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Guest Post: Cloud: the Key to Global Sourcing Strategy

February 18, 2014

Developing a global sourcing model to serve a world-wide customer base as well as to manage global operations in a seamless way, manufacturers have adopted a ‘build anywhere-ship anywhere strategy.’ Adopting a cloud manufacturing system is emerging as the best strategy to quickly enable these capabilities.

No doubt global markets are enticing to manufacturers, since firms want to place manufacturing close to customers or take advantage of low-cost-country sourcing. If the goal is to service global markets, then three major objectives need to be achieved simultaneously. One is to find and achieve a cost model that reflects a fair global price point for products. The next is to achieve the global strategy, yet somehow stay close to customer markets. Lastly, manufacturers face the challenge of an expertise shortage,[1] so finding the best talent to stay competitive can be difficult.

Global Manufacturing Muddle

From start-up until stability is achieved, managing the global processes continues to be a key challenge for manufacturers. Firms are seeking ways to leverage process and expertise on a global basis, yet they lack a method to establish and maintain cohesion. Software is a method for establishing and codifying business processes. But if organizations set up new plants in isolation, they lose the opportunity to establish cohesion with the rest of the enterprise.

Having traveled the world installing on-premise systems, several weaknesses in an on-premise-software-and- process-plants approach became apparent:

  • Lack of ability to leverage total corporate expertise. Each location may have good ideas, but those ideas are poured into the local system and it is hard to share them or establish them as the M.O.[2] for the rest of the company. This is true for both process and product.
  • During a plant start-up, the design and installation of equipment and processes experience delays. Rather than leveraging a standard yet configurable solution with a clear delineation and guidelines for when and how localization of the systems can be allowed, customization begins almost from day one, introducing more mistakes and delays.
  • Another major challenge is in procurement. Corporations have challenges in determining procurement strategies that work across the enterprise in a rationally distributed fashion, for example, deciding when to procure locally to take advantage of rapid response/JIT relationships with local suppliers vs. when centralized procurement might be better in order to achieve volume discounts.

The additional risk is that ‘local control’ of the software implicitly means the plant either will go its own way or be starved in some way for information. Not a good strategy for controlling costs and creating that global sourcing strategy within your company or with your customers.

Cloud Cohesion from Start-up to Stability

If we see software as the means with which to codify the corporate M.O., then the approach we use to implement software and how we use it to control the process is all-important. Many global companies have been implementing a global cloud single instance for the enterprise. A multi-tenant cloud approach can help address the challenges mentioned above.

Here are some benefits, from start-up to stability, which we see:

Stage One—Bringing Plants Online. Huge losses can accrue if projects go over budget and are late. The losses don’t affect just operational costs; a resulting lack of competitiveness and/or revenue can affect the company for a long time. By using a cloud software solution, the following advantages can be attained: IT challenges associated with onsite installation and integration are reduced. Employees can get trained quickly so they can address localization adaptations and go live with less anxiety and fewer delays.

  • Time to get processes online and the plant running is significantly reduced, and cost improves. Speed to Return on Asset/Return on Investment and Time to Market benefits accrue. Cloud, of course, reduces hardware and other support costs, as well.
  • Leveraging corporate expertise to share process ideas across all the functions that rely on systems and data
  • Cloud, de facto, creates an environment for better integration between entities: with suppliers, to place and receive orders, shaking out inbound and outbound logistics, etc.
  • Implementing corporate processes

Stage Two—Establishing and Maintaining Continuity and Cohesion. Over the long term (which happens sooner than you think), companies need to think about how each plant supports the whole. How does that plant establish and maintain an integrative strategy and set of workflows with the rest of the company and trading partners?  Some of the areas in which strong integration is required are:

  • Product management integration. Whether products are built for local consumption or global customers, there are either local design teams or local alterations of a global product. End-markets also often demand rapid engineering changes that need to be communicated and adhered to across the company. Integration facilitates keeping track of design and engineering changes, across facilities, for the life of the product.
  • Balanced global procurement strategy. This means using one purchasing system, but allowing local purchasing, where needed, since the plant personnel are more in tune with impending shortages, overages, or issues with or the benefits of using local suppliers. These purchasing decisions still have central management oversight to ensure that inventory and other procurement policies are adhered to.
  • Global and local customer compliance. Each market has unique requirements. But it all needs cohesion. Also, source products need to meet not only the regulations of the country they are in, but also the destination country’s requirements.
  • Supplier integration and management
  • Cost accounting/cost management over time

Stage Three—Change Management. Ultimately, change happens. Change management across sites can be maddeningly frustrating, not only due to divergent approaches, but the complexity of moving to the new process in a synchronized way. A diverse IT portfolio is a major obstacle to process, product, or market changes.

As customers and products change, if product and process can’t quickly adapt, companies lose that global flexibility to respond to their markets. Global sourcing advantages fade and costs increase. Building in adaptability with a highly configurable cloud solution that is architecturally designed in a continuous deployment mode allows for agility and balance across global resources. It allows bringing the best talent and ideas forward to solve world-wide challenges.

Global trade has allowed businesses to take advantage of new and innovative resources and new opportunities. At the same time, managing the entire global process has become a lot more complex. It requires a cohesive, unifying, adaptive system. Cloud technology has provided an excellent foundation: one set of rules, unambiguous process guidelines and communications, and real-time data visible to all parties are only some of its benefits.

The global availability of new markets, a global work force, and coordinated transportation make businesses more competitive. To survive in this environment, companies cannot afford to believe in the status quo. To excel, they have to use technologies that integrate the globe.


[1] Labor may be plentiful, but the more technical professions such as plant design and engineering, product and materials engineering, manufacturing IT, and supply chain all have a global shortage.

[2] Modus operandi

About the Author

Ann Grackin CEO of ChainLink Research

At ChainLink Research, Ann Grackin and her team have advised hundreds of global corporations, achieving dramatic improvements in business performance through process and technology innovation. ChainLink Research leads the market in research coverage of supply chain—the links in the chain. She is a popular speaker and respected writer featured in leading trade publications. Ms. Grackin is active in several supply chain and technology industry groups where she has participated or led the creation of supply chain methodologies.