I went to a Larkmead Winery winemaker event last weekend. The opportunity was to compare the 2006 release to the 2008 and understand the winemaker’s strategy when he made and blended each of these unique vintages. The wine is great, pick some up if you can find it. But the discussion about French oak barrels versus American barrels, what country the yeast came from, how to ensure that the grape vines take full advantage of the local soil and environment, what steps in the process were outsourced and which were kept in house, and how this wine compares to wine from other parts of the world really got me thinking about how globalized this very small manufacturer of fine wine is.
The past fifteen years have brought about a dramatic explosion in the outsourcing of manufacturing to lower cost locations like China, Malaysia and Latin America. This in itself is hardly front page news. The real ‘aha’ for me, is how outsourcing is no longer a ‘big company’ thing. Barriers to globalization have been knocked down, and global operations have become ubiquitous. Virtually any company, regardless of size, has the ability to tap into global manufacturing partners in order to gain a competitive edge. Even manufacturers operating in very local markets no longer define themselves as local players, as their manufacturing processes are most likely not local.
This new reality presents its own unique challenges and opportunities. The biggest and most obvious benefit to outsourcing is lowered costs of production, which allow SME’s to optimize operations. Outsourcing allows smaller companies to achieve a level of cost efficiency and enjoy economies of scale previously exclusive to larger manufacturers. Lower upfront investments in manufacturing infrastructure make it easier to grow and scale the business.
However, I have seen how globalization makes life more complicated: for both large and small manufacturers. SME’s are challenged with embracing a whole new way of doing business, without the infrastructure available to their larger counterparts. The new reality for smaller manufacturers is that they now have to navigate a more complex supply chain process, but with fewer resources than a large company. A small company in growth mode needs to walk the line of managing these processes in a more effective and controlled way, without spending the big bucks. This is especially true as the company scales, in terms of customer volume, new markets, new distribution channels, or all of the above.
Many small companies are finding that a fully integrated ERP solution, delivered on demand, is what they need. It helps them implement structure and integrated control over all functions of the business, without having to invest in expensive IT infrastructure. I talked to a customer this week and he told me it was like getting a COO, at a small fraction of the cost. And it was exactly what he needed to manage his rapidly growing business.
So what’s the deal with the chocolate? I buy wine from small wineries and have it delivered directly to my home. Living in California, transport is pretty quick and wine is usually shipped in the cooler months to avoid spoilage. In centuries past, transport took a lot longer so heat was a factor. Some merchants would include a piece of chocolate with their wine shipment. If the chocolate arrived melted, then you knew there could be a problem. If not, then you were probably good. Supply Chain control in the 1800s, who knew?