. In terms of process docking, the CPFR process was started on the basis of continuous replenishment. The two parties will formulate a common business plan, jointly carry out market promotion, sales forecast, order forecast, and jointly evaluate and summarize market activities. Inventory of P&G products in Walmart stores ended up near zero, and revenue and profit from sales of P&G products at Walmart increased by more than 50%.

Supply chain collaboration requires that all node enterprises in the supply chain coordinate and work with each other in order to improve the overall competitiveness of the supply chain.

The core is the establishment of a unified information platform. Due to the establishment of this platform, in the entire supply chain, the information platform acts as a multiplier. Due to its existence, once the market changes, the information can be conveyed to all links in the supply chain and respond quickly accordingly. , resulting in the effect that one plus one is far greater than two. In the increasingly fierce global competition, multinational companies have taken the lead and have already exercised their mature global supply chain management capabilities. For domestic enterprises, only by learning to formulate a global supply chain strategy that conforms to their own reality can they actively adapt to the comprehensive competition of globalization.

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