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.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”