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The Global Experience of the Supply Chain Management Professional
One of the more controversial topics in defining a supply chain management professional focuses on the type of global experience required for this discipline. Here's a perspective on the best ways to develop the global expertise required to qualify as a supply chain professional.
This editorial is a follow-up to my comments in the last edition of LQ, which proposed criteria for defining a supply chain management professional (SCMP). This framework was developed based on experience within IBM, interviews with other major supply chain operating and manufacturing organizations, and discussions between members of the research team. The result is a suggestion that a true SCM professional must demonstrate skills and capabilities in the following five areas: 1) Functional; 2) Technical; 3) Leadership; 4) Global management; and 5) experience and credibility. Last edition's comments focused on the need for information technology experience as a criterion for the supply chain professional. This edition focuses on the need for a global experience.
In today's boundary-spanning supply chain environment, a SCM professional must also have global planning and operations experience. This experience provides the insight into the global supply chain environment and its challenges. Ideally, professionals will have had one or two experiences working outside their home country or at least extensive involvement in and responsibility for global planning and operations.
In the discussions leading up to defining the supply chain professional, one of the more controversial topics focused on the type of global experience required for qualification as a supply chain professional. While all the authors agreed that some type of international experience should be required, there was not total consistency regarding what a true international experience needed to be. Some believed that a true supply chain professional needs to have experienced an international assignment including 1-2 years internationally. Others believed that it is not necessary to live in a foreign country, but that substantial international experiences would be sufficient.
I was reminded of the international experience discussion recently in reviewing the rankings of various supply chain academic programs and in discussions with business executives and academic colleagues. A Wall Street Journal program review and the discussions strongly reiterated the need for supply chain academic programs to require substantial international experiences. Like most North American born business faculty today, I have not had the opportunity to actually live on another continent. However, I have traveled extensively internationally through executive education, conferences, consulting, and research. While this hardly qualifies as living internationally, this experience has provided me with substantial perspective regarding the importance of global experience for supply chain professionals. Based on my travels and discussions, I believe that there are five specific experiences that students and young supply chain managers need to develop their international awareness and skills. These include: 1) Culture; 2) Politics; 3) Distance; 4) Documentation; and 5) Economic rationalization. Each is discussed below.
The first and most basic experience in my view is to understand the cultural differences in other regions of the world. These differences include both the nature of demand and the guidelines for business processes. Global operations typically require much more diversity in terms of product variations such as physical and technical characteristics, feature requirements, and unique market functionality. While most North American managers are now being trained to minimize complexity and variation in products and services to achieve scale economies, supply chain professionals must have the sensitivity to recognize when variation is important and be able to design supply chain processes that can deliver it. While many supply chain managers can identify and understand the difference in requirements, it takes the global experience and sensitivity to be able to effectively determine the appropriate trade-offs. To effectively make the trade-offs, it is necessary to have spent time in the local marketplace and supply chain environment. From a supply chain perspective, it is particularly important to understand the relative role of infrastructure, unions, service providers, and local operating procedures.
The second experience is the need to understand the political environment. This includes some understanding regarding the governmental processes, and how governmental policies influence supply chain decisions. As I noted in my previous comments regarding globalization, the regional governmental policies can have a significant impact on supply chain design but it may not be permanent as the policy and the environment may change. For example, the electronics and pharmaceutical industries have recently (within the last 10 years) established significant presence in Ireland due to government taxation policies. Similarly, while many people assume that the rationale for moving production to China is to reduce manufacturing cost, in many cases the more significant reason is to enable product marketing in China. Another example is the focus that the government of Singapore has placed on developing an infrastructure that takes advantage of its location and role as a global supply chain cross-dock. While these government requirements will not likely change, they my in the near future, The global supply chain professional must be knowledgeable regarding these factors that typically overwhelm specific supply chain considerations. This knowledge then needs to be translated into supply chain design and operating decisions that allow the firm to take advantage of the global opportunities while minimizing supply chain risk and cost.
The third experience concerns the impact of distance, particularly over the water. Supply chain experience, particularly in developed countries, results in limited view regarding the impact of relative distance and transportation variation. This is particularly true, but not exclusively, when the movement involves water transportation. In itself, most water movements result in 2-4 week transit times. The time is further extended with the addition of substantial variation when the delays related to consolidation, shipping schedule, port congestion, labor incidents, and weather are included. It is not uncommon for these delays to increase the total transit time by up to fifty percent with more than a corresponding increase in transit time variance.
While extended water transit time is the obvious distance factor supply chain professionals need to consider, the more subtle factor is the impact of infrastructure and congestion on motor and rail transport. It is more subtle because infrastructure and congestion can significantly increase transit time and variation in what we traditionally think of as developed countries. The impact of these characteristics has become evident to me in multiple visits to Ireland and Brazil where 100 km does not mean a transit time of 1-2 hours. The lack of limited access highways and the significant congestion, particularly near metropolitan areas, typically result in transit and delivery times that are double or triple what might typically be expected. A true supply chain professional understand the magnitude and the implications of global transactions and transportation.
The fourth experience concerns the requirements for documentation. without substantial international experience, it is difficult to understand the number and breadth of legal and customary documentation and fees required to move goods in a global supply chain. While it is not trivial moving product across the border between the Canada and the United States, it is substantially more difficult to transit goods across a border when the laws, language, cultures, and customs are different. This is further complicated by the need to comply with the policies of the firm and the financial reporting requirements in the "home" country. As an example, a supply chain professional must be able to effectively differentiate between a bribe and a "facilitating payment", which is legal under U.S. law. Although there are substantial efforts to harmonize international documentation and security requirements, the supply chain professional must have a broad understanding regarding the types of documents and practices required (or allowed) and access to specific sources for relevant countries.
The final experience is the ability to develop a comprehensive economic rationalization for specific international operations. As firms struggle with supply chain operations using low cost country sourcing, long distance transport and security uncertainty, increased pipeline inventory, and currency fluctuations, there is increased need to combine the uncertainty and economics into a single integrated model. The integrated model can then provide insight regarding the complex trade-offs the decision needs to consider. The need for this capability is particularly evident for firms attempting to source in low cost countries without understanding the cost and reliability considerations of longer and more uncertain lead times. A related consideration is the need to determine the trade-off between the incremental revenue from international markets vs. the incremental cost of serving them. The major challenge in this economic rationalization is the need to identify the combined impact of demand, supply, environmental, and financial uncertainty.
While the need for the combined international experience to support professional status as a supply chain manager is not new, the major question concerns how to develop the expertise. Can the depth of expertise required for anyone desiring to be a senior supply chain professional be developed through multiple trips to international markets or does it require a temporary international assignment? It appears that firms that do not have their headquarters in North America believe strongly that the international experience needs to be in the form of an international assignment. Can North American firms maintain their global competitiveness with less international expertise for our supply chain professionals?