Solving Supply Chain Problems Proactively
(Excerpted from our article published in Industrial Engineer, February 2010)
Managing the problems associated with the global supply chain of major products these days requires a flexible, adaptable, and consistent approach.
One need look no further than the latest commercial aircraft designed by Boeing to see just how far a company is willing to go to realize the numerous and enormous benefits of a decentralized, extended global supply chain. Expertise and specialization is focused directly on individual components. Profit and loss responsibility is concentrated into smaller, more manageable (and thereby accountable) business units. Risk is diversified across multiple "baskets" of suppliers. The benefits of local markets (such as cheaper labor and the proximity to raw materials) can be exploited. The list goes on.
But Boeing's strategy also shows some of the inherent risks and unfortunate consequences associated with managing such a supply chain. Unfortunately, it is one thing to map out all the potential benefits of a diversified global supply chain, yet quite another for the company and its managers to actually make it out alive given the risks involved.
While the new 787 by Boeing may be one of the most ambitious attempts at wringing benefits from an extended global supply chain, we can find other examples of all sizes, shapes, and flavors. Globalization is just another way to say "global supply chain." Like it or not, it is here to stay.
Companies that learn to manage the risks of a global supply chain can expect to reap, at the very least, the reward of survival. But those that learn to proactively manage the problems encountered in such a diverse system can expect to rule their sectors. The key component to proactive problem solving is a robust Solution Management System (SMS) built on a solid, adaptable root cause analysis program.
To proactively minimize the risk of future failures by learning from failures in the supply chain, read the rest of our article published in the February issue of Industrial Engineer magazine.
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