Supply chains: Danger ahead!

Among the many things that can complicate the supply chain for multinationals, legislation and regulation can be the hardest to master

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Poor Chipotle! No company wants CNN, Forbes, MSNBC or other news services reporting on its latest corporate debacle. An E. coli outbreak in the food industry is a company’s worst nightmare, and can tank a company’s reputation (and stock price!). Businessweek’s barfing-burrito cover is an image that will live in advertising history and, unfortunately, customers’ memories. While I hope Chipotle will not back away from its commitment to small, local farmers supplying hormone- and antibiotic-free meat, the outbreak highlights the difficulty of managing a complex supply chain with a large number of suppliers.

The supply chain in most multinationals has evolved over many years to minimize the cost of raw materials, labor, transportation and taxes. The supply chain is further complicated by mergers, acquisitions, divestitures and partnerships. Given the pace of business, it is unlikely that underlying business processes and supporting IT applications are thoroughly analyzed and improved to accommodate each change.

New regulations are making supply chain management even more complex. In recent years, the U.S., the European Union and others have created a number of regulations that are creating a great deal of work for large companies that manufacture or handle physical products. The regulations require such companies to regularly gather and report additional data about their supply chain. New IT support will be required whether the company gathers the information itself or engages the services of a third party.

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