Success at “going global” isn’t a slam-dunk. It’s true that international expansion helps many companies increase profits, dominate new markets, and mitigate economic risk.
However, few companies succeed on the international stage. In 2015 the Harvard Business Review found only 40% of companies had an average Return on Assets (ROA) greater than 3% ten years after expanding. For most, ROA was just 1%, or less.
What did many of these companies do wrong?
First, they took the step of developing a strategy but failed to plan effectively for implementation. Companies didn’t understand the new markets, business cultures, or expenses they would incur. In turn, this cost them in terms of profits and lost opportunities. And they didn’t ask the experts or find a service logistics partner to help mitigate the inherent risk of supply chain global expansion and trade compliance.
Where Good Strategies Go to Die
It’s easy to see, in hindsight, why bad strategies fail, but even good ones can be spectacular failures without adequate planning and execution.
The Target Corporation learned this the hard way in 2015, when the company recorded a $5.4 billion quarterly loss on an ambitious expansion into Canada. After only 23 months, the company cut its losses and left the Canadian market. Why? Poor planning. A better supply chain partner with experience in Canada could have helped Target’s managers avoid the pitfalls of supply chain snafus that left warehouses full and store shelves empty.
The road to poor business results is paved with good strategies that failed due to a lack of proper planning. It’s true. Without effective planning the risk of global expansion likely will become deterrents to your success.
Where do you start planning?
Step 1: Know Your Goals
Most customers come to Flash Global with one of these three broad goals:
- Reduce turnaround time – Maybe you want repair times to get turned around in weeks rather than months or days rather than weeks. End customers expect consistent, dependable results, and one key to exceeding customer expectations is having a repeatable experience driven by a maintenance partner’s data and processes.
- Cost Reduction – Companies often want to cut both hard and soft costs. Hard costs are shown on the balance sheet. Soft costs are harder to quantify but really matter – things like a lack of product for service spares, and tracking.
- Better management & control of test, screen and repair processes – Company goals differ, but this goal involves setting up processes that return a set of expected results.
OEM partners are especially concerned about affordable, consistent turnaround times that help them meet (or exceed) existing Service Level Agreements. Your service repair partner should be committed to finding new ways to improve the repair process and upgrade the final customer’s service experience. That value-add can help your company stand out from competitors.
Step 2: Turn Your Strategy into an Actual Plan
Suppose your company comes up with the following strategy: accelerate international growth 6% in the next year by using an outsourced global maintenance partner in our strategic economic zones.
How? That’s always the hard part. There are many planning items to consider:
- Where will our locations for testing and screening be? How many parts tested return the no trouble found (NTF) code?
- How will the forward stocking locations feed back to the repair center?
- Which parts are serviceable? For example, do your network devices support hot-swapping core components?
- How do you track the flow of parts?
- Do you have planned volume vs. strategic volume vs. totally unplanned volumes?
- Is the repair stream consistent, or is it supplemental and untapped?
- What type of packaging will you use? Will it be generic brown boxes or shiny, branded boxes?
- Which items will be used in repairs – inventory or bench stock items?
A lot of work goes into the tactical side planning your implementation, and a good partner should be asking these types of questions that you might not have considered.
Import/Export Compliance Planning
Too often trade compliance is something that gets shoved to the side until the first shipment is boxed and ready to go. That’s a huge mistake because import/export compliance it crucial to supply chain stability. Choosing the right business partner is one key way to mitigate supply chain risks.
Accuracy is everything regarding trade compliance because the devil really is in the details in import/export processing. A minor mistake (such as a typo in paperwork) can delay a shipment for days or even weeks.
Product classification is crucial as well. Countries calculate the value of every component and finished assembly, classifying them accordingly.
Duty and tariff amounts are based on these classifications and, in some countries, it may be substantially less expensive to import a chassis and the component parts separately, then assemble them in country.
That’s just one example why OEMs need a partner who can guide them through the dangerous shoals of trade compliance management and create a plan that could save millions of dollars in taxes. As Flash Global’s Senior Director of Trade Compliance Peter Liston likes to say, “Compliance is good, but a compliance strategy is even better.”
Choose a Partner, Not a Vendor
We see the word “partner” used often in conversations, but too often where asked to take over when another supply logistics company failed to meet expectations.
If you’re looking for a partner, it can be hard to truly know how a relationship will go until it’s too late. Once a contract is signed you may find your “partner” just really isn’t that into “partnering” after all.
So how do you distinguish true partners from the rest of the field? Here are a few ways to better understand a service supply chain logistics company’s intentions:
- Talk it out – Have your technical teams talk with the prospective partners’ technical teams during the selection process. Those two groups will work closely together throughout the life of the contract. They should feel comfortable and confident with each other before the contract is signed.
- Ask in-depth questions – What’s the partner’s motivation for providing the service? Is it just fulfilling a contractual obligation or is service management a driving part of the business? Many companies offer it as an add-on but have little urgency or expertise to innovate because service isn’t really part of their company’s focus.
- Attitude matters – Business is constantly evolving and companies must adapt. The right partner sees optimization as on ongoing effort rather than a one-and-done task.
- No off-the-shelf solutions – Your company has unique goals and challenges. Find a maintenance partner who offers optimized solutions with a long-term focus. End users expect support for up to five years, even though most product warranties have technically expired by then. It’s important to align the product serviceability/lifespan with the ROI statement end users expect.
Vendors typically do what’s necessary to fulfill contract terms. A true partner does that – and a lot more. Dedicated partners look for ways to advance your goals and processes in ways you never considered could improve your bottom line.
It may seem like magic, but it’s just experience and dedication that makes all the difference in the world. Literally.
Flash Global is a service supply chain logistics partner with all the experience and dedication you need to expand internationally.
Talk to us to learn more about why we’re the right service supply chain partner to help plan and execute your entry into a new country and optimize operations in those where you already have a presence.
Global expansion offers up no shortages of obstacles to overcome. International logistics is one of, if not, the most important components of getting planning done right.
Are you factoring in all the logistical steps required to be successful? If not, one of our Flash Global supply logistics experts is here to help.
To find out how our supply chain services can help, fill out the form below. We look forward to helping you grow.