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UT study on global supply chain highlights reversal of outsourcing
(2 December 2014)
Streamlined, global supply chains are still efficient for companies with complex technology and low logistical costs.
Relocation of manufacturing and product sourcing to emerging economies is no longer the gold standard for global businesses, according to a study from UT’s Global Supply Chain Institute.
The rush to Asia in the last decade promised major cost reduction, but financial gains for many corporations have been short-lived. The study delves into the downsides of outsourcing by putting the complexity and risk of the global environment into context. Evidence from the research, compiled in Global Supply Chains, the fourth installment in the Game-Changing Trends in Supply Chain series from UT’s supply chain faculty, suggests a more localized supply chain for many products may soon be making a comeback.
The report utilizes a framework of key national characteristics that appeared in Global Supply Chains: Evaluating Regions on an EPIC Framework, a book Stank co-authored with three other faculty from UT and ESSEC business school in Paris. Ten companies, with industries ranging from materials refining to health care, were then interviewed for the study. Real-world examples of their experiences are presented to demonstrate best practices in global supply chain network development.
BT, one of the world’s leading providers of communication solutions and services, sponsored the study. One of BT’s offerings is BT Trace, a portfolio of solutions that accesses and manages information and assets at different points throughout the supply chain. This promotes visibility between different areas of a corporation’s business, helping them more thoroughly evaluate indicators of risk within their supply chains.
“Visibility is the most pivotal and elusiveelement of a successful global supply chain network. Our clients need reliable communication and an understanding of big data to make their businesseswork,” said Keith Sherry, general manager of Supply Chain for BT Global Services.
Streamlined, global supply chains are still efficient for companies with complex technology and low logistical costs. However, supply chain network design must change and adapt as the world changes and adapts. The report highlights communication and visibility across the entire supply chain as a consistent element in successful businesses.
The research suggests that supply chains throughout the world will eventually break into a series of “pods” where regional procurement and manufacturing will supply the demand centers of the area with a significant percentage of its production needs.
UT’s Global Supply Chain Institute is an internationally recognized thought leader in supply chain research. To access other studies in the discipline, visit globalsupplychaininstitute.utk.edu.Global Supply Chains: Evaluating Regions on an EPIC Framework is available on amazon.com.
Countless factors can harm performance when supply chains are stretched across the globe,” said Ted Stank, UT Bruce Chair of Excellence and one of the co-authors of the study. “The most successful companies evaluate the local variables before jumping into a global supply chain and design a dynamic network less vulnerable to the pitfalls of modern globalization.”
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Haslam College of Business
the University of Tennessee, Knoxville