Vivek Sood's Blog, page 58

Why Supply Chain Models have to change

In his book The 5-STAR Business Network (http://bit.ly/5-STARBN), Vivek Sood exposes the results of his researches on the organizational structure of companies. Companies used to follow the model of a traditional organization structure as in the following figure:

 

 However, the global business world has changed and this structure is no longer adapted to current businesses. Companies focus on customer’s needs, but their supply network cannot provide the expected results because of this organizational structure. In effect, the problem about this structure is its rigidity. Relations between these people and departments within the company are not flexible enough, which limits the results. Rigidity is responsible for the limited effectiveness of the organization. In fact, the supply network should be more flexible, which will help the organization to be more customer centric. The traditional structure shown above is so rigid that it stifles customer responsiveness and innovation.

The main change that has made this organizational structure inefficient in today’s business world is outsourcing. In effect, today’s globalized world involves outsourcing and bigger supply networks than before. This is what makes this rigid structure unadapted to current business realities. Strict hierarchy and silo mentality of the different departments prevent companies from achieving their objectives. In fact, CEOs and executives think their globalized supply network will enable them to achieve very good results and respond to customer’s needs very quickly and effectively. However, this cannot happen because of rigidity that is still present in their business, but they do not realize it. That is the reason why those who understand that are leaders in their markets. This is how Apple became leader, outstripping Sony, Samsung, Nokia, and Dell.

To be better than your competitors, you must first have a look at your organization structure. Is it rigid or flexible enough to be able to benefit from great supply opportunities thanks to your globalized supply network? Can you act faster and more effectively than your competitors in the global market? Does your organization structure enable that? If the answer to these questions is “no”, then you have to reconsider your structure first, before implementing any project. In fact, your business structure is the basis for all your decisions and strategies. That is the reason why this is the first step in your evolution towards success.

Nowadays, supply chains are built across multiple countries and continents, and you cannot take the risk to keep a traditional structure. It is not adapted to new the supply chain models. Although you are still selling a product to a customer, the process is very different from former businesses in the old business world. New supply chain models involve new organizational structures.

In the new organizational structure, the customer-centric model is based on customer’s needs obviously, which involve the sales team as a key player. In fact, the sales team would be the basis for new organizational structures because they are the first people your organization needs to be able to create a satisfying product for your customers.

Then, Research & Development and Marketing are also two key functions of the modern structure. Finally, the supply chain, including procurement, production and logistics, represents the support base of the organization.

Consequently, the most important point to underline in this article is the importance of flexibility in new organization structures. In fact, your supply network cannot provide the maximum results if you keep a traditional structure. They do not get along together. New supply chain models imply new structures, and these modern structures involve flexibility in hierarchies and collaboration between the departments within the organisation.

by Anais Lelong

5 tips for social media use in business

 Social media are amazing because they allow you to interact directly with visitors, which could be a great help for your business. This term covers a large range of websites, and it can refer to social bookmarking (Del.icio.us, Blinklist, Simpy), social news, social networking (Facebook, twitter, etc.), social photo and video sharing (YouTube, instagram etc.), or any other specific websites that enable you to interact with visitors (which concern a tremendous amount of websites these days).

 Executives should get involved personally in social networks

CEOs and other executives are those who embody the organization. People want to see who is representing what they are buying. They want to get to know they are, what they look like, and what they stand for. There is the example of the French businessman Alain Afflelou who embodies this brand in his tv campaign. At some point the audience  has  so seen him so much that there was a buzz about the fact to know if he was an actor or not. That is why you should not be afraid of getting involved in social media and social networks. It is good publicity for your company. Besides, future partners want to know who you are. It is a matter of communication, but also a matter of company identity. You are the person who represents your brand the best.

