Let’s sponsor a supply chain

Supply chains compete not companies is an insight from Professor Martin Christopher that T L uses as a fundamental principle. On the one hand, this means that no company stands alone and partnerships become the norm as non core activities are outsourced. On the other hand, global sourcing has triggered the need to coordinate various tiers of suppliers, aggregatating capacities from formal SMEs and informal micro enterprises alike.

This insight opens up fresh opportunities to link clusters from Regions all over the world. This can lead to the development of hybrid business models that explore synergies and common purpose between the informal economy and formal markets. For example, what about linking a mature cluster in the developed world with one in an emerging economy as a means to transform outcomes and accelerate sustainable growth?

When is a table a table? The point is that the wood for the top comes from Liberia; the screws are made in China and the legs moulded in, say, Thailand. The table takes shape out of a flat pack in your living room – for the first time. The cardboard for the packaging was made in China from waste paper sourced in the UK and the design itself took place on a drawing board in Goteborg, Sweden. 

Now, consider the drive to develop manufacturing in developing and emerging economies. Conventional wisdom would attempt to vertically integrate a cluster in a single geographical region. Why? Why not explore the possibility to “stretch” the cluster with a dispersed network of suppliers linking to a demand driven “front end” located in one of those City Regions where up to 70% of the worlds consumers will soon live. This would mean that the table could be branded, manufactured, marketed and sold by a loose partnership of specialists all over the globe.

A stretched cluster means dispersing elements of the value chain to wherever parts, components or processes that make up the end product can be produced better, cheaper and faster than in a single location. This stretched cluster cocnept could open up endless possibilities for micro enterprises and smes in the emrging world. Alos, it could be the vehicle for more effective and efficient knowledge transfer as we use the supply chain to transform outcomes.

Take the example of buttons. We are not talking the whole garment here. A remote Region of China, Qiaotou is now responsible for 60% of global button production and, most of China’s zip production too. China makes 80% of the world’s zips. The first commercial workshop was set up in Qiaotou in 1980 and there are now more than 700 factories producing over 15 billion buttons and 200 million metres of zips per year. This critical mass has generated a level of expertise that is not just about making buttons but includes all of the disciplines that are needed to market and sell them in overseas markets. 

This example of buttons, recalls the experience of 19th century America when single industry townships were set up. The traders figured out what would sell and how to do so; the entrepreneurs how to create and develop capacity; the bankers followed to set up trade finance and then the lawyers moved in to make sure that the transactions carried minimal risk. And the migrant workers (and later their families) moved in to make things scaleable and, with them came all sorts of services. These days, this would include shops selling mobile phones!  

During many lively discussions with B Sridhar in recent months, several other examples from India have emerged. For instance, the Leather industry in Tamil Nadu. See: the Post on this Blog relating to Leather. In an innovative project sponsored by UNIDO (United Nations Industrial Development Organisation) working with Tamil Nadu Leather Trade associations and funded by the Italian Government; the leather cluster in Italy is working with a corresponding cluster in Tamil Nadu. This is a three year project designed to act as a catalyst for investment; provide access to expertise, develop local skills and improve productivity. 

What is true of manufacturing expertise is true of knowledge based elements too. Take the example of PRL Rao, an entrepreneur from Hyderabad. Working with the Indian School of Business in Hyderabad, he has developed a strategy to take his niche electronics business global and assisted in developing a Business Plan that will provide potential financial and marketing backers with suffient information to support their investment. In an interview with the Financial Times [FT, 09.02.09], Mr Rao was clear on the value of a knowledge partnership with an academic institution: “Through ISB, I got to understand the scene outside India much better and, the conviction that we must operate globally got stronger.” 

The Japanese have invested in Indonesia in a similar way. There, post conflict dislocation has led to the creation of Village Productivity Groups that are geared to add value to products and promote access to markets. This is another initiative sponsored by UNIDO and, as we consider “strethc clusters” in more detail, such examples help us to shape a replicable model to roll out elsewhere.

Archomai, the University of Sheffield’s LSCM Research Group and the World Trade Centre, Humber are exploring ways in which the idea of working globally can be applied to the Food industry in Yorkshire and Humber. Already, it is clear that working with another region, as with Leather and Tamil Nadu, is not just a matter of skills and productivity. As Dominic Ward of the Hull based legal firm Andrew Jackson and member of the WTC Advisory Board makes clear “it is not enough for a company in an emerging economy to focus the process itself and expect successful export to happen overnight. There is a need to understand the regulatory environment of the target export markets, the legal documentation that any export transaction requires and, the need for appropriate trade finance to be in place before anything moves.”  This is where products and services have to be merged in a seamless end-to-end approach to export opportunities.   

