Managing a global supply chain is complex, and fraught with risk. So what tactics can you use to minimise this risk?
This article was written by Rob Barnes, Founder at PrimeRevenue.
In many ways, sourcing goods and services internationally is easier than ever, with the internet making it possible to research, source and communicate with global suppliers from the comfort of your desk.
But in reality it isn’t always that simple. Setting up and managing an global supply chain is a complex, and often risky, business. Without careful planning, local expertise and meticulous management, there’s a lot that can go wrong.
Not only are you dealing with numerous rules, regulations, taxes and constantly fluctuating currencies – all of which have the potential to significantly impact your bottom line. You also have cultural and language differences to contend with, which, in the world of business, can be daunting and confusing to say the least.
On the other hand, getting it right can give you a huge competitive advantage, with cost savings and higher quality or unusual products just a couple of the potential benefits.
So how can you make sure your global supply chain works effectively, while minimising the risks to your business? Here’s a few pointers:
Planning and management of a global supply chain affects the whole organisation, not just certain departments. That means ownership must come from the top, and involve all areas of the business, from procurement and finance, operations and logistics, to sales and marketing.
Don’t allow teams and decisions to become siloed. Make sure there is transparency across the business. Otherwise you’ll be missing important pieces of the puzzle, and find that your supply chain isn’t delivering the value you need, either for the customer or the bottom line.
Knowledge of the local market is crucial to ensure you understand what to look for in a supplier and how to handle local business practices, from taxes and duties, to employment law and health and safety regulations.
If you don’t have this local expertise internally, consider hiring somebody who does. Or look to bring on a consultant who can guide you through what, and who, you need to know.
The foundation of a successful supply chain is building strong relationships with as many elements of the chain as possible. While the internet can help you at the research stage, it’s crucial to visit suppliers regularly, to make those personal connections, scope out their operations in person, and discuss ways of maximising efficiency and collaboration.
In many countries, personal relationships and networks are even more important than in the UK, so it’s in your interest to prioritise this valuable bonding time.
Forecasting is crucial when sourcing products globally, to avoid ending up with too much or too little inventory to deliver on what you need.
This is partly due to timing – your goods are going to take longer to arrive from far flung locations – but there is also a cost element, with taxes and duties to pay every time you move your goods.
Accurate forecasting means that you’ll be transporting the right quantity to arrive at the right time, to deliver on projected demand. You’ll also avoid wasting money on warehouse space by over-ordering.
Technology is your friend when managing a global supply chain, helping you to streamline processes and minimise unnecessary administration.
Look for a supply chain management solution that works across the different markets you’re operating in, so you don’t need to work with numerous systems.
You can also streamline your invoicing and payment terms using a supply chain finance platform, avoiding the need to negotiate these on a case by case basis, and improving consistency and transparency across suppliers.
Just one disruptive link in the chain can impact your whole operations. Make sure you implement a system to measure the success and efficiency of each supplier regularly – delivery times or product quality for example.
By doing this, you can spot any warning signs early on and be ready to replace an underperforming supplier if necessary.
Have a Plan B
Even with top notch processes, you can never be sure what’s going to happen, so have back-up suppliers ready to go in case of any unexpected disasters. This will keep your supply chain running smoothly and avoid lots of unhappy customers.
Focus on Long-Term Sustainability
To minimise risk in the chain, look for ways that you can support your suppliers both financially and logistically. Make sure your lines of communication are always open, so any potential issues can be aired quickly and easily.
You can also help your partners manage their cash flow through supply chain finance, allowing them to choose to be paid more promptly if and when they need. This is particularly useful for suppliers in emerging markets.
This reduces the need for them to take out expensive bank funding or overdraft extensions, minimising costs and risk in the long-term.
Supply Chain Finance from PrimeRevenue and AIG caters to thousands of mid-market, non-investment grade companies, by providing financing, with the credit risk insured by AIG’s market-leading trade credit insurance. It enables suppliers to take early payment less a small discount, while enabling buyers to standardise and potentially lengthen their payment terms.