Ireland needs to seize supply chain chance

30 Sep 2003

Ireland has a once-off opportunity to become a global supply chain management leader, according to the powerful lobby group the American Chamber of Commerce. The body, which comprises CEOs of 570 US companies in Ireland that employ 90,000 people and represent 65pc of all inward investment, has warned that the country is vulnerable to competition from low-cost economies if it continues to partake solely in manufacturing.

Supply chain management effectively marries the islands of technology that make up the vital stages of manufacturing and selling a product, ranging from procurement systems and manufacturing software to logistics management solutions and customer relationship management (CRM) technologies.

Joanne Richardson, chief executive of the American Chamber of Commerce said that to become global supply chain management leaders, overseas companies in Ireland must reposition themselves for a new phase of economic growth if they want to build a sustained and successful future in a substantially changed Irish economy. She was speaking to 70 CEOs from US companies based in Ireland at a seminar held in Limerick this morning.

Richardson warned that although Ireland has garnered a reputation as a first-class manufacturing location for US corporations, it is vulnerable to competition from lower cost locations. To succeed, Richardson said, Irish-based multinationals should strive for R&D functions and more intelligence-based activities such as supply chain management and logistics.

“Companies that ignore the new reality will see their operations migrate to other geographies. The evolution of global supply chain represents both a challenge and opportunity for US multinationals. R&D investment, traditionally confined to pure product development, should now be redefined to encompass intelligence-based activities such as supply chain management. These changes are imperative if Ireland is to gain competitive advantage over international lower cost locations.”

She added: “Today was about industry coming together to examine best practices and to share experiences in building competitive advantage. Companies that embrace supply chain management can move to the apex of the supply chain thereby controlling their futures and building real competitive advantage for the companies.”

Also speaking at this morning’s event in Limerick was the head of Dell’s Limerick facility, Nicky Hartery, vice president of manufacturing for EMEA, and also chairman of the American Chambers’ working group on supply chain management.

He explained the need for local subsidiaries of global firms to move forward in assuming roles in supply chain management. “As industries mature, supply chain management innovation has become more important as a source of competitive differentiation. Quality, cost and velocity are critical factors in execution,” he stated.

“The feedback from our working group clearly demonstrates that innovation in this area can play a key role in helping to introduce increased competitiveness in Irish based operations – specifically in manufacturing organisations. Industry in Ireland needs to focus energies on building higher value-add activities where a unique skill set can be offered,” he added.

Hartery cited as an example Dell’s transformation in Limerick, which is now considered the most productive Dell manufacturing site worldwide. Dell’s operation in Bray/Cherrywood is the centre of excellence for the company’s home and small business division within EMEA. In addition, the Irish operation has recently evolved to include a number of key European functions, such as the company’s European Centre of Excellence for Supply Chain Management and Engineering. Likewise Dell’s EMEA Enterprise Expert Centre, its Applications Solutions laboratory together with specialist EMEA finance and marketing functions are also located here.

This was achieved, he explained, “through training, automation, a focus on higher value add processes, business process problem solving methodologies with active employee involvement, and the application of lean manufacturing philosophy and techniques”.

In recent weeks spoke to Randal Faulkner, director of consulting at the National Institute of Transport and Logistics (NITL), who said that Ireland’s industrial planners need to start thinking in terms of virtual manufacturing driven by supply chain management (SCM) technologies and techniques. “Yes, Ireland has logistical and transport problems, but if we’re clever, Ireland may never ever need to see the product. The world order is changing, manufacturing is shifting to lower cost locations and you could run a very successful business from here without the product ever having to be made in Ireland. SCM and the activity around it could make that happen. SCM is extremely important to Ireland,” he said.

“We are seeing an end to the days of physical manufacturing of goods in Ireland, so we need to start thinking about the next level. By excelling in SCM skills and helping to manage and co-ordinate the global supply of goods, Ireland needn’t suffer. If we can get companies to retain R&D, sales and marketing and SCM here, we have a very bright future in Ireland.”

By John Kennedy