Open global supply

The globalisation of the marketplace can and will continue to increase over the next ten years. Every organisation should now, as a matter of routine, benchmark the performance of its value chains against the best in the world, wherever they are found, since it is those with which it will be competing.

Until now a prime focus of globalisation has been on the search for low-price suppliers and the past decades have seen a ready supply of those in the emerging economies. However, with the increasing emphasis on maximising value in the value chain, global sourcing on price alone is becoming an unstable strategy. In the emerging economies, producers are seeking to add greater value to their products; customers are more sophisticated and also expect to add more value in their own premises. These expectations suggest that partnering on a global scale may be the norm in the future. However, there are a number of problems to be overcome and worldwide partnering may not deliver the competitiveness it seems to promise.

In countries with emerging economies, development of suppliers and customers will be necessary before the expected benefits can be generated for the value chain partners. Conventionally this would not fall within the scope of procurement management as it could involve negotiations with foreign government agencies. However, it will be part of the job of the relationship managers of the future.
'Worldwide' trading in some form has existed for thousands of years, so the fundamental processes of buying and selling are widely understood. The ideas of partnering and value chains have developed only over the last decade and a universal grasp of these concepts does not yet exist. Therefore education and training of potential partners may initially be necessary, adding to costs.
Despite global communications and the ubiquity of the electronic news media, (for example CNN), cultural and political differences can still stand in the way of close organisational relationships.
Experience has shown that markets in the emerging economies can develop quickly but are very susceptible to the global politico-economic environment. In such an atmosphere of volatility business relationships have to be more robust than usual to endure.

STEP factors and conditions for globalisation illustrates the STEP (sociological, technological, economic and political) factors and conditions for globalisation. Therefore truly global business alliances are likely to continue to be more complicated to set up, and more difficult and expensive to manage, than those formed within a single economic, cultural and political bloc. An adaptable approach is most likely to succeed, favouring pragmatism over evangelism, and formal solutions, such as setting up joint venture companies, may be more politically acceptable than partnering. The Partnership Sourcing publication Japanese Supply Chain Relationships in a Recession (Lamming et al. 1999) has useful information on the Japanese view of global sourcing. The 1998 and 1999 editions of Partnering for Profit (PSL, 1998, 1999) carry a series of essays on aspects of globalisation.

Figure 6: STEP factors and conditions for globalisation

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