Platt Perspective on Business and Technology

Moving past early stage and the challenge of scalability 32: reconsidering and rethinking the supply chain 1

Posted in in the News, startups by Timothy Platt on June 11, 2013

This is my thirty second installment in a series on building a business for scalability and long-term success (see Startups and Early Stage Businesses, postings 96 and scattered following for Parts 1-31.) This is also a direct continuation of Part 9, where I first began explicitly exploring the issues and challenges of supply chains in business expansion and scalability.

And I begin writing this posting by doing something that I do not often do here – by explaining why I have decided to write this series installment. When I wrote Part 30: business scalability from the global business perspective 1 and its continuation: Part 31, my intent was to finish this series at that point. And then I found myself explicitly thinking about supply chains and their role in business growth and scalability again.

When I wrote Part 9 of this series I laid out a basic foundation as to how supply chain systems, and building to effectively leverage value from them, enhance business strength and scalability. But I found myself thinking about how this can actually play out and particularly in an international context. When a business is developed online and in a cyberspace context, with an online storefront, and in general an online interface with the world around it, this is likely to be important from fairly early on (see my series: Online Store, Online Market Space at Startups and Early Stage Businesses, as postings 20 and loosely following for Parts 1-21.) If a business starts out with an explicitly lean and agile business model approach, that begins at day one of business building and even before that in the initial planning for this new business to be (see for example, my series Virtualizing and Outsourcing Infrastructure at Business Strategy and Operations, as postings 127 and loosely following for Parts 1-10.) But working in an international context with its often bewildering complexities of legal systems and cultural differences can add both opportunities and challenges, and with both coming in unexpected ways and forms, and from unexpected directions.

And I found myself thinking about how things planned for in principle, can go wrong in practice in this wider and even open-ended international and global context and particularly when a strategic and operational goals-defining premium is placed on cutting costs to maximize profitability and competitive advantage by always and only looking to minimize operating expenses while maximizing returns coming in. So I started thinking about writing this Part 32 to this series, to put its Part 9 in a fuller context if nothing else. And then an illegally constructed sweat shop factory building called the Rana Plaza collapsed in Dhaka, Bangladesh and as of this writing the death toll from that has risen to well over 1000 fatalities, trapped and crushed in the rubble, along with a very large number of injured, and even maimed-for-life survivors. And the collection of minimal wage businesses that assembled garments in this building were all lowest possible operational cost, supply chain partners for some of the biggest and best known brand name, high end clothing and sportswear manufactures in the United States and Europe, and in fact globally.

• What is going to be the impact, and the long-term impact on those brand name companies as the details come out, with their products being manufactured in a building with four illegally added top floors, that was known to be in danger of imminent collapse from the cracks forming in its walls and foundations, and where factory owners ordered workers back in on threat of losing their jobs?
• What is going to be the impact on those big-name clothing designers and manufacturers when it comes out that none of the businesses involved were in any way quick to offer help to the people so affected – that they did not even push to get at least minimal medical care for the injured or even wages due paid out as quickly as possible?

These big brand name businesses grew and became the recognized business successes that they are, and both for scale of operations and for market share and profitability by pursuing business models that were built in significant part around stringent globally international supply chain expansion efforts, centered around a business model that involved always looking to cut operational costs and no matter what. I am not accusing any of them of intentionally or systematically violating the law in either their own home countries or in the countries they do business in, and either in their manufacturing and distribution supply chain systems or in the venues they sell to. This posting is, however, about risk and consequences when worst case possibilities are in fact realized.

I am going to continue this discussion in a next installment where I will delve into at least some of the core issues involved in planning and developing strategic and operational systems, that will both create profitability and scalability but without falling into this type of uncontrolled long-term, and short-term catastrophic risk. Meanwhile, you can find this and related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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