SCOTTSDALE, Ariz. — Borrowing a phrase from Sir Francis Bacon, Transportation Media editorial director Lou Smyrlis advised shippers considering outsourcing that those who “will not apply new remedies must expect new evils.”
Sir Francis Bacon’s remarks may date back to the 1600s, but they ring true today nonetheless when we consider the growing complexity, obstacles and challenges faced by managers of North American and global supply chains, Smyrlis told delegates attending an outsourcing seminar at the recent annual Supply Chain & Logistics Summit held in Scottsdale, Arizona.
Smyrlis led a panel of speakers which included Ted Augustine, who runs Goodyear Tire and Rubber’s supply chain and Christopher MacFarlane, representing Canadian-headquartered 3PL provider Unicity Integrated Logistics.
In his presentation, Smyrlis outlined what he considered to be main challenges having an impact on supply chain management.
“Companies are compelled to drive revenues by expanding to wider domestic or new international markets. China, Europe, Central America are considered top market destinations for more than 40% of North American firms. As a result a growing percentage of supply chain managers have either NAFTA or global responsibilities,” Smyrlis said. “And companies are under pressure to reduce costs by moving manufacturing or sourcing of parts to overseas locations. Fifteen percent of North American companies no longer carry on production on this continent. So inbound supply chains are increasingly becoming stretched.”
Corporations are also under pressure to reduce inventories and cycle times. And to do so in the face of new security legislation and potential political events that threaten to have the opposite effect.
And finally, companies are under pressure to leverage technology to further optimize operations and better serve clients, an expensive proposition, Smyrlis noted.
“Put it all together and it makes for much more extended, much more complicated, potentially much more expensive supply chains. And all this is happening at the same time as two other developments that are impossible to ignore: The fact that your customers continually want more for less and the fact that at many companies supply chain management is finally receiving the corporate attention we’ve been craving for years,” Smyrlis said.
He explained that whether it’s because the word “supply chain” is generating much greater response from CEO’s than “logistics” ever did, as professor John Langley of the Georgia Institute of Technology suggested recently, or because of groundbreaking studies, such as the one conducted by the University of Western Ontario and the Georgia Institute of Technology that tracked over 800 publically held companies and found that supply chain management has a definite and measurable impact on shareholder value the point is the same: The corporate spotlight is on.
“Meeting these challenges requires greater supply chain innovation and agility, a greater ability to meaningfully measure performance and a greater ability to leverage technology. Are you better off meeting these challenges on your own or does outsourcing have a central role to play? If so, exactly what role should it play?” Smyrlis questioned.
Studies show that attempts to improve supply chain performance through outsourcing is evolving on at least two fronts, he added. The first, and most obvious, is the growth in the number of companies choosing to use third-party logistics.
The second, and distinctly more complex front, involves an evolution towards deeper more integrated relationships between 3PL providers and their clients.
“This is a process by which, we believe, companies are seeking to progress from tactical to strategic relationships,” Smyrlis said.
The seminar focused on how the outsourcing relationship can be improved from both the service provider and customer side.
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