The 20^th century’s first era of ‘globalization’ (roughly 1970-2010) was marked by major changes in global trade, consumption, manufacturing, supply chains, jobs and our daily lives. The world shrank rapidly due to free trade, mass media, technology, easier travel, improved supply chains, the emergence of Asian powers, and the dawn of the BRICS economies.

Thomas Friedman’s 2005 bestseller The World is Flat became the definitive text of, and shorthand for, Globalization 1.0. It gave context and a name to the sense many people and businesses in the US, Europe, and Asia had that an industrial revolution-sized change had taken place.

Perhaps nowhere were the effects of Globalization 2.0 felt more intensely, widely and definitively than in manufacturing.

Shifts in geography, technology, markets and consumer demand drove change in how companies approached their PLAN-MAKE-BUY-MOVE strategies for their products.

What is Globalization 2.0?

The megatrends that emerged from the first era of globalization have evolved to shape the Globalization 2.0 world. They dominate and influence almost every aspect of business and trade, including the way companies make, move and sell their products.

Megatrends:

1. The emergence of China as a global manufacturing, supply chain and consumer power
2. The emergence of the Internet and its evolution from something “we do” to “who we are,” as well as the emergence of e-commerce and its evolution to cross-border commerce
3. The emergence of fast supply chains that are cost-effective, tech-driven, and simultaneously global, regional, local and hyper-local
4. The emergence of new models in B2C and B2B product sales and distribution due major disruptions in domestic and global consumer demands, manufacturing models, retail disruption and environmental and social compliance demands

Whether you produce apparel, heavy equipment, computer chips or chocolate chips, these mega-trends are essential to understand and embrace for a few reasons.

Companies are, or soon will be, rethinking, reimagining, redeploying and digitizing their entire go-to-market strategy and all six mega-processes (plan, make, buy, move, distribute and sell) of their supply chain to meet the needs of a globalized and digitized world.

They are also resetting their entire MAKE IT-MOVE IT-SELL IT operations, where they consider what combination of Asia, North and South America, and a wildcard 4^th destination they will use to make and sell their products. They are rebuilding their global, regional, local and hyper-local supply chains to meet customer demands.

The following are four critical actions suppliers and manufacturers must take to ensure long term survival, growth and profitability in a 2.0 world.

Transition to strategic from transactional operations

You may think you have a long term strategy, but if you are like most manufacturers and suppliers, you still operate on a largely transactional basis.

You must transform your operations, philosophy, strategies and KPI’s to reflect a 2.0 world that uses technology, analytics, market assessments and big data to create a long term strategy mindset.

This sign-the-orders, make it fast and well, sign the next one, rinse-and-repeat mentality is not fit for a 2.0 world.

The first step you need to take is to conduct an end-to-end assessment of your “as-is” business model and your go-to market strategy. This will include a thorough analysis of your operations, technologies, level of digitization, personnel, policies, supply chains, component and raw material sourcing, customer relationships, compliance regimes, and the markets and customers you currently serve.

You should include internal and external primary and secondary research, competitive benchmarking, market, product and customer analysis, channel analysis and the impact of e-commerce for B2B and B2C on your business.

Use all of this to create your “to-be” model, strategies, tactics and sales effort. Prioritize adoption and implementation of required changes and begin implementation immediately – ideally within 3 days.

Fully embrace e-commerce and digitization

After conducting your “as-is” analysis, suppliers need to understand the impact that e-commerce and the digitization of all aspects of the commercial world will have on their current and future business.

E-commerce and cross-border e-commerce have changed the dynamics of retail, wholesale and B2B channel sales. Your customers are adjusting their strategies and operations to meet the demands of an e-commerce driven world, and this means that their relationships with suppliers are changing.

Your customers are shifting their mix of supplier countries, looking to consolidate, seeking more flexibility in capacity and minimum order quantities, and embracing numerous avenues for delivery.