 Adopt an intimacy strategy with your customers

The goal of social media is to interact, and with whom? “Your customers” seems to be the first answer. In effect, through social media, you can tell your customers about what you sell. It is a communication tool, so use it as such. Social media will help you transmit the qualities and values of your products and services. On the other hand, interaction also means customers can give their opinion, which is good news. Then, you will be able to know what your customers think about your company and your product, which will enable you to get better. You can build stronger relationships with your existing customers through the utilization of social media. In fact, Facebook is a way for keeping your products top of mind among already loyal customer and thus build a tighter emotional relationship between your brand and your customers. Besides, thanks to these feedbacks and customer’s opinion and tips, you might be able to reach new customers.

There is no choice but to admit that social media is an amazing tool of communication because it can reach millions of people anywhere in the world, it makes you able to target particular groups in particular locations, and it is very fast for all this.

 Think about your social media strategy beforehand

Although intervene in social media is becoming essential today, you cannot decide it on an impulse. It has to be deeply thought and requirements must be analyzed. In fact, all companies will not act the same way on social media. There are differences according to your target and your industry. Your presence is crucial on social media, but which ones? How do you choose a social media? What would be the best for your specific company? On which websites are your customers and what do they need?  Learn more about that matter, read Vivek Sood book The 5-STAR Business Network (http://bit.ly/5-STARBN).

Evaluate the results

After your strategy is implemented and you are present on social media, you should be able to analyze the efficiency of your strategy. You have to evaluate it your presence on social media is helping your business or if the added value is disappointing. This is about ROI calculation. You can measure different outcomes, like revenue growth, profit, customer acquisition cost, or any other key parameter for your business. If something specific is important to your business, you must be able to evaluate the impact of social media use on it.

By Anais Lelong

Time to fix the fixing: Ford to recall Escape SUVs for the 7th time

Car owners are generally not pleased on hearing about manufacturer recall of their vehicles, yet once again, those owning the 2013 Ford Escape SUVs will be affected. U.S. automobile giant Ford is to recall two more types of the popular model worldwide to fix oil and fuel leaks that may increase risks of engine fires, starting in January.

Described by Ford as voluntary, these actions mark the seventh time the automaker has had to recall the hot-selling SUV since it was redesigned and went on sale in spring 2012.

On Tuesday, Ford announced the recall of more than 161,000 Ford Escape SUVs with 1.6-litre EcoBoost 4-cylinder engine, 140,000 of which were in the United States. Responding to a safety concern, Ford told the National Highway Traffic Safety Administration that “localized overheating of the engine cylinder head” which could cause cracks and allow oil to leak. Fires may be ignited if the leaked oil drips onto a hot surface.

The car manufacturer, based in Detroit, Michigan, said that 12 fires had occurred in the United States and one in Canada, which were caused by the problem mentioned above, but no injuries have been reported.

The vehicles in question are the 2013 model equipped with the 1.6 liter engine, manufactured between October 2011 and June 2013.

“The EcoBoost is a family of turbocharged engines, which Ford has heavily promoted and plans to use in 90% of its vehicles. However, looking at the incidents so far, Ford may have some mismatch between its product maturity, in this case the engine, and its supply chain maturity” – said Vivek Sood, CEO of Global Supply Chain Group.

Meanwhile, in a second action, Ford is also recalling another 11,821 of the 2013 Escapes worldwide, including 9,469 in the United States. This is to do with the engine compartment fuel line, which may have been installed wrong and could lead to a leak. No fires have been reported.

Notably, some of these vehicles are among those recalled last year for the same problem. The automaker said some mechanics did not install the new lines accurately and they may chafe against an engine part, causing a leak.

Ford dealers would fix the problem by making “enhancements to the engine shielding, cooling and control systems.”

“This reputation-tarnishing series of events points to a crack in Ford’s supply chain management. It could be a gap between the strategic and executional level, where the monitoring and control process is not as rigorous as it should be” – said Sood, author of the Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”.

In 2012, around 85,000 Escapes were recalled in two phases between July and November. The company also paid a $US17.4 million fine for not informing Escape owners soon enough about a flaw in 423,000 vehicles built between 2001 and 2008 that could cause autonomous acceleration from a sticky gas pedal. Ford denied any wrongdoing.

