What is a Glocal Supply Chain?
Thanks to rapid advances in communication and information technology, manufacturers are now able to operate at a truly global level, sourcing materials where it is most convenient and expanding their international client base. However, manufacturers also need to adapt their offer to local trends, predicting which items are going to be more in demand in a particular area and adjusting their stock accordingly. Here Neil Ballinger, head of EMEA at EU Automation, explains the advantages of a supply chain that operates globally but reacts to local demand.
In a world dominated by connectivity and information technologies, political, economic and social relations are naturally encouraged to adopt a global view and become more and more interdependent. This is what characterises globalisation, a term that began to be used in its economic connotation during the 1980s and that since then has become more and more widespread.
In manufacturing, globalisation has brought numerous advantages, such as the possibility to easily access technical knowledge, learning from countries that lead the way in automation and digitalisation. Also, in a globalised world, it is easier to communicate with business partners in real-time, no matter where they are located. This clearly benefits business transactions and helps establish trust among business partners.
However, one of the most controversial aspects of globalisation is the threat of homogenisation. In a globalised society, the same goods are often produced and distributed across very different markets, with little attention to the preferences and habits of the final consumers. In the long run, this can negatively impact sales and prevent businesses from really establishing themselves in a particular location.
For these reasons, a new term has recently emerged to indicate the possibility of operating on a global scale, but with special attention to regional markets – it’s the era of glocalisation.
Think global, act local
The shift from global to glocal has been pushed by several factors. Firstly, in recent years it has become evident that disregard of local market conditions can negatively impact business, leading to operation and supply chain issues. Secondly, there is increased public attention to the necessity of supporting national and regional economies by sourcing raw materials locally, which can also contribute in streamlining the supply chain and reduce freight fees.
Glocalisation is not really a new thing, since multinational companies have always been compelled to adapt their production to local requests. For example, automotive manufacturers have to diversify their offer based on specific regulations, with the most obvious example being which side the steering wheel is on and whether the speedometer is in miles or kilometres per hour.
What is new is the impact that a glocal business model is having on supply chain management, with manufacturers striving to achieve a supply chain that acts on a global level but adapts to local demand.
Can automation help?
Companies need distribution and inventory management systems that can trace products at a global level, which means providing visibility across all nodes of the value chain, regardless of geographic location. However, these systems also need to be able to adjust to local trends, predicting demand for certain items in specific locations and managing stock accordingly.
To achieve the level of traceability and flexibility that a glocal supply chain requires, it is necessary to analyse data on consumers’ behaviour in real-time and to be able to rapidly move items where they’ll be needed. Automation technology can help create what is known as a cognitive supply chain, where all these complex operations are fully digitalised.
One example of this is Amazon's anticipatory shipping technology, which allows the logistics giant to predict demand based on big data collected while customers browse the website, entering contact information and leaving reviews. However, Amazon is not the only company using automation to manage its stock more efficiently.
Big data, big challenges
Fully automated – or cognitive – supply chains can perfectly integrate into a glocal business model and provide a number of advantages. However, they are still not widespread.
One of the biggest challenges to overcome is the poor quality of data at manufacturers’ disposal. With consumer trends changing so rapidly, using a historical statistical approach for demand forecasts is no longer enough. Big data can help modernise this approach, but only if data are processed fast enough to react to the swift changes of local markets.
Another common issue is insufficient communication between the different nodes of the supply chain. Nodes located in different geographical areas can use a variety of Enterprise Resource Planning (ERP) systems, that range from Excel spreadsheets to dozens of different open-source or proprietary software solutions. This is especially true for companies that have grown through acquisition, which is currently a very common scenario.
Luckily, smart technologies can help manufacturers overcome some of these challenges. For example, it is possible to implement an overarching supply management solution that collects and analyses data from all sources, reducing issue related to the heterogeneity of ERPs in place.
Manufacturers can also use digital technology to help their businesses react to unexpected situations. For example, digital twinning can be used to test issues with supply and distribution, and it is even possible to use sets of dummy data to create a series of possible scenarios and see how the supply chain would react to them. In this way, manufacturers can be more prepared for rapidly changing market conditions.
By overcoming some of the most common challenges in supply management, manufacturers can successfully manage the shift from global to glocal. Cognitive supply chains are an essential step in this direction, as they will allow businesses to meet the needs of their increasingly diverse customer base.