Suppliers must adjust their operations, personnel, IT infrastructure, MOQs, packaging and supply chain capabilities to meet B2C and B2B customer demands placed on brands and retailers by e-commerce.

Customers are also reinventing their go-to-market operations and strategy by digitizing every aspect of their business, including:

• product development and engineering
• forecasting and replenishment
• choice of supplier and engagement with supplier
• warehouse and DC operations
• distribution
• logistics and sales

The smart supplier will have a strategy and operation capable of integrating seamlessly into customer’s digital transformation.

Meet (and exceed) new standards in social, environmental and compliance standards

The need for suppliers to meet social responsibility requirements in their operations, to move toward greener operations, and to comply with local and global regulatory regimes is not new.  All three movements have gained momentum over the last ten years, and many suppliers have differentiated themselves and increased business by being ahead of the curve on these.

However, social, environmental and regulatory compliance is still in the maturation stage and in the next ten years will reach full maturity.

This means that environmental compliance and innovation will be a must for suppliers.

The days of buyers moving from country to country to leverage more relaxed regulations will come to an end. The same goes for social compliance.

Younger, more socially conscious consumers are demanding that their favorite brands are green, clean, human rights advocates.  B2B customers face pressure and are being offered incentives to do the same. Along with social pressure, there will also be greater profits to be had in being not only compliant, but innovative.

Make ANY order size profitable

In a 2.0 world, the manner in which your clients plan, buy, receive, store and sell inventory has changed dramatically, and will continue to do so.

The new realities of a Globalization 2.0 world include a more global landscape for sourcing new markets, the ability to source from new locations in your country, the unwillingness of retailers and wholesalers to hold inventory, major advances in forecasting, replenishment and inventory visibility, and most importantly consumer and business preferences. Together these realities mean that capacity and MOQ flexibility is a must to stay competitive.

Manufacturers must be able to use technology, smart planning, and customer needs research to set up a system where fast ramp-ups and ramp-downs, meeting smaller micro-orders, and direct ship orders can be part of your offering.

Critical to this process is building long-term, focused strategic relationships with your customers and understanding where they are going, not where they are.  This is a key element of shifting from short-term, transactional thinking to 2.0 thinking.

Act now or risk getting left behind

Globalization 2.0 has shattered the traditional norms of the product lifecycle, from engineering to planning and production, all way to sales.

Manufacturers and suppliers can only survive by being proactive on strategy, technology, and “inside the four walls” operations. The alternative is watching others do it and get left behind in a Globalization 1.0 world, wondering what happened.

The post Change or die: 4 things suppliers must do to survive in a Globalization 2.0 world appeared first on Trade Ready.

Throughout his two terms, President Obama and the Republicans in Congress have not been able to work together.

A rare exception is their current alliance to secure Congressional passage of what is known as “fast track authority” for the President to create, with eleven other countries including Canada, the Trans-Pacific Partnership (“TPP”).

This week the Senate joined the House of Representatives in voting for this fast track authority giving the Obama Administration the ability to move forward and conclude the negotiations. The support came mostly from Republicans but with some defectors on both sides of the aisle.

The other countries involved in the TPP are: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Look who is missing from the group – China!

The Office of the U.S. Trade Representative claims that the TPP will support American exporters, including small businesses, and enforce labor rights and environmental protections.

The Obama Administration and Congressional Republicans also view the TPP as a way to counter the expanding economic and military influence of China in the Pacific region.

Can you hear the “giant sucking sound”?

Despite their loss in Congress this week, the vigorous opposition to TPP will continue when the actual treaty is finalized and presented to Congress for ratification. The opposition is led mostly by Democrats and union members, but it includes citizens of all political leanings.

In 1992, presidential candidate Ross Perot predicted that the NAFTA agreement would lead to the loss of millions of American manufacturing jobs.

He called it the “Giant Sucking Sound” – one of the most famous lines in American political history.

In my view, no one can credibly argue that NAFTA and the following trade deals with China and other countries did not lead to the loss of America’s manufacturing base and millions of blue collar factory jobs.