In a recent workshop at the World Trade Centre Humber, Rob Bell and Ben Dunn held discussions to explore ways in which a business idea in an emerging economy can draw on global expertise all along the supply chain. Now, T L is starting to explore ways in which this can open up the possibility of sponsoring a supply chain. That is, finding ways in which expertise from one cluster or region can assist a fledgling industry sector in an emerging economy. There are three main areas to focus:

  1. Target market intelligence. This can be all about providing an emerging economy cluster with the insight into how their products have to adapt to export markets.
  2. Offering. There is a clear need for an emerging economy cluster to understand the rules of the game. For example,
    – What are the implications of any SLAs (Service Level Agreements) that may be a pre-requisite of any trade with leading Retailers.  
    – What are the Food Hygiene and Food Safety issues that need to be addressed? An insight into ISO 22000 is a great start.
    – What are the product packaging, labelling and tracebility issues that need to be factored in to comply with service level agreements. 
    – What are the Environmental issues that need to be considered? Again, ISO 14001 is required reading.  For example, the work being done by Professor Lenny Koh at the University of Sheffield LSCM on the Green Supply Chain is an area that is developing fast.  
    – What are the implications for an organisation in terms of skills and facilities to comply with any or all of the above?
    – What are the risks associated with compliance to any or all of the above?
  3. Market Access. We can start with the end-to-end supply chain that will be required to for any product to enter a new market. This can include considerations of specialist equipment and packaging when we are looking to sell food and other perishables.Then, we need to move beyond productivity and security to comply with formalities and, mitigate potential risks. For example, EXIM (Export Import) documentation; Legal considerations and, Trade Finance.

No emerging economy cluster or micro enterprise is going to be able to deal with the all of the above on their own. In fact, few SMEs from developed economies have the resources to cover all of these bases internally either.

Technology can be used to explore fresh ways of mentoring . On a personal note, a recent tele conference with NITT Trichy (many thanks to Aditya, Ganesh and Rahul for setting this up and to everyone for some superb questions) taught me a lot about how such dialogue can be structured and how a variation on that approach could become an affordable and accessible mentoring scheme.

Given technology, we are confident that this pooling of know how to transform economic, social and environemtal outcomes and can generate signficant benefits. It is like using the learnings from telemedicine to develop tele supply chains or a mentoring service drawn from dispersed expertise. And the benefit from those who make a contribution just might be for them to open up new markets as they do so.

Watch this Blog for more on Export Ready and, the creation of T L Know How Networks along the supply chain. Any thoughts on Sponsoring a Supply Chain or, a cluster in an emerging economy?

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8 Responses to Let’s sponsor a supply chain

  1. I am fascinated by the whole concept of Transformational Logistics. What strikes me in the recent articles around the simplicity of emerging supply chains, is that these have been developed (in one form or another) over millenia and are “naturally” formed supply chains based on a form of survival that is unknown to the western world. When the head of supply chain of a leading retail outlet or supermarket chain in the west, seeks to “revolutionise” the supply chain, there can only be one outcome in his/her mind and this may be labelled as “getting a stronger partnership with supplier” but it will not be because he/she does not have anything to feedhis/her family with. Simplicity and speed at low cost are driven by the need to survive in a very different way from our forms of survival, which are often driven by the stock market – a lot of good that seems to have done us- Keep it up!

  2. Bob Spence says:

    This could be a massive opportunity for UK PLC and industries that are on their knees. Take the Caravan industry in Hull. Thousands have lost their jobs and we risk losing the know how. Could we not sponsor an industry somewhere in the developing world to build affordable housing units or, other types of flat pack buildings? Our skills in setting up supply chains; productivity and the use of equipment and general management could be vital. Local Colleges could design the courses and our skilled labour could deliver them. Is there any Government money out there to help with this? And it could even sow the seeds of growth markets that we can benefit from in the longer term.

  3. robjbell says:

    Thanks Piers. You raise a fresh perspective. I think we are seeing a shift from linear supply chains to something far more dispersed in geography and, in levels of sophistication.

    An ant colony behaves with an intelligence that no particular ant possesses and a city – particularily a mega city – develops districts and neighbourhoods no planner can impose. Sad to say that the only plan they seem to know in that context is a bulldozer and let the market deal with the consequences. Or, fall back on iconic showcase areas that resemble Haussmans Paris (shove the workers into suburbs). This can no longer be enough.

    In the informal economy, order and synchronisation arrives bottom up not top down – like an endlessly adaptive swarm. The World Devlopment Report 2009 is all about spatial geography (see Blog Post on this) and this is where supply, demand and connectivity have to operate.

    As to what is produced. People who are defined by survival instincts do not have room enough for last seasons clothes. And this can have other consequences. For example, recently we have been defined by a drive to the niche of one. With the informal economy, we are back to a niche of many. Adaptability, affordability and accessibility are more important than brand alone.

