Tyndall Says:

Simplify the products, lower the prices, lower the costs, and respond to actual demand in short-time cycles. Sounds like history. What do you say? Send us your comments here

A few weeks ago, Dan Gilmore mentioned in his excellent First Thoughts column on “The New Supply Chain World Order” (See End of a Supply Chain Era) that German industrial giant Siemens is increasingly focusing on selling new, lower price versions of its products in developing nations, and would manufacture these close to those markets.

That’s an interesting move, and worth a few comments.

I am reminded of the following characterization, which I mentioned in my keynote address at the recent International Air Transport Association (IATA) world cargo symposium:   

Is the world really flat? Actually, it is fast, cheap, and out of control. 

• Fast – in that connectivity makes the world smaller, yet it is more complex.
• Cheap – in that products are dropping in price, and becoming more powerful, yet global sourcing is increasing risks and other problems.
• Out of control – in that most of the world’s purchasing power now resides in the hands of customers who are empowered, demanding, and impatient. Businesses are no longer in charge.

Does this sound familiar? Does it resonate with most of our companies?  Well, it does with most that I know. Now Siemens – with a very interesting and proactive strategy – is striving to respond in a positive manner, taking some control back.  By targeting the growing number of underdeveloped world customers, dropping their prices, and producing locally, this progressive corporation is making a bold move with bold leadership!

Instead of only fighting against the fast, cheap, and out of control world with the normal offshoring strategies and market share battles, this company is going after new channels with its supply chains in tow. How clever: “Think global and act local” is back!  And, it is back with a clever new supply chain strategy.

Time will tell if this bold move will really pay off; but, with clever execution, why would it not?  Demand is growing, discretionary income is rising, and product information is expanding in these markets…..but, buying power there is not equal to that of the developed world.  So, simplify the products, lower the prices, lower the costs, and respond to actual demand in short-time cycles. Sounds like history.

Most futurists and global thought leaders see the new world order developing many times faster than the old world has.  We need only to look to China as the example.  Why would this model not apply in other countries – not likely as fast, due to other socio-political structures, but the trends are clear.  

Good for Siemens. The time is right. Innovative supply chain strategies can enable new markets to become profitable growth engines.

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