You can download the book Move Beyond the Traditional Supply Chains: The 5-STAR Business Network here (first three chapters).

When the Ship is Sinking: Focus on Plugging the Hole in the Hull

My sabbatical from writing blogs over the past few weeks has been interrupted.  Besides my day job of consulting, I was focusing on finishing my second book “Know When to Outsource, and How to Do It Well: Outsmart, Outprofit, Outsource”. However, after reading a Harvard Business Review blog, I feel compelled to jot down my thoughts because of the deleterious nature of the advice from some very high quarters. The name of this HBR blog is Managing People on a Sinking Ship and it is based on research from two professors at Harvard and Michigan.

From my observation after many years of working as a business transformation consultant for CEOs and executives, by the time many companies acknowledge they have a problem serious enough to demand the attention of highly paid experts, generally it is far too late. Such cases are akin to bringing patients to doctors in the terminal stage of cancer. While our team conducts a fact-based diagnostic, and figures out the best way of turning around the situation, I have always wondered what kept them from engaging our services earlier. The HBR blog gave me one of the possible answers. They possibly were following the advice of business school professors who wrote “Managing People on Sinking Ships” without having been on a ship, let alone managing a sinking ship.

I will talk about my experience of literally building a cement box to save a sinking ship in the freezing waters of British Columbia (Canada) in a later blog. Here I will confine my discussion to my experience in saving companies who were leaking money profusely due to supply networks that were poorly aligned with their business strategies.

I find the title of the blog impractical, if not ludicrous – Managing People on a Sinking Ship. When a ship is sinking you have no time to think about people. The time to think about people was when you first got on the ship – to make sure you have the right people on your ship, and the wrong people off your ship. I know it is heresy to say in the modern management circles that people do not matter. Thus, let me paint a picture not much different from what I actually encountered in the freezing waters off Canada. You are merrily navigating the ship when suddenly the bow of your ship starts dipping more and more into the water to an extent that the ship takes a pronounced trim to the forward and list to the starboard. She starts shipping water over the forecastle, and you are not even sure whether in the next wave the forecastle will come back up or split apart due to shearing forces. Now, in a situation like this, if you are standing on the bridge of the ship, will you worry about managing the people, or call your chief officer and the chippy (deck fitter) and ask them to sound the tanks to find out which tanks are breached first?

If you follow the advice of the professors, you will give your team a larger purpose. You will provide reasonable incentives, show people they matter as individuals and perhaps even do a culture survey on the ship and give a motivating speech to “keep people enthused, engaged, and working hard when they know the company may not be around.”

However, in a real life crisis, you will forget almost all of the advice from the good professors, and focus on finding out where the ship’s hull is breached, and how big is the damage, working closely with the right experts, internal and external. In our case, we had to enlist the help of outside divers and underwater welders as those skills were not available in the ship’s company. In addition, we needed a whole raft of equipment, ranging from steel plates to concrete mixers, cement and of course very thick wet-suits.

Does that mean that the people do not matter? Quite the contrary. The sea is a challenging work environment, as is the modern commercial world. Selecting the right people, training them repeatedly, and motivating them through authentic capability based leadership is a priority before you set sail, as well as in routine navigation. Crisis situations, by definition, leave no time for these routine leadership tasks.

Your sole focus during the crisis will be on the hole in the ship’s hull and plugging it. If you are worrying about anything else, you are not only endangering the lives under your care, but also putting at risk cargo worth several millions of dollars and perhaps creating an environmental disaster with oil strewn beaches. You would have prepared your team well before the crisis strikes on how to respond. That is the reason why we did lifeboat drills and firefighting drills every two weeks at sea.

Similarly, if your company is sinking, the first priority is to find out where the figurative holes are. The second priority is to work with the right team of experts (internal and external experts) to plug the holes. Once the situation is stabilised and the cash leak has stopped, then the team must be acknowledged and thanked profusely. Next, it is time to work out a long term plan to not only repair the ship but also ensure it will not sink. If you doubt my advice, ask any sea captain, serving or retired, – what to do when the ship is sinking. There are thousands of us on the face of earth, find and show any of them the blog I am talking about. See how many of them agree with it.