    It seems to me that instead of imposing a better yesterday on the informal or emerging world, businesses from the developed economies have an opportunity to learn and innovate from what is out there and happening on the edge.

    Instead of laying off workers, why not strike a deal with some key players for the future and give them a year off to go travelling and see what they come up with. It could be part of the Corporate Responsibility agenda with an R&D root.

    You raise a persepctive that sends me back to Darwin rather than the shelves of self help books. Any further thoughts?

  4. robjbell says:

    Piers – on the Biology theme. Have a look at the book by Steven Johnson, Emergence. The connected lives of ants, brains, cities and software.

    It is a book that triggered my early interest in the potential for innovation and the informal economy.

  5. robjbell says:

    Bob, a useful insight. Great to see a comment out of Hull at last!

    You are so right. As the Post highlights, the Italians in Tamil Nadu; the Japanese in Indonesia and the Millenium Village concept based on the MDGs are all geared to offer know how. It is time to see this as an extension of the developed world’s market intelligence.

    On deploying laid off skilled or semi skilled labour in the Sponsor a Supply Chain initiative – I agree totally. We seem to be focussing on apprenticeships in the UK at present which is a good move. However, what about those with experience? This idea is a viable option that deserves closer attention.

    We are starting to work on Food but, maybe, this angle could take us into the infrastructure field. This would be major. Of this more later. Watch this space.

    On the affordable housing units … there are many possibilities. After all, after any global disaster there is an immediate need for living accomodation. Back in the 1970’s the Hull caravan industry sent out caravans for the Napoli disaster and has provided units for other problem areas. Maybe there is more that can be done to explore this. After all, up to 70% of global population will live in cities very soon and they will not all live in semi detatched.

    What about using the massive mountains of waste paper that China no longer wants? We could link with the Universities and test ways in which this can be waterproofed; flat packed and deployed either in disaster zones or, as temporary housing. The devil may well be in the detail but at the very least you are opening minds. Watch this space.

    Digby Jones has been telling a sorry tale of the wasted effort in the UK Business Model. It is far from being fit for purpose and is too focussed on using the same old ways but expecting a different result. This is what Einstein defined as madness!

    At the very least, your comments merit consideration as part of Plan B. Do get in touch and let’s have a look at what could be done.

    Anybody else want to trigger similar thoughts?

  6. This is the first time I have commented on one of these – I was wondering if there might be something in this for young entrepreneurs as we try to help those in the current situation I am particularly concerned about those aged 16-19 who struggle in any case though are interested in the world dimension – peoples thoughts would be of interest to me though I have to say if there is maybe a less academic approach would be required if we are to engage with young people linking up with other young business people across the world and the Indian Sub Continent and the Gulf States.

    Here in Hull we have a Youth enterprise that trys to raise young peoples aspirations so if we can develop an approach that could inspire young people in this area than that would be welcome.

  7. robjbell says:

    Charles, This is soooooo relevant.

    A couple of years ago, I offered to talk about Logistics as a career to a group of 16 year old students. Just before we started, the careers adviser asked me: “what is Logistics?”. What chance did any of those students have in being directed to a career in Logistics? Then again …

    Logistics is not understood by the vast majority of people. More needs to be done to explain it and, make it plain that we are not talking purely about big ships, big trucks and big stores.

    I showed a set of photos from the farm to the fork. It started with women carrying water to a village and a bike (see photo on the Blog)doing the same thing. Then, a photo of a fisherman using a mobile phone to sell his catch and a woman phoning to the next village to order food. We talked through Fair Trade and discussed how the bar of chocolate made it onto a shelf for them to buy – in Hull. We used a simulation game to bring this to life. Then, we pinpointed all of the jobs involved. From bike riders and fork lift operators to truck drivers to crane operators (they cost up to $20 million on a dockside)and on to people who buy and people who move the money. Logistics is a BIG story. And the industry needs to get this message over so that young people don’t dismiss it as little more than stacking shelves on Saturday mornings.

    In Rotterdam at STC (see website) a purpose built Training Centre offers simulator training on all aspects of Logistics. It supports the Port but, significantly, it runs a programme based on computers to simulate a supply chain from end-to-end for young people from Rotterdam. It is designed to bring them in to the day-to-day of global trade.

    Archomai are trying to bring this to the Humber. An American company, MPRI have built a simlilar centre in Alexandria. The idea is to build skills and entrepreneurial capacity in Egypt. IRG (See Blog Roll) have done > 750 projects all over the world on Development issues and we are starting to work with them on how to expand this to T L. Many companies are working in the emerging world.

