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We live in a global business world where trade has been growing at an annual rate of 2.8% for the past two years and is expected to rise to 3.6% in 2017, according to the World Trade Organization.
When going global, companies of all sizes face a number of logistical challenges. Effectively planning, controlling, and managing the movement and storage of goods and services as they extend over international boundaries - from raw-material suppliers to end customers - poses several logistics challenges that companies should contemplate before going global.
1. Unknown supply-chain risks and volatility.
The longer the supply chain, the more exposure to risk and potential disruption. For example, earlier this year, global manufacturers Toyota and Sony encountered supply disruptions due to multiple earthquakes in Japan. When disasters such as this occur, it's important to "develop a supply chain plan that helps mitigate as much of the risk as possible," according to eft Supply Chain and Logistics Business Intelligence.
To best manage global supply-chain risk, companies must identify and assess the potential issues, work through various what-if scenarios, and gain transparency into their own suppliers' operations by assessing the financial stability and wherewithal of their Tier 1, 2, and 3 vendors. These steps will help prepare companies to face unknown supply-chain risks as they arise.
2. Greater supply-chain variability.
Variability - the difference between what we expect from something and what actually happens - becomes a key issue when doing business overseas. Within the supply chain, deviation from planned production, supply, and transit times can increase variability. Rather than invest in large buffer inventories to cover those gaps, companies should closely examine their supply-chain capabilities and then determine how well those competencies translate into the global environment.
If, for example, the infrastructure is inadequate, then a multipurpose distribution network that incorporates new physical warehouses and transportation options can guarantee responsiveness and flexibility in high-variability environments.
3. Less supply-chain visibility.
Maintaining good supply-chain visibility - tracking shipments as they move around the world - becomes difficult when multiple carriers, third-party logistics providers, and modes are used to transport goods overseas.
According to KPMG, 40% of global manufacturers lack information and material visibility across their supply bases. Poor visibility can lead to shipment delays, supply-chain disruptions, and revenue losses that can severely affect a global business.
To reduce the business and supply-chain risk associated with visibility, organizations are using collaborative processes like data sharing and demand planning across departments and business partners. They are also turning to cloud-based software platforms for data collection and information sharing and are working with global logistics experts to effectively identify and address any visibility gaps before they become problems.
Going global adds time, complexity, distance, and new risks to the logistics equation. As the global marketplace continues to expand, those companies that assess their skills and capabilities now - and look to partners with the expertise and infrastructure to help - will be well-positioned to support both existing and future global business initiatives.
Find out more about how to overcome the logistics challenges as you take your business global.
This post is sponsored by UPS.
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