 

Survey finds more than half CEOs do not believe in social medias

At Global Supply Chain Group, we are highly interested in global business networks and that is the reason why, today, we want to underline importance of social medias and social networks. We have no choice but to accept that social networks take an increasing place in today economy with already more than a billion users around the world. However, when it comes to business, the picture is a bit different. In effect, many CEOs do not see the interest of social medias and networks and look at it as a trendy auxiliary gadget of the marketing strategy.

What is social media?

Social media is an instrument of communication, and more specifically, an instrument of social communication of many to many. Social medias involve websites, which give you information while interacting with you. Then, social medias can play an important role in data gathering since you can get comments from customers. It’s an instrument of information that helps you improve your strategy thanks to customer’s feedback. Although many CEOs doubt its efficiency, Sir Richard Brandson, the founder of Virgin Group, finds it very helpful. He said, “Embracing social media isn’t just a bit of fun, it is a vital way to communicate, keep your ear to the ground and improve your business.”

Usually, CEOs who do not use social medias think it is not relevant for their industry. According to them, there would be a poor return on investment. They do not see it as an efficient instrument for communication. However, as almost everybody uses them, why would not it be useful? In effect, customers like to be able to give their opinion and to criticize product and services they pay for and, in this respect, social medias empower the customers. Nowadays they want to have their word on what you produce for them. Caroline Wiertz, PhD in Marketing at the Cass Business School, realized a study on the impact of Twitter for business. The results are clear-cut: customers follow the customer reviews of their network by 70% This is the reason why social medias should not be neglected by CEOs. Although some may think it is too risky for them, which can be true if they receive bad comments from customers, there is no doubt that it will be helpful in order to improve the results in the long-term.

Social medias are becoming weapons of mass persuasion. You must think twice before you decide not to use them. Social medias can be good for communication and become part of your company identity. Social medias make evolve the customer relationship management even for sectors such as the luxury getting the brand closer to the customers.  Besides, using social medias will make you reach new customers, rejuvenate your customer base and modernize your image. In fact, your communication should reflect your company. Then, if you want to have an intimacy strategy with your customers, you must build your marketing strategy around social media. Despite the fact many CEOs neglect social medias, they are actually becoming a main channel of communication.

Nowadays, organizations seem to realize the importance of social networks and social medias. Therefore, CEOs and executives should review their strategy if they are not using social medias efficiently yet. In fact, social medias can give a boost to your business with little investment in comparison to traditional marketing campaigns. It can push you towards leadership, if you use it smartly and efficiently in your specific market. You can find out more about modern types of networks in Vivek Sood’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN

by Anais Lelong

Intel gearing up to face the mobile assault: It may even beat them at their game – says expert

News Release

Contact: Angela Crown, Angela.Crown@globalscgroup.com

Due: November 26, 2013

Forwarding: Permitted

Intel gearing up to face the mobile assault: It may even beat them at their game – says expert

The world’s biggest semiconductor manufacturer has announced plans to expand the use of its state-of-the-art factories for other chipmakers. As competition escalates, Intel hopes the move will push its revenue by taking advantage of its multi-billion dollars’ worth of supply chain investment.

Specifically, Intel plans to manufacture chips to order for other companies instead of solely making its own as per tradition. By extending its foundry service, Intel could soon be making components for rivals such as Samsung, Nvidia and Qualcomm.

This is seen by many experts as a bold departure for Intel, a decision that the current CEO is more willing to make than his predecessor Paul Otellini.

Given that Intel’s sales forecast for next year does not include any drastic change, and so does the capital spending on equipment and facilities of around $US11 billion, the company needs to adapt its supply chain strategy to stay competitive.

Another measure for Intel to tackle the below-analyst-expectation revenue in 2014 is focusing more on providing what consumers want rather than trying to push its own designs, said Brian Krzanich – the sixth Intel’s CEO.

