Challenging the lead time issues in global supply chains

Other conference contribution, 2007

Supply chain managers are generally trained and accustomed to solving lead time issues by contracting the chain geographically and connecting the nodes with road transport. Structuring truly global supply chains based on lowest possible labour cost for each refinement step then involves true challenges by re-introducing long transport lead times. Substituting air for road transport to maintain short lead times is no universal solution. For connecting supply chain nodes within continents, alternatives to road transport might also be sought due to cost and environmental concerns. So what are the options for supply chain managers and the managers focusing the individual links and nodes of the chain? This is a conceptual paper identifying, structuring and analysing the effects of the options for dealing with the increased lead times when connecting manufacturing steps into global supply chains. Focus is on components and sub-assemblies rather than raw material and finished products. The article is mainly based on logical deduction, but the frequent examples are empirically based on interviews and published material. The rendering is structured along the domains of transportation, logistics, manufacturing, supply chain structure and product design. In the transportation domain, the options regard how transport services are produced and offered, i.e., what can be improved within the traffic modes, but also which new roles can be developed for traffic modes. Examples are faster vessels, further use of the Trans-Siberian railway and offering bundled services by different traffic modes. The options in the logistics domain, rather regard the demand side of transport services, i.e., the choice of traffic mode and how these are used and combined based on standard offers. Examples are to change traffic mode between seasons or over the product life cycle, use air transport for solving occasional problems and adapt consignment sizes and departure frequencies to the transport offer. In the manufacturing domain, the obvious, but for some industries painful, option is surrendering from production to order and use prognoses to produce to stock again. Buffering components applying the postponement principle might also solve some problems. The supply chain structure domain regards which actors are part of the chain and predominantly the localisation of the intermediate nodes. From a manufacturing firm perspective it would be called sourcing. The options include balancing demand over the season and the production life cycle by taking the same component from geographically separated facilities. In the longer run, the product design domain will be further affected by the globalisation of supply chains. The measures include over-delivering, i.e., building in all optional equipment in the standard model, modularising the product, increasing the share of generic components and design the product for postponement. Nevertheless, the simplest, and often applied, option for the dominant actor along the chain, often the final assembler, is to require that other actors solve the problems, i.e., move the problem along the supply chain rather than solving it.