Building an Agile Enterprise

Supply Network Re-engineering

Configuration of processes and co-ordination of IT and knowledge systems across national borders determines the agility of an organisation to deliver continuous increasing shareholders value.

So, what can companies do, to guide them through the new opportunities and challenges in the present and future global market? What we have found over the last five years is that multinationals have increased their shareholder value by re-engineering their business processes into teams and intelligently selecting where in the world each value-added component should be located to lever on its competitive advantage. Each company required a different approach because, of course, the nature of the activity in each is different. But creating global supply network gives   corporations an enormous competitive advantage over domestic competitors.

Supply Network Re-engineering involves the use of Economic Value Added to marshal or organise investment, activities, material, people and fixed assets. This radical change is the next evolutionary step in globalisation; the difference is to move all work through processes based on value add quickly, where work involves the movement of parts or information. It builds on the lesson learned in process industries, high-volume lines and assembly lines, and applies them to the batch and intermittent processing of paperwork and manufactured components. It requires configuring process globally and co-ordinating dispersed processes, which leads to either cost advantage or differentiation.

The factors that favour configuring process globally are economies of scale in the process and a proprietary learning curve in the process. The business process is a collection of activities in a logical sequence that people perform in conjunction with technology. Individual activities might be undertake well, but if they are not well co-ordinated into the overall process, or if one of the key activities in the process is done badly, the process will not be effective. Therefore, it is the performance of the business processes as a whole that is important.

Recognising that not all the processes in a business add equal value, cross-border process re-engineering puts them into two categories: core, and support.

Core processes are those for which the teams exist. They use their specific expertise, add value to the business, and therefore provide a service to internal or external customers.

Support processes make it possible for core processes to take place.

A key outcome of CPR is to change the mix of core and support process within the business. There will be far more emphasis on core processes to enhance service quality, to displace non-value-adding activities elsewhere and to improve services to external customers where necessary.

There is also comparative advantage in dispersing processes globally. For example, where the process is performed allows the company to use the cluster of economic activity in the nation as a platform to leverage on its competitive advantage. It also allows a company to respond to shifting comparative advantage, where shifts in exchange rates and factor costs are hard to forecast. It also differentiates the company with multinational buyers if it allows the firm to serve them anywhere and in a consistent way. It enhances leverage with national governments. Finally, it yields flexibility in responding to competitors, by allowing the company to differentially respond across countries and to respond in one country to a challenge in another.

Of course, a company's ability to operate across national frontiers in a way that magnifies the company's competitive advantage is dependent on the company's ability to change its organisation into a deep and wide competitive value network of related processes and supporting industry on which a company depends. As a consequence, an organisation needs to focus its attention on value adding activities to ensure that their organisations are able to identify and meet new business opportunities instead of operational efficiency.

There are also substantial organisational difficulties involved in achieving co-operation among process teams, which are due to the difficulty in aligning individual needs with those of business. People have legitimate questions, such as: 'Where do I fit in? Which task will I perform? How different is it from now? Can I do it? Do I want to? Can we cope?' Frequently the problem is made worse by contradictory, functional objectives. Therefore, reconciling business needs and individual needs and communicating the plan from the earliest stages allows people to understand the changes

As you would expect, changing to an agile organisation is not easy when traditional ways are entrenched. The people in the company must be willing to spend at least three years re-engineering the organisation. However, there is irrefutable proof that successful companies are using affiliates in developing countries to form a core part of their production process. This sort of internationalisation reflects and augments the economic liberation and technical change binding the worlds' economies together. To this extent, globalisation of markets is forcing companies to change.

By Paul Simon           Enterprise Change Consultant

Homepage

Further Reading & Topical Sites

A Radical Route to success

Value Delivery Chain/Supply Chain Solution

Navigating the Supply Chain

Helping Hand ? Managing Your Supply Chain

The Supply Chain Revolution

The Nature of Product Flow

BPR Centre

Reengineering For Results

The Two Faces of ERP

Evaluate Information and Make it Grow

E-Commerce for Executives

Work/Life Flexibility: A key to Maximizing Productivity

How to manage a successful information system implementation

Return to top