“One of Intel’s competitive advantage is its aggressive investment in manufacturing technology, which is fed by its sale volume. To ensure the cycle goes on smoothly, the company is refining its market understanding as it should be.” – said Vivek Sood, CEO of Global Supply Chain Group.

Famous for its effective product development cycle encapsulated in the “tick-tock strategy” since 2007, Intel is doing what they can to avoid becoming insular. The PC market is predicted to be down in the “low single-digit” percent, albeit the decline rate may be slow due to improved demand from enterprises and some developed markets. “Our view is that it’s declining but it’s beginning to show signs of stabilization”, said Krazanich.

Meanwhile, the mobile market is expanding rapidly, prompting Intel to start manufacturing chips for companies that are beating it in mobile phones, Krazanich confirmed.

Moreover, Intel will also focus on developing parts for a smaller number of phone makers with large sales volumes. Intel’s newly appointed President Renée James said: “In addition to Intel’s traditional areas of strength, increased integration will be Intel’s future and we plan to leave no computing opportunity unserved”.

Intel’s CEO said the company needs to catch up with the ultra-fast pace of mobile growth by delivering new products. The company also plans to have chips in sub-$100 devices and ship more than 40 million tablet chips in 2014.

Given the fact that the mobile chip market is dominated by ARM, Intel plans to be serious contender with next year’s release of Atom chips for smartphones and tablets. A line-up of new products is already announced as Intel pursues its goal of boosting mobile chip graphics performance by 15 times by 2016.

“Intel is not giving up on mobile. It is trying to bring its advanced product phasing to the new competitive landscape, which has earned it the top position in the PC component industry.” – said Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”.

Same same but different: Apple’s emerging rival Xiaomi continues to upstage demand with market valuation more than Nokia’s sale price of $10 Billion

China’s three-year-old technology company Xiaomi has recently announced the sale of its flagship Mi-3 smartphone will be on the Chinese top messaging app Wechat. This is another in a series of tactics deployed by Xiaomi to get to the heart of consumers and spur their demand.

Already with 7.2 million handsets sold last year in China, Hong Kong and Taiwan, and a revenue of $US2.1 billion, Xiaomi continues to pursue its drip-feed supply strategy. It will be selling 150,000 units of the flagship Mi-3 smartphone on WeChat on November 28th and customers can reserve their spots in advance.

Xiaomi has been famous for its lightning fast sold-out rates through its solely online distribution channel.  In November, two records were made during China’s Single’s Day flash sale: Xiaomi sold over 200,000 smartphones in just 3 minutes, making it the first company on Alibaba’s Tmall to break the $16.4 million benchmark.

A similar picture is expected with the upcoming sale on WeChat, with potentially added credibility to both partners since WeChat is seeking to be a payment platform as well.

Being compared to Apple with both positive and negative connotations, Xiaomi seems to be faring better than the global giant. Although the two companies have manufacturer Foxconn in their supply chain and are praised for innovation, Xiaomi’s considerably lower price range has earned it a 5% Chinese market share, surpassing Apple’s 4.8% in the second quarter of 2013.

Xiaomi’s latest funding round put it at $US10 billion in value, more than what Microsoft just paid for Nokia’s handset division. Xiaomi, already profitable since September this year, is one of the 15 most heavily venture-backed mobile start-ups ever.

Some analysts have gone as far as saying Xiaomi was able to do in a month what Apple did in a year, pointing to Apple’s 2012 sale of 125 million smartphones globally.

Xiaomi’s achievements so far have been attributed to a number of factors: the right partnerships (e.g. with China Mobile, the country’s state-owned telecom giant; with Google for running its Android operating system; with Foxconn for assembling its phones containing components from Qualcomm and Sharp).

The key differentiator, however, is Xiaomi’s acute attention to innovation and customer service. While Apple takes a top-down approach to innovation, Xiaomi thrives on idea crowdsourcing, leveraging user feedback to develop and release a new version of its Android-based software every week.

