Hau L. Lee and Chung-Yee Lee (Eds.)
Building Supply Chain Excellence
in Emerging Economies
©2006 Springer Science + Business Media, LLC
Chapter 2
GLOBALIZATION AND EMERGING
MARKETS
The Challenge of Continuous Global Network Optimization
Peter Koudal
Deloitte Research
Deloitte Services LP, USA
Douglas A. Engel
Deloitte & Touche LLP, USA
Abstract:
In pursuit of new revenue opportunities and lower-cost operations, manufac-
turers around the world are creating ever-more complex global networks of
sourcing, manufacturing, marketing, sales, and service, and research and devel-
opment activities. Over the last two years, we have monitored the development
of such networks through our global benchmark studies of the global operations
of nearly 800 manufacturers based in North America, Western Europe, Central
and Eastern Europe, South Africa, and Asia-Pacific. These companies represent
a broad range of industries, including consumer business, automotive, high-
tech, diversified industrials, pharmaceuticals, and the chemical process sector,
and together account for about $1 trillion in global sales.
1
Our research finds that most companies have made little progress in optimizing
their operations from a global perspective. Rather than take a holistic view in the
expansion and optimization of their global networks – the complex web of sup-
pliers, production and R&D facilities, distribution centers, sales subsidiaries,
channel partners, and customers, and the flows of goods, services, information,
and finance that link them – most global manufacturers focus on fixing individ-
ual pieces of the network. In spite of launching many improvement initiatives
across their global operations, most are overwhelmed by increasing strategic
1
For further details on this research, see Deloitte Research,
Unlocking the Value of Globaliza-
tion: Profiting from Continuous Optimization
(New York and London, 2005) upon which study
this chapter is based.
38
BUILDING SUPPLY CHAIN EXCELLENCE IN EMERGING ECONOMIES
and operational complexity. And the complexity will only increase as compa-
nies continue their global expansion efforts – as our research indicates they
will. The problem is that those who let their global footprint grow without con-
tinuously determining how the various pieces of their operations should be re-
designed, rationalized and optimized unwittingly build in huge redundant costs
while losing opportunities for higher growth and profits.
2.1.
The Optimization Paradox
Coordinating product development, supply chain, and sales and marketing
activities that are oceans and time zones apart will become even more difficult
in the years ahead as companies’ operations become more fragmented with
continued globalization.
This is just one of the key findings our global research on how companies
can effectively optimize global networks. It is based partly on our comprehen-
sive, in-depth global benchmark survey with executives at nearly 800 compa-
nies or business units around the world.
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