Management: Applying Best-Practice Structures and Processes

The success of a global production network depends on more than just strategic design and systematic setup. Tactical and operational management is just as critical and becomes more challenging as production is increasingly globalized. New locations have to be integrated into the existing network. The reporting structures need to be sensible and incentives in line with corporate objectives, which change over time. Initially, the commitment and direct involvement of senior management are crucial. This should be followed by step-by-step decentralization of decision-making authority until local management is largely independent and directly accountable for financial and operational targets. As production “goes global,” the bar for the supply chain management function rises. Distances between production sites and markets become longer, and service level expectations, the number of product variants, and the cost of holding inventory also all increase. Companies can achieve significant competitive advantage and reduce their costs by optimizing their distribution network and managing transportation intelligently. Specific challenges arise in many developing countries, and applying the right ground rules can make a fundamental difference. Tactical production planning - the assignment of orders to plants across the network - is also increasingly important and a key enabler to leverage a global footprint effectively. The exchange of expert knowledge, experience, and best practices between different locations poses special challenges, too. The lack of physical proximity makes it even harder to overcome cultural and language barriers. A global production system - a uniform standard for “how things are done” across the network - is an important tool for establishing the sustained use of best practices. It provides a common language for the operations community, and guides frontline managers through standard operating procedures and problem-solving techniques. The right selection of performance indicators and their rigorous tracking is another key element in a successful global production system.