Global companies switch to outsourcing

Global or transnational companies (TNCs) are increasingly outsourcing distribution and logistics, which are seen as being “non-core,” according to the 2013 World Investment Report by the United Nations Conference on Trade and Development (Unctad). This ties in with local industry trends based on research by local consultant Haute Performance quoted in FTW (November 1, 2013). TNCs are outsourcing primarily to transnational logistics companies which can provide logistics and supply chain solutions in different global locations, it adds. Logistics services are outsourced to specialists because supply chain management strategy is at the heart of TNCs’ coordination of their global value chains (GVC), says the report. “Whether elements of supply chain management are located in the home country, set up in critical international locations for global management purposes, designed to favour a strategy of regional value chains, or fully farmed out to partner firms at the host country level depends on the specifics of a GVC. “For instance, IBM (United States) has moved from a structure defined by regional divisions in the 1960s and 1970s (with product sales in 150 countries), through a globally integrated firm in the 1980s and 1990s, to one in which “supply chain management analytics” within a network structure are at the heart of how it operates today. “Along the way, it has integrated over 30 supply chains into one and focuses particular attention on areas such as risk management, visibility, cost containment and sustainability. This process, supported by ICT-based services, has improved coordination, reduced costs and boosted profitability," says the report. INSERT IBM has integrated over 30 supply chains into one.