Tips on getting started with global supply chain management
Globalization isn't just for big corporations. Whether you employ 50 or 500, the potential for your company to access suppliers is no longer limited to Canada or the United States.
Many companies are looking beyond their traditional markets and discovering new opportunities—and profits. They’re focusing on what they do best and taking advantage of global supply chains. This could include sourcing raw materials internationally or outsourcing manufacturing to countries with a lower cost base.
In fact, many smaller companies no longer have a choice—they have to start paying attention to supply chain opportunities. The first and most difficult step is taking the time to explore the opportunities.
Looking beyond Canada
Most companies don’t start out with an international focus. AGF Steel Inc., for example, became world renowned as a designer and installer of reinforced steel after decades of working on infrastructure projects in Canada. It is now exporting that know-how to the Middle East and other regions of the world.
On the supply side, AGF began purchasing reinforced steel and welded wire mesh materials from international suppliers well over a decade ago. Those suppliers may be from Turkey, China or Brazil—depending on the nature of the job, the quantity of materials required, the terms of payment and the price.
“Our suppliers change all the time. It's a never-ending journey for us,” says Serge Gendron, president of AGF.
Initial doubts within company
Sourcing materials from global suppliers didn't come naturally at first for AGF. Gendron says there was concern in his company and among customers that anything fabricated outside of Canada would be of inferior quality.
“And that's just not the case,” he explains. “Not only could the price be interesting, but sometimes the quality is even better.”
While there are more opportunities than ever for small businesses to take advantage of global supply chains, they need to keep close tabs on suppliers.
Managing international suppliers
Large corporations, for example, routinely source globally, so smaller businesses should expect to compete not only on price, but quality and reliability of delivery as well as design and engineering. Delays in shipping, substandard materials or IT glitches can lead to higher costs and tarnish your reputation with your customers.
“If you're doing business on an extended basis around the world, it's important to be able to manage the quality of your suppliers,” says Jayson Myers, president of Canadian Manufacturers & Exporters.
Where do you fit in the chain?
Similarly, it's critical to always know where your company fits within a supply chain. It's not enough to have current information on your customers and suppliers, but on their customers and suppliers as well. If one link in the chain changes, it could have a devastating ripple effect on your business.
Flexibility is the name of the game when it comes to supply chains. The global economy is constantly in flux, which puts pressure on companies to respond quickly when circumstances change.
China may be one of the hottest outsourcing markets for now, but that could change as a result of higher fuel costs, a fluctuating Chinese currency, rising wages and the removal of some export tax credits.
Must remain flexible
“Companies that are operating on a global basis have to remain very flexible and manage these changes on an ongoing basis,” says Myers. “There's no silver bullet for companies that think they're going to reduce costs simply by outsourcing to China.”
Those changes could also mean moving operations to another country. Increasingly, large corporations are demanding that their suppliers move with them when they open new production facilities abroad.
Lastly, Myers recommends changing how you view and market your company—from one that provides a specific product or service to one that delivers solutions.
“The core value of your product may not be the product itself, but the technology, knowledge or service that is embodied in your product. You don't want to outsource the core value of your business to other companies. I see that mistake a lot.”