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Unformatted text preview: Many global supply chains are not equipped to cope with the world we are entering. Most were engineered, some brilliantly, to manage stable, high-volume production by capitalizing on labor-arbitrage opportu- nities available in China and other low-cost countries. But in a future when the relative attractiveness of manufacturing locations changes quickly—along with the ability to produce large volumes economically— such standard approaches can leave companies dangerously exposed. That future, spurred by a rising tide of global uncertainty and business complexity, is coming sooner than many companies expect. Some of the challenges (turbulent trade and capital flows, for example) represent perennial supply chain worries turbocharged by the recent downturn. Yet other shifts, such as those associated with the developing world’s rising wealth and the emergence of credible suppliers from these markets, will have supply chain implications for decades to come. The bottom line for would-be architects of manufacturing and supply chain strategies is a greater risk of making key decisions that become uneconomic as a result of forces beyond your control. Against this backdrop, a few pioneering supply chain organizations are preparing themselves in two ways. First, they are “splintering” their traditional supply chains into smaller, nimbler ones better prepared to manage higher levels of complexity. Second, they are treating their supply chains as hedges against uncertainty by reconfiguring their manu- Getting there means ditching today’s monolithic model in favor of splintered supply chains that dismantle complexity, and using manufacturing networks to hedge uncertainty. Building the supply chain of the future Yogesh Malik, Alex Niemeyer, and Brian Ruwadi O P E R A T I O N S P R A C T I C E J A N U A R Y 2 0 11 2 facturing footprints to weather a range of potential outcomes. A look at how the leaders are preparing today offers insights for other companies hoping to get more from their supply chains in the years to come. Twin challenges The stakes couldn’t be higher. “In our industry,” says Jim Owens, the former chairman and CEO of construction-equipment maker Caterpillar, “the competitor that’s best at managing the supply chain is probably going be the most successful competitor over time. It’s a condition of success.” 1 Yet the legacy supply chains of many global companies are ill-prepared for the new environment’s growing uncertainty and complexity. A more uncertain world Fully 68 percent of global executives responding to a recent McKinsey survey said that supply chain risk will increase in the coming five years. 2 And no wonder: the financial crisis of 2008 dramatically ampli- fied perennial sources of supply chain uncertainty—notably the trajectory of trade and capital flows, as well as currency values—even as the crisis sparked broader worries about the stability of the finan- cial system and the depth and duration of the resulting recession. While cial system and the depth and duration of the resulting recession....
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This note was uploaded on 10/16/2011 for the course ACCT ACTN taught by Professor Vanderbeck during the Spring '11 term at Abu Dhabi University.
- Spring '11