Xiaomi’s founder Lei Jun said: “We’re trying to create greater products while selling a product that is close to the manufacturing price”.

“Preferring to be compared to Amazon, Xiaomi follows the business model of selling low-margin devices and making profits from customers as they use them, just as Amazon sells Kindle and e-books. In that case, Xiaomi probably wants to grow into a super networked business like Amazon too, with innovation, efficiency and outsourcing optimisation already achieved at admirable levels” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”.

 

With its high price-performance ratio smartphone line, Xiaomi is also tapping into other technology products, such as smart TV (MiBox, MiTV) and a newly announced wireless router. Originally operating without brick-and-mortar retailers as middlemen, Xiaomi recently announced the upcoming launch of 18 stores, albeit they are only for selling accompanying accessories and services.

As Apple ventures into the growing Chinese market, Xiaomi is looking outwards. In August, Hugo Barra, a Google executive, was hired to develop new products for international markets. No detailed plans have been released yet, but analysts point to some criteria that Xiaomi would consider in a prospective international market: high activity levels on social media and a robust e-commerce infrastructure.

“It’s still early to tell if Xiaomi will create a disruptive force like Apple did when it first introduced the iPhone. But if the Chinese firm knows how to balance the current needs for profits and future needs for products, how to match its product maturity with supply chain maturity, it can be a game-changer”, said Vivek Sood, CEO of Global Supply Chain Group.

The power of preparation

 When implementing a new Information Technology system, companies often neglect the preparation step and the story always ends with failures. Indeed, the lack of preparation is the first mistake to avoid. Preparation is the basis of the entire implementation process. Your results will depend on how you prepare this new IT system implementation. Most mistakes occurring during the implementation and after are, first of all, due to the lack of preparation. If you prepare your process enough, many mistakes will be avoided.

 First of all, when they decide to carry out a new IT system, companies often neglect the collateral changes. A new IT system involves changes of organization and management in the company. These changes are often hold as secondary during the implementation phase. Most companies realize it far too late to be able to repair the mistake. That is the reason why preparation is crucial. It is the step that will include anticipation of future changes. Indeed, many changes have to be anticipated, like how warehouse management will change, as well as logistics management, for example. New procedures should be thought in order to improve IT system management in the company. Here are some changes that need to be examined and prepared: local requirements, human capital practices, employee alignment, communication changes, etc.

 Besides, the lack of preparation is also the cause of the improper budgeting process. In effect, companies usually underestimate the cost and time of the implementation of a new IT system in their organization. For this reason, the expected results are not achieved. ROI calculation is also often wrong and the results do not compensate the cost of implementation. All this leads them to budget overruns. This is the reason why preparation is essential. Indeed, thanks to preparation, companies can expect several possible scenarios and imagine different solutions to apply if one of these actually occurs during or after the implementation process.

Consequently, preparation will help avoid many mistakes and forecast solutions for unavoidable issues.

 The cornerstone of preparation is, obviously, information. Then, what is most important is first to collect enough data to be able to make an analysis before implementing any new system. Data collection takes time but it is crucial to be able to achieve the expected results. Therefore, companies should take any necessary measures to collect the maximum data, which will enable them to make the essential analysis. Indeed, they must analyze the possibilities, according to the requirements, then rate number of suppliers available, as well as their proposals. Preparation is also important in the provider choice of course because they need to focus on long-term and sustainable relationships.

 Preparation is essential for all the areas that can be concerned and affected by the implementation of a new IT system. These areas can be about labor, law, prices, functioning, providers, contracts, skills, investment priorities, competitors, etc. Vivek Sood insists on this point in his book The 5-STAR Business Network (http://bit.ly/5-STARBN), and this topic will be even more analyses in his next book Outsource, Outsmart, Outprofit.

Thus, preparation is the first step and although you may think it is not part of the project itself, it actually is. Besides, it will determine the entire following and the results of the project. Then, you must not neglect this point and make sure that everything was thought deeply before implementing a new IT system in your organization.

by Anais Lelong

Apple’s manufacturer invests millions in the US to meet more demand

Taipei-based Foxconn Technology Group, whose biggest client is Apple, is to invest $US40 million in the United States to boost its high-end production chain. The move, welcomed by the US government, is part of the growing trend to seek a non-China outsourcing location.

