Insourcing - One of the world's flattener

Insourcing – a whole new form of collaboration and creating value horizontally; made possible by the flat world and flattening it even more. Although supply-chaining is very important but not every company, indeed very few companies, can afford to develop and support a complex global supply chain of the scale and scope that Wal-Mart has developed.

That is what gave birth to insourcing. Insoucing came about because once the world went flat, the small could act big-small companies could suddenly see around the world. Once they did, they saw a log of places where they could sell their goods, manufacture their goods, or buy their raw materials in a more efficient manner. But many of them either did not know how to pull all this off or could not afford to manage a complex global supply chain on their own. Many big companies did not want to manage this complexity, which they felt was not part of their core competency. Nike would rather spend its cash and energy designing better tennis shoes, not supply chain.
(Thomas L. Friedman, 2005, pg 169, 170)

Insourcing is coming right inside your company; analyze its manufacturing, packaging, and delivery processes; and then design, redesign, and manage your whole global supply chain.

Insourcing is looking deep inside its business and then into its suppliers business.
(Thomas L. Friedman, 2005, pg 171)

Insourcing is distinct from supply-chaining because it goes well beyond supply-chain management. Because it is third-party-managed logistics, it requires a much more intimate and extensive kind of collaboration.
(Thomas L. Friedman, 2005, pg 175)

Source : THE WORLD IS FLAT, Thomas L. Friedman, 2005

Supply-Chaining - One of the world's flattener (2)

Wal-Mart case study – 3 methods to lower products’ prices
1) Working with manufacturers to get them to cut their costs as much as possible.

2) Working on its supply chain from those manufacturers.

3) Constantly improving information systems - so it knew exactly what customers were exactly buying and could feed that information to all the manufacturers, as the shelves would always be stocked with the right items at the right time.
(Thomas L. Friedman, 2005, pg 158)

Wal-Mart’s application
1) Connect its drivers by radio and satellites – after drivers dropped off at certain store, they could go few miles down the road and pick up goods from a manufacturer so they would not come back empty and this helps to save on delivery charges.

2) Communicate by headphones with minilift trucks drivers – received instructions and being reminded whether were behind or ahead of expectations

3) By implementing a collaborative planning, forecasting, and replenishment (to supply)(CPFR), Wal-Mart began a just-in-time inventory program that reduced carrying costs for both the retailer and its suppliers.

4) RFID-Radio Frequency Identification Microchips, attached to replace bar codes which have to be scanned individually and can get ripped or soiled. RFID is a generic term for technologies that use radio waves to automatically indentify people or object.


In this world a smart and fast global chain is becoming one of the most important ways for a company to distinguish itself from its competitors. (Thomas L. Friedman, 2005, pg 155)
(Thomas L. Friedman, 2005, pg 159, 160, 161)

Source : THE WORLD IS FLAT, Thomas L. Friedman, 2005

Supply-Chaining - One of the world's flattener (1)

Supply-chaining is both enabled by the flattening of the world and hugely important flattener itself, because the more these supply chains grow and proliferate (increase in great numbers), the more they force the adoption of common standards between companies (so that every link of every supply chains can interface with the next), the more they eliminate points of friction at borders, the more the efficiencies of one company get adopted by the others, and the more they encourage global collaboration. (Thomas L. Friedman, 2005, pg 152)

Supply chain involves dozens of suppliers, distributors, port operators, customs brokers, forwarders, and carriers. (Thomas L. Friedman, 2005, pg 152)

To make the global supply chain work is very difficult because there are basically 2 challenges.

1) Global optimization – Is not the matter of where you get the products but is the matter of the total cost of delivering all your parts on time from all four corners of the globe to your factories of retail outlets has to be low, and certainly lower that those of your competitors.

2) Hard-to-predict demand
(Thomas L. Friedman, 2005, pg 153)


Solutions

1) Replacing inventory (complete listing of stock) with information – The faster you can get information from stores about customers are buying (what products, what models, and what colors), the faster you can get that information to your manufacturers to your manufacturers and designers and the faster they can send back down the supply.

2) Postponent – It becomes harder and harder to forecast demand, good companies find ways to post-pone adding value to their products until the last possible moment.

(Thomas L. Friedman, 2005, pg 154)


Source : THE WORLD IS FLAT, Thomas L. Friedman, 2005