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Here’s hoping that the dust has settled as you read this.
Whether or not we’ve seen a true bottom on global markets, the facts on the ground in the real economy show things changing fast and furious. We knew that even before the financial meltdown. And, now it’s even more so!
At the annual CSCMP meetings in Denver, I spent an hour ‘looking into the future’ with the eminent Georgia Tech supply chain expert, Professor John Langley. At one point we got to discussing supply chain centricity, the principle of organizing the enterprise around its supply chain, which is a concept more frequently praised in business school discourse than implemented in actual companies. I mentioned that at two places where I had reported this actually being done, IBM and Cisco, leaders were quick to admit that it had taken real pain to drive the process.
John responded to the effect that we’re likely to see lots more of such ‘pain-driven’ supply chain initiatives. As he put it, the new axiom for the new economic paradigm: “the supply chain that worked for you last year won’t work for you next year.”
A key element in ‘this year’s model’ is the resurgence of near-sourcing, figuring out which elements in your supply chain can be brought closer to home instead of shipped over from the other side of the Pacific. The reasons aren’t hard to identify: transportation expenses are surging, ‘hidden’ landed costs can quickly cancel out the initial advantage of cheap labor, the supply chain is faster, more responsive and safer when it is less extended.
But changing gears for lots of companies won’t be easy. Various observes have noted that companies often got into off-shoring (read: China) almost impulsively and without fully considering the long-term implications; they now find themselves locked into business models and processes that are more committed to these sources than might have been optimally desirable.
We’re focusing on Mexico in this issue as one way out of this dilemma. Proximity to the U.S. and ‘special status’ as a NAFTA partner puts Mexico on most short-lists. The first wave of border workshops and factories in the ‘90s (before the mass exodus to China) produced a reservoir of experienced workers. The last several Mexican Presidents have been unequivocally ‘pro-development,’ implementing their policies with petro dollars.
That having been said, though, our article examines the ‘down side’ to Mexico, as well. Infrastructure progress has been disappointing. Highways outside of the border zone are inadequate to sustain time-sensitive supply chains; the commercial legal system is not always reliable. So ‘buyer beware.’ In looking to Mexico to implement an agile near-source supply chain, it’s going to be important to exercise due diligence.
Near-sourcing is also going to have an impact on transportation providers. Consultants Ben Gordon and Karen Rutt, in an article accompanying the Mexico piece, sketch out the kinds of concerns shippers (and providers) need to be attentive to as the U.S. enters the “major change about to sweep through the supply chain.”
So whichever way the financial gods blow, its time to acknowledge the winds of change and start addressing the agility of your supply chain.