Going global with logistics - multinational corporations' communication systems - includes related article on logistics software to help European businesses meet recycling goals - Industry Trend or Event

Software Magazine, Nov, 1997 by Julekha Dash

Whether they are looking to expand their markets or manufacture their goods less expensively, U.S. companies have long known that they have to look beyond their borders to remain competitive. Managers at multinationals know from experience that going global involves more than pointing to a few regions on a map. For these companies, dealing with language barriers, customs, import/export regulations, and finding local trading partners are just a few of the complexities involved in doing business on a global scale.

They're also just the beginning. Before they sell or source abroad, companies first need to determine how to get their goods from point A to point B, which can be a far more trying task when a shipment to Cleveland is coming from Bangkok instead of Kansas City. The shipping process involves knowing the costs associated with overseas manufacturing, how long the goods take to deliver, what international trade regulations apply, and what bottlenecks might impede timely delivery. More and more companies are relying on logistics software -- with features specifically designed to meet import/export requirements -- to track the movement of goods across the globe.

In the past, many companies failed to take their global operations seriously, says Sue Welch, president and CEO of RockPort Trade Systems in Gloucester, Mass. These firms often viewed their international arm as the step-child of their organization. "Once it was 8% to 12% of their business and now it's become 40% to 50% as they begin to expand their operations globally," she says.

According to Barb Peszka, a partner with Deloitte & Touche ICS, many multinationals are just now starting to realize what it means to manage logistics on a global level. "Managers are asking 'Where is my inventory sitting?,' 'How much inventory do I have on a global basis?,' and 'How do I go about making decisions about effectively distributing these products?'" she says.

Steve Gold, partner-in-charge of KPMG's National Logistics Practice, says that while many companies have implemented technology specifically to address processes such as warehousing, transportation, or order management, they are just starting to think strategically about how to receive significant ROI from their global supply chain.

"When you start reaching out beyond your boundaries and start saying 'How do I partner with my vendors?,' 'How do I ensure communications with my plant in Indonesia realtime?,' or 'How do I measure my inventory from point-of-source all the way through to the customer?,' then you're really delving into more strategic decision-making," says Gold.

Like Peszka, Gold says many organizations are just starting to grapple with these issues. The attitude in many companies has been "Hey, just ship it, give it to the guy in the warehouse," he says. In some cases, individuals assigned to handle the overseas shipping had worked their way up from the loading dock and hadn't been involved in senior-level decision-making or weren't aware of how to leverage technology to move products, says Gold. Many CEOs have come up from the sales and marketing channel and, while they know how to sell products, "they don't understand the events that go on behind that to make that a successful sale," he says.

"The whole area of logistics has historically been not managed," Gold continues. "Unfortunately, in many organizations that's the most important part of customer satisfaction." For example, L.L. Bean loses a sale -- and often a customer -- if a large green shirt arrives days late when the customer ordered a small blue shirt. When the customer is a merchant ordering product for an entire season, that's a lot of returned shirts, not to mention lost sales and inventory.

"If you don't have a good idea of where your product is either at your location or in transit, the customer may call up and cancel the order," warns Peszka. "What happens then if you don't have a good mechanism or understanding of where product is and how close it is to being delivered?"

Moving product in a predictable, timely manner across the globe is especially crucial in the retail business where products experience quick turnover and are typically manufactured in developing countries. Ken Surdan, director of application and systems development at Stride Rite Corp., a Lexington, Mass., maker of athletic and casual footwear, explains that the footwear industry is becoming "more and more fashion-oriented," which translates into shorter life cycles for products.

"Where it used to be acceptable to have variations in delivery because there was high inventory and long product life cycle, we're now constantly trying to manage our inventory as low as possible to reduce cost as well as increase our service level," says Surdan.

Stride Rite is using the logistics module from the RockBlocks supply-chain software suite offered by RockPort Trade Systems. The logistics module is specifically geared toward handling import/export requirements. Stride Rite uses it to track inbound shipments, as well as receipts from their domestic distribution centers. Stride Rite considers it a business-critical application, since more than 90% of their product line is sourced from contract manufacturers in 20 countries throughout Europe, Asia, and the Americas.