Global Supply Chains–growing links, navigating risks #CSIS
Russ Imrie – 2012
#CSIS (Center for Strategic & International Studies) Forum on the real risks and appropriate levels of integration with overseas/offshore suppliers in a world of accelerating cross-border supply chains.
Outsourcing manufacturing or software development is universal in the complex commercial world. Global access and availability of manufacturing capacity, proprietory technology, and talent make much we take for granted in a “made in USA” cachet possible. Automobiles and popular tech products such as Apple’s iPhone/iPad are some very visible products that are designed and built in diverse locations. They amalgamate technologies deployed from multiple sources and owners, inhabiting diverse corporate legal environments.
It’s a jungle out there
Offshore supply and manufacturing practice extends deep down into the roots of modern science and technology, not just the front page items. Paint, medicine, office equipment, chemicals, metal and alloys, solar technologies, electronics, heavy machinery, and transportation all are interconnected from raw materials to process to final assembly. For enterprise though, selecting offshore partners involves navigating a sometimes treacherous path of murky laws where their invaluable intellectual property may be stolen or diverted with no legal recourse in offshore jurisdictions.
That darker side of outsourcing includes intellectual property theft that comes with sharing specifications with a remote supplier who is vulnerable to data theft. Copycats can then launch a low-cost manufacturing operation. Of particular concern is the situation in China. Foreign operations in China are often forced to build in China to qualify for best pricing on essential raw materials, the “rare earths” whose trace presence is important to high-tech. CREATe’s research (link below) indicates that partnering with a Chinese company can result in theft of intellectual property. Is that a risk that’s necessary? According to Passman, the U.S. lost $7.5 Billion and 7.5 k US jobs were lost, from counterfeiting.
One little global crisis…
Another threat to global supply change practice is the random supply disruption, whether accidental or strategically deliberate. Manufacturer practice is to stock minimal components and factories can grind to a halt if a critical part of the mix is in short supply.
It’s clear integration of global supply chains and the requisite wide accessibility of critical intellectual property assets poses a risk. On the other hand it enables rapid coordination of work-arounds as it has in the German resin crisis:
Automakers GM and BMW faced a critical shortage of a resin used to make tubing that met heavy-duty safety-related requirements when the single source plant in Germany had an explosion. Scrambling to assure an alternative supply, they face the same situation as high tech electronics manufacturing faced after the great earthquake and tsunami of 2011 in Japan. But the industry has worked quickly to discover and qualify a material for replacing the critical tubing. Technical standards, a legal framework, cooperation, and a real-time response, solutions enabled by the very global meshwork seen in this critical dependency on a single formulation of a key plastic material by two “rival” auto manufacturers, are upside world-class developments that will only increase. This assures more globally interconnected manufacturing.
- CREATe(Center for Responsible Enterprise And Trade)
- Belfer Center for Science and International Affairs- Harvard U.
- Trade Secret Theft Managing the Growing Threat in Supply Chains – white paper CREATe.org
Copyright © forever by Russell Imrie