Tuesday, February 26, 2013

Collaboration in future supply chain

After reading the article about Apple’s offshoring in China, I searched for some articles about offshore. As far as we know, China is the country which is well known for cheap labor. Numerous companies set their manufactures in China. But today’s China is far more expensive than before. I often heard new in China that many manufactures in China can’t find workers because they have to pay more to workers, otherwise they can’t even hire any workers. Then the companies have to stop operation. This is a very bad situation. So I began to think about the advantages of offshore. The first one is the cheap labor in the offshoring country. Second one is maybe the places are to the raw materials. It’s also possible that the company would like to expand their market to the offshore country. But I believe that the logistics is big concern in offshoring. Except for this, companies also have to consider other problems, such as inventory, currency exchange rate, and environmental regulations. As far as I see, even in the time the labor price was still low in Asia, the benefits of offshore are still limited. On good example is TOYOTA. TOYATA makes Corollas in Silicon Valley, one of the most expensive places on earth to produce goods.[1] The reason for it is that TOYOTA believes in the principle that sending goods to customers within one day is better than shipping goods through long and complex logistical and political boundaries in a month. TOYOTA applies other method to attain low cost, applying lean manufacture to keep its cost least. In summary, when considering whether manufactures should go offshore or not, they should clearly think about that if lower labor cost is decisive to the final total cost or not. They should also consider how quickly they can respond to customers’ demands. They must also take into account for risk in offshore supply chain.
----Collaboration in future supply chain
When I read the collaborative physical logistics in the article, the future of supply chain, I began to doubt the possibility to realize it. Then I found a research studied by McKinsey and ECR Europe, discussing the collaboration in future supplies chain. The participants in the research represent industry leader in 13 countries. The willingness of collaboration is not very agreeable. And only 60% of the collaboration initiatives yield some benefits. Researchers conclude that the reasons for failure of collaboration are insufficient resources, lack of support from management, and resistance to share information. But the research participants show great interest in the collaboration in supply chain. I believe that the idea of sharing warehouse storage and transportation vehicles sounds tempting to them. I think the collaboration in supply chain can reduce the cost and also do benefits to environment. It will take fully use of supply chain resources.
To attain successful collaborations, companies must first decide who to collaborate with, what to collaborate on and how to collaborate. For example, to collaborate with those who are more willing to collaborate is better than to those only have larger capacity and good performance. Those who collaborate should focus on long term rather than stick to currently interests, otherwise they can hardly overcome initial hurdles to keep collaboration in future. [2]
My question is supply chain in future will be in a more uncertain, complex and risky world. How do companies establish long-term collaboration and trust in such environment.

[2] Collaboration today and tomorrow--taking the right steps on the path to impact.

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