The world’s biggest contract electronics manufacturer will commit $US30 million to build a high-tech plant for making precision tools, components for telecommunications equipment and other advanced technologies.

Foxconn flagship company – Hon Hai Precision, will also fund $US10 million for research and development in robotics at Carnegie Mellon University in Pennsylvania.

The main rationale behind the investment, which also creates 500 hundred jobs in the US soil, is to meet customers’ demand for more of their products be domestically made. “This is an example of results-focused outsourcing in which the customer retains control of the relationship. Although Foxconn can also win by investing in US-based manufacturing, the original call was made by its customers.” – said Vivek Sood, CEO of Global Supply Chain Group.

Foxconn will not move the production of Apple’s iconic iPhones or iPads to the US, amid the growing trend for American technology companies to relocate manufacturing plants so that their product designers can be near the manufacturers for quality control.

“We won’t be migrating Chinese production lines, but creating high-precision, high-tech, high value-added manufacturing in the U.S for future technology trends,” Terry Gou – Founder and chairman of Foxconn said.

The company has its fingers in multiple pies, as most service providers, and is responding to the modularisation trend. “We’ll go from original component R&D through to a complete high-end production chain. However this is not, as assumed, manufacturing for a specific brand”, said Gou.

“Many technology companies are now seeking modularisation to achieve homogeneity, where products start looking similar, eventually leading to falling prices. Foxconn knows they are playing in an increasingly commoditised market and their decision to raise their bar is understandable in ensuring the leading position.” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”.

On the other hand, many US companies are not reaping desirable benefits from their outsourcing in China and moving their production back to their homeland. “This insourcing movement is a result of poor supply chain strategy planning. Many companies choose to go with the obvious benefit of low labor costs while ignoring other factors, which may well offset the former” – Sood added.

What two African entrepreneurs have learnt from Amazon.com – globalization in action serving humanity

Boasting exponential growth since its inception in 2012, Jumia became the first e-commerce site to bring the coveted Play Station 4 to Nigeria. The company announced the offering after just two days of the release in the US. The Nigerian would-be Amazon is following the global giant’s footsteps in becoming a super networked business, although there is still a long way to go.

Jumia started with a relatively similar aim and manifesto to Amazon, which puts customers at the heart of its operation. In the same vein, the Nigerian site also reaps benefits from being one of the pioneers in Africa’s emerging online retail market.

“Being first is good, but it is not everything. What fuels Jumia’s success so far is somewhat akin to Amazon’s evolution into a Five-star business network” – said Vivek Sood, CEO of Global Supply Chain Group.

Jumia is not shy of innovation either, given the fact that people are still skeptical about online retailing as well as online payment in Africa. The Lagos-based retailer launched a range of online payment options but steers its technology-shy consumers by accepting cash on delivery and offering free returns. “It’s very important that people know it’s not a scam,” said co-founder Tunde Kehinde.

They even take a step further and deploy a direct sales team of 200 to educate Nigerians about secure online shopping, which also serves as a means to build trust.

Now with pick-up stations spanning over 6 locations, a warehouse facility, 200 delivery vehicles in Nigeria and 4 other country-specific microsites, Jumia seriously strives to become a one stop shop for retail in Sub-Saharan Africa. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” said co-founder Raphel Afaedor.

Both co-founders and Harvard Business School graduates built the business from $75 billion in funding and are bringing “a couple of million” dollars in monthly revenue, a growth rate of nearly 20%.

Vivek Sood, author of the book “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”, said: “Jumia is taking the right steps towards building the five cornerstones of a super networked business: innovation, efficiency, profitability maximisation, product phasing and result-oriented outsourcing. With the promising results so far, perhaps we could see the next perfect example of a 5-star business network besides Amazon.”