    How much do they know about the emerging world? Why is it relevant? Goldman Sachs reckon that Brasil, Russia, India and China will be the dominant force by 2050. This is relevant to the entrepreneurs of today.

    Bob Spence (see other Comment) suggests working on affordable housing. Can we look at this with young entrepreneurs? Flat pack carboard sounds like Blue Peter but, again, just look at where the Majority World lives …

    These initiatives could help young people to understand the world we live in and, with subjects like the Green Supply Chain, explore other real life issues.

    For example, there are 1.8 billion stoves used by families in slums worldwide to heat water and cook food. Innovation is needed to make cookers that are affordable, safe and environmentally sound. For example, 70% of all accidents on building sites world wide are due to a poor understanding of safety at work. And 97% of all goods sold in India are sold through Mom & Pop stores. How can these people be helped to make their stores more profitable? Just look at newsagents here and see the difference merchandising makes. All of this is the territory of the entrepreneur. And it can be simulated and explored in schools.

    To me, development is about transforming people’s lives not just transforming economies and TL is all abut how logistics can help. Transformational Logistics takes the story into the Majority World. And this is a place few young people go to. Places like where slumdog millionaire was filmed.

    Dharavi (means loose mud in Tamil) is the shadow city of Mumbai. This is where 1 million people live on a space of 550 acres – not much bigger than the centre of Hull. It is also a place where $1 billion worth of goods are produced per year. There are tanneries and mini leather factories; there aree bakeries and places where textiles are cut and sewed. Also, EVERYTHING is recycled. This is Logistics in the Majority World. And this is their talent. they deal with what is.

    There is a word in Hindu – jugaad. It means make do and mend. This is the root of innovation and enterprise in the Majority World. Young people need to understand that innovation is not only about blue sky thinking in a lab. It can be about thinking through ways to do things better, cheaper and faster with what you have got. It can be about what to do with waste and so on.

    I did another talk with a group and placed a mobile phone in the middle of the table and asked the group what you can do with this? We went through calling home; texting mates and accessing football results. I then showed photos of fisherman selling their catch, women in villages phoning their orders for food, maintenance people asking for help to solve problems, medics doing the same. Then, how they are using them in Kenya (>100 languages) to develop voice commands for illiterate villagers. To me, this sort of experience can trigger all sorts of enterprise.

    I gave a talk yesterday at the University of York St John. Students in their Psychology Department will be visiting Tamil Nadu, India later this year. They will work on a project training basic skills in remote villages. They will be looking at the role of women and, ways in which such villages survive. I ran the video we did in Chennai last year – SEE: THE LAST MILE VIDEO on this Blog. See under Blog Roll to the right.

    Here, we stuck a video camera on a truck driving out of the Chennai Port. You want to see the real India and, the challenge that entrepreneurs face … Have a look.

    Anything that nurtures a spirit of Enterprise with Youth is vital. These days, Public Sector jobs are declining world wide. So too jobs for life with the big Corporates. The fact is that 85% of all jobs in the US are with SMEs. More than 65% in the EU and, over 90% in the developing world. Mind you, in the developing world many of those jobs are in the informal economy. We do not have the right to ignore the entrepreneurial agenda with the youth of today. And it will be better for everyone if the horizons of where their entrepreneurial spirit may roam is widened.

    There is one other thought – Hull is the birthplace of William Wilberforce so instrumental in the Abolishment of the Slave Trade “one of the turning cicumstances of the World” (Trevelyan). Hull is twinned with Freetown, Sierra Leone and much has been done to promote links. Why not take the “Sponsor a Supply Chain” concept to the Hull CC and suggest this as a part of taking twinning into the future. Hull Truck Theatre could be a venue to run an excercise of moving goods from farm to fork and this could highlight all sorts of opportunities. Maybe this is relavant to WISE.

    I hope that these thoughts help to take Transformational Logistics off the page and, illustrate ways in which youth enterprise is central to the Transformational Logistics project. Soon, India will have > 50% of those aged < 25 years … in the world. Working on links with India could be a great place to start. Archomai and the WTC is doing just that.

    These are tough times but we are trying to set sponsorship links with companies. They stand to gain loads by understanding markets in emerging economies better. This will lead to a whole raft of possibilities beyond a better yesterday.

    Please encourage traffic onto the Blog and, we’d be delighted to hold a couple of those talks soon. Any thoughts?

  8. Bob Spence says:

    Good to hear from you Charles…in the South where I am currently based this is totally relevant too. Loads of businesses under pressure and few putting effort into youth enterprise. This set of ideas could be a useful platform to do something positive.

    Linking to an emerging market and sharing know how could have short, medium and long term benefits. After all, amidst the gloom it is something positive. And some of the ideas will work well with youth groups. I like the one that starts with the mobile phone … Must try that one!

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