Think global, act local - is it working?
In the face of a global health pandemic, the globalisation world adage 'Think global, act local', raises a concern that players - commercial and institutions - have been and still are focused rather too much on lowering piece cost (from the simplest to most complex items and sub assemblies in going to global supply actors in faraway places with extended and unpredictable lead times both in terms of production and importantly delivery). The West's new far eastern supply hub, especially in China is a very long way away in distance and most importantly time. All that glitters is not gold - it might look cheap for items small or complex but the big deal solution has not worked and is not working.
In pandemic health management terms, these issues have caused real and continuing problems. Apart from the fact that the Chinese supply chain has some experience of supplying the basic products needed, the UK is but one of many other nations and companies competing for the same supply. These global constraints have not been taken fully into consideration and one wonders whether the automotive industry, the cradle of just-in-time and lean thinking has made the same mistake?
Some transferable pointers for automotive:
'Think global', yes, but take into account other demand players in the game and their effect on the supplier side of the equation, their lead times and constraints in terms of multiple tiers and sub-assemblers and their inter and extra company capacities and shipment constraints.
Taking 'act local' into account, as with 'think global', this is also not a one-sided issue. On the demand side, there is a tendency to think that once a deal is done and a bulk order is placed, that is 'job done'...tick box for purchasing and supply! A fixed supply pipeline going out for months is seen as stable. The problem is that such long term commitments are rarely dynamic enough to take account of actual end user rather than forecast demand. If one is going to operate in such a way, product and component simplicity rules. This is not the way that the automotive industry has set out its stall with its product ranges littered with models, derivatives, options etc. In a restart mode, some careful thought needs to be applied here.
Similarly, on the supply side, under 'think global' perhaps not enough consideration has been given to the importance of local manufacture and sourcing (it is very interesting that in the pandemic, it was Mercedes Formula 1 engineering input into respirators working in the UK with a University College London backed by a local UK manufacturing capability that is now bearing fruit).
In the 1950s, it would have been unthinkable to move manufacturing away from one's domestic market unless it was in the form of local assembly market entry requirements - this route was filled in distant markets via simple CKD and SKD product configurations. In the 1970s, this reluctance to move manufacturing capability beyond domestic shores grew with the establishment of 'transplants' by the Japanese OEMs - these arrangements operated very integrated supply chains and simple product line-ups in such markets. Key components - drive trains etc - either came from Japan or via transplant power train factories owned by the OEM. Local outside suppliers focused on high usage often cross product components such as fixtures and fittings.
Further developments in the 1980s and beyond saw 1st tier suppliers working much closer with OEM R & D to co-develop and supply major sub-assemblies as OEMs progressively withdrew into final assembly (whether at main plant or transplant). Was this a move too far? Giving away the family silver and transferring skills? Further 'cost savings' followed with OEM sub and final assembly plants being established in developing markets as well as relatively local plants within one's trading block or region.
Arguably these moves have created on the one hand a highly complex just-in-time supply chain environment operating multi-nationally across the Globe. On the other hand, OEMs have diminished their core ability to engineer and make. This loss of knowledge is now embedded in what were originally 'vassal' or newly developing markets. These long distance supplier and assembler relationships are much more difficult to manage and will present a major challenge as the attempt to restart production and post pandemic selling.
Using the pandemic as an example, the pitiful problems of personal protection equipment (PPE) should maybe have been assigned to local manufacturers where capacity existed to fill the gap. Costs of using this more local route might appear higher but could be much more flexible with short lead times and agile local response. It is only after various companies and charities seized the initiative that this was seen as a possible solution to the global supply problem. Perhaps there are, to use that hackneyed phrase, 'lessons to be learnt' from this by automotive OEMs?
It strikes me that in the current chaotic environment being over-dependent on a distant supply chain is a major risk which needs attention. It is therefore an appropriate time to revisit entire supply chain management principles - mapping adapting the process to enhance flexibility, simplicity and leverage to deliver the best result for the consumer in these beleaguered times - and 'think global' for markets, and 'act local' for supply? 'Right product, right place, right time'...