Manufacturing and Distribution CEOs Find Hidden Opportunities in Supply Chain  

Critical Criteria for Global Supply Chain Expansion

Manufacturing CEOs know when the supply chain breaks, there is a great deal lost: revenue, market share, shareholder value, and the integrity of the brand. Given such financial stakes, Thomas A. Lawson  reported for Chief Executivemagazine the nine criteria manufacturing CEOs should consider to make the supply chain resilient. Lawson is president of FM Global, a $5.6 billion mutual insurance company dedicated to property risk management. According to Lawson, growing manufacturers are starting to look at locations for the next manufacturing plant. The new facility needs to be close to  customers and convenient for shipping with affordable labor, real estate, and taxation. The CFO and supply chain manager create a scorecard reflecting this set of criteria. They evaluate destinations and pick the location, signed off by the CEO.Looking deeper there are missing vulnerabilities that are making the supply chain fragile and putting business at risk:  

1. GDP per capita. Strong economies contribute to resilient supply chains. Per capita gross domestic product is useful when comparing one country or state to another, because it shows relative performance.  
2. Political risk. Countries like Ukraine and Greece are experiencing conflict, upheaval, and attendant economic issues that can jeopardize a business.
3. Oil intensity. The greater the consumption, the more vulnerable a country is to an oil shortage, disruption, or price hike. A good metric is oil consumption divided by GDP.  
4. Exposure to natural hazards. No country in the world can be absolutely unexposed to wind, flood, fire, or earthquake. Some regions, however, are far more exposed to particular hazards than others. It is critical that manufacturers understand where candidate countries or states lie on the natural hazard spectrum. Given the prevailing natural hazards, the culture of the region regarding risk management must be considered, such as the strength of building codes and the vigilance of officials in enforcing them. 
5. Fire risk management. Fires are expensive and one of the most common causes of property damage at commercial facilities. Fortunately, they are preventable when there is a strong commitment to risk management. Manufacturers should consider how rigorous the fire codes are and the degree to which they are enforced.   
6. Corruption. Examining how extensively public power exercised for private gain in places being considered for the new plant is vital. Businesses need to know how much control elites and private interests hold over private citizens and public property; be realistic about whether the company is prepared to deal with business cultures that are quite different from the home base. 
7. Infrastructure. Manufacturing CEOs must be knowledgeable about how sound the transportation, telephony, and energy systems of prospective locations. Plant productivity may grind to a halt when the electricity goes off for an hour every month.   
8. Local supplier quality. Knowing the reliability of the people and businesses that would support a new manufacturing plant is essential and must have proven track records which can be verified.

CEOs Paying Closer Attention to Lean Supply Chain

Chuck Intrieri is a highly experienced and a credentialed supply chain professional. In the Lean Supply Chain, Intrieri suggested that top management knows that lean can add value, but many still have not moved past the initial education stage into full-scale lean supply chain implementation. One reason may be that they have not made the paradigm shift as to how to implement lean. The lean supply chain is a system of interconnected and interdependent partners that operate in unison to accomplish supply chain objectives. There should be metrics involved to monitor these objectives to insure success across the supply chain. Manufacturing CEOs are now focusing on eliminating all waste in the supply chain so that only value remains. Creating a smooth flow of products downstream in a supply chain requires all departments and functions in the organization to work in collaboration. In the supply chain, the seven wastes worthy of a manufacturing lean supply chain include: 

1. System complexity-additional, unnecessary, steps, and confusing processes
2. Lead time-excessive wait times
3. Transport-unnecessary movement of product
4. Space-holding places for unnecessary inventory
5. Inventory-inactive raw, work-in-process, or finished goods
6. Human effort-activity that does not add value
7. Packaging-containers that transport air or allow damage

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