The critical role of the supply chain in the global world
In 2005, Apple introduced the iPod Nano, and demand for state-of-the-art flash memory components surged. SanDisk needed to move like lightning. Doron Myersdorf, supply chain executive at SanDisk, sees the coming of the iPod as a watershed. "We wanted to capitalize on the market conditions," he says, and the answer lay in the global supply chain that the company had built.
The target for business today is the global markets. Mom & Pop shops and back-yard goat-cheese production facilities are relics of yesteryear. Most of the products we consume are manufactured in another country, and behind the scenes of this manufacturing are global supply chains. In his book "The World is Flat", Thomas L. Friedman coins the phrase "supply chaining", which he describes as one of the flatteners of the world. "The more the supply chains grow and proliferate, the more they force the adoption of common standards between companies... The more they [the supply chains] eliminate point of friction at borders, the more the efficiencies of one company get adopted by the other, and the more they encourage global collaboration", he explains.
The supply chain has become central to modern society, not just because of globalization, but because of the need to supply vast varieties of products in order to meet consumer demand.
Key to building a successful supply chain in today's dynamic market is the ability
to apply an integrated framework of strategy with the right processes and technology. Success involves not only strategic thinking and planning, but methods for executing the strategy with the right processes and with the supporting tools and technology.
A local branch supporting a global corporation has complex challenges. Take
Kodak, where the supply chain challenge involves synergy between different branches and divisions. The Israel branch is one of the biggest: Kodak Israel, which is part of Kodak's Graphic Communications Group, employs 900 people,
about half of whom engage in R&D.
"We serve two GCG divisions. Because of the complex company structure, each branch manages several supply chains simultaneously", says Kodak Israel CEO Avi Waldman. It works because the company's organic structure is built around supporting this multiplication of chains without losing group integrity: on the one hand, each team is oriented to the division with which it works and with the division procedures. On the other hand are standardization and unified tools, to assure that Kodak's divisions work as a united group, he says.
Another aspect that helps the site to maintain its effectiviness and efficiency is the structured global measurement system. Waldman: "All the measure and targets are also widthwise. It's valid to the supply chain, and also in the division and product levels". Central to managing a global company with multiple branches is a good connection between the local supply chain and the global company supply chain. The two chains may conflict, in inventory management for example. "We can see a dilemma between the local and the global optimum", says Waldman. "When our inventory targets are given, the branches are placed in a situation of competition. Naturally we aspire to be the best". Ultimately, however, what matters is the greater company good and all the divisions must attain their inventory targets, he explains. Because of the broader view, Kodak Israel often finds itself adjusting towards the end of the quarter, to adapt to the global target. Maintaining optimal levels of inventory in each channel and at the hubs is an extremely complex challenge, says SanDisk's Doron Myersdorf.
"In our industry, market price per gigabyte might drop on a daily basis. We need to constantly make decisions at the inventory levels and adjust according to the changing supply/ demand market balance. And we must also have answers for sudden shortages of flash, such as happened when the iPod Nano came out".
Local and global levels also interface in the sales and operations planning (S&OP) process. Kodak's Waldman describes a monthly procedure that starts with collecting information from the field and continues with meetings with relevant people from the group – around the world. At the end each branch get its target and must stick to it. Nor may they hurt the standard of service by reducing inventory, he says.
SanDisk's Myersdorf, is to maintain agility while managing production and logistics in multuiple locations around the world. SanDisk's experience in big diversity of markets and products, made them focus on centering the manufacturing of the main runners in close proximity to allow greater flexibility for CM location and hubs for the other products.
"We operate as one global team that meets virtually on a regular basis," he sums up. We use the same supply chain systems and unified business processes. It doesn't matter where each local supply chain organization is located."
By Zohar Yami, Partner, Tefen Israel
Golan Meltzer, Project Manager - Supply Chain Practice, Tefen Israel
