In a recent article for the BBC, executive Alastair Sorbie discussed how technology is helping American and European corporations assert greater control over their supply chains, which have come to be dominated by foreign operations after decades of outsourcing manufacturing operations to emerging economies such as China.
As industrial capacity has declined in the U.S. and Europe, it has thrived in many nations in the East. Low wages and limited regulations made outsourcing production to overseas factories a major competitive advantage, as it allowed companies to offer goods at lower prices while remaining profitable.
However, the financial advantage afforded by overseas production has begun to recede over time, owing to a number of factors. Wages have been rising in emerging economies, while technology-driven efficiency enhancements have made domestic manufacturing more competitive.
Also, production runs and project life cycles have become shorter and smaller. This increases the effects of one major downside to relying on overseas factories – finished products often waste weeks in transit. A flaw in a particular shipment may not even be uncovered for a month or more, and then it will take the same amount of time to ship in a load of replacement products.
These factors have many corporations re-considering the balance of costs and benefits offered by overseas production and considering relocating their operations to domestic facilities. However, careful attention to detail in project management will be a critical part of making this a successful strategy.
Sorbie asserts that the ability to track project costs at any stage and assess profitability is redefining the rules of the supply chain. By integrating traceable labels into its system, a company can gather information about its production operations and make data-driven decisions about when and where to manufacture its products as well as identify the source of problems in its supply chain.