The evidence is there for all to see – shuttered factories in big cities and small towns all over America, persistent wage stagnation and high unemployment for workers without college or specialized vocational skills. Big box stores sell consumer goods mostly imported from China.

You don’t have to be a trained economist to see the downside of the free trade deals signed since NAFTA.

The unseen benefits of free trade agreements

Unfortunately, the upsides of free trade are not always fully recognized. Freer trade has provided American consumers with year round fruits and vegetables imported from the Southern Hemisphere.

Cheaper imported consumer goods have increased our purchasing power even as real wages for millions in the U.S. have stagnated since the 1970s.

What many people don’t see is the biggest upside of free trade – increased exports of foodstuffs, airplanes, defense articles, construction equipment and vehicles, high technology products and many services.

Unless Americans work for companies like Apple, Caterpillar, Boeing or Tyson Foods, they are not seeing all the products which leave our shores every day – only the products that come in.

International trade was much easier for all Americans to support when it only involved things like importing coffee and bananas – foodstuffs that we cannot grow here.

Would public opinion really be aroused to a fever pitch over imports of French perfume, English bone china or Canadian hydro-electric power? Of course not.

Are trade deals the real culprits for American job losses?

Protectionism and support for trade barriers arise when global corporations send manufacturing and service jobs to cheap labor countries and equivalent “good jobs” are not created to replace them.

The blue collar factory worker is left floundering when his job is sent to China and his only options are lower wage retail or attending community college to be “re-trained” for jobs that may not exist or he cannot fill.

When it was only factory workers who were displaced by free trade, service workers and other professionals were not really concerned – especially when they could buy less expensive imported goods like flat screen TVs.

But when corporate America started outsourcing programmers, radiologists, call center operators, lawyers and others, a much larger anti-free trade bloc has emerged.

Some opponents of free trade are encouraging class warfare with their rhetoric about inequality, while they fail to note that it is not only trade deals, but also advances in technology thathave displaced so many workers – like secretaries and low skilled factory workers.

The irony is that while millions of Americans are unemployed or underemployed, companies which want to manufacture high value products in the U.S. have a hard time finding workers with the math and computer skills needed to operate factory equipment.

I am fortunate to currently live in Pasco County, Florida which, as a leading participant in the Tampa Bay Advanced Manufacturing Skills Initiative, has recently established a world class, internationally recognized German/European apprenticeship program in cooperation with local companies and educational institutions.

This program will help existing manufacturers grow and will attract other companies to relocate here, especially exporters.

Don’t shut it down – lead it forward

The opponents of TPP are taking the short view. In some ways, they resemble the 19th century Luddites – the English textile workers who destroyed labor saving machinery in textile mills.

Technological progress has always displaced workers – the famous example of the automobile displacing horse drawn wagons and buggies.

Clearly, earlier trade agreements did not do enough to protect American workers from sudden dislocations and, especially when it comes to China, the agreements did not protect the environment.

The TPP promises to address these types of problems. Of course, many opponents distrust this will happen.

The way I see it – we can either have the twelve countries in the TPP, including the U.S. and Canada, lead the way in the Pacific region, or we can withdraw and let China dominate the region.

Wouldn’t the U.S.- and Canadian style’ worker protections and environmental standards and those of Australia and New Zealand be a better model than what we have seen from China to date?

Properly managed trade agreements like TPP will advance shared prosperity.

The “giant sucking sound” has already occurred, not so much from NAFTA but from our existing trade imbalance with China.

Advances in computing, communications and aviation have shrunk the globe. There is no going back. The way forward is to increase the volume and quality of our exports and increase the skills and work ethic of our citizens – not to close ourselves off from a leadership role in global trade.

Do you oppose or support the TPP deal? Do you think Canada and the U.S. can lead the way in the Pacific with worker protections and environmental standards?

The post Is the TPP deal another “Giant Sucking Sound” or a path to 21st century shared prosperity? appeared first on Trade Ready.