Gone are the days when ‘going international’ meant simply exporting your wares to a few neighbouring countries. Today’s global businesses operate on an entirely different playing field.
Imagine a biscuit company that sources wheat from Canada, cocoa from Ghana, and manufactures in Poland before distributing worldwide under a single, recognisable brand.
That’s the new face of global business.
The Hallmarks of a Global Operation
What sets these companies that are performing well in the international market? Here are the key ingredients:
- Global Branding: A consistent image worldwide.
Think of how a certain German luxury car brand exudes the same air of sophistication whether you’re in London or Lagos.
- Global Sourcing: Hunting for the best materials worldwide.
Your smartphone might have American design, but its components likely hail from a dozen different countries.
- Global Production: Manufacturing where it makes the most sense.
An Australian fashion label might produce wool jumpers in China but outsource t-shirt production to Bangladesh.
- Centralised Inventories: Managing stock on a global scale.
Picture a vast warehouse in the Netherlands, serving as the beating heart of a British retailer’s European operations.
- Centralised Information: One system to rule them all.
An Australian supermarket chain might use a single, mighty computer system to track every tin of beans from warehouse to shelf, whether that shelf is in Sydney or Adelaide.
- Local Adaptability: Being global doesn’t mean being inflexible.
That biscuit company? They might tweak their recipe to be less sweet for the Asian market or create halal versions for Middle Eastern customers.
The Complexity Conundrum
Of course, this global reach comes at a price – increased complexity. Here’s what businesses are grappling with:
- Extended Supply Lead Times.
A British furniture company sourcing wood from Brazil and manufacturing in Vietnam will face significantly longer lead times compared to local production.
- Production Postponement: Companies may ship generic products globally and customise them locally.
For instance, a global appliance manufacturer might ship standard washing machines to different countries, adding country-specific power adapters at local distribution centres.
- Complicated Supply Chain Networks: A single product might cross multiple borders before reaching the end consumer.
A British chocolate bar, for example, might use cocoa from Ghana, sugar from Brazil, and packaging materials from China, all assembled in Belgium before being shipped to stores in the UK.
- Multiple Freight Transport Options: Companies must navigate a complex web of air, sea, rail, and road transport options.
A British pharmaceutical company might use air freight for urgent drug shipments to Australia, while relying on sea freight for bulk shipments to the United States.
- Extended and Unreliable Transit Times: Global shipping routes can be unpredictable.
A British retailer importing goods from Southeast Asia might face delays due to port congestion in Singapore or adverse weather conditions in the Indian Ocean.
- Environmental and Ethical Issues: Global operations face increased scrutiny on their environmental impact and ethical practices.
A British clothing retailer sourcing from factories in Bangladesh must ensure fair labour practices and sustainable production methods.
- Need for Greater Visibility: In a global supply chain, knowing the exact location and status of goods becomes crucial.
A British supermarket chain importing fresh produce from Spain needs real-time tracking to ensure timely delivery and maintain product freshness.
The Just-in-Time Juggling Act
This increasing complexity presents a significant challenge for companies striving to implement just-in-time (JIT) and quick-response strategies. While globalisation often leads to longer lead times and higher inventory levels, JIT philosophy aims to reduce these very aspects.
Consider a British automotive manufacturer implementing JIT principles.
They might achieve this domestically by having suppliers deliver components directly to the assembly line multiple times a day.
However, when sourcing specialised electronics from Japan, maintaining such a lean inventory becomes significantly more challenging due to longer transit times and potential supply chain disruptions.
So, How Are Companies Coping?
- Regional Manufacturing Hubs: Establishing production facilities closer to major markets to reduce lead times while maintaining global scale.
- Advanced Forecasting: Utilising big data and AI to predict demand more accurately, allowing for better inventory management despite longer supply chains.
- Strategic Stock Positioning: Maintaining buffer stocks of critical components in key locations to mitigate supply chain disruptions.
- Flexible Logistics Networks: Developing adaptable supply chain networks that can quickly respond to changes in demand or supply disruptions.
- Collaborative Partnerships: Forming close relationships with suppliers and logistics providers to improve communication and responsiveness.
So, globalisation has expanded markets but also increased logistical challenges.
Here’s where integrated planning systems, like ERP (Enterprise Resource Planning) or SCM (Supply Chain Management) systems, help businesses manage complex logistics across global operations efficiently.
