What is the role of technology in defining the pros and cons of global supply chain? Find the answer here! This essay analyzes the advantages and disadvantages of global supply chain management and explains why GCCs and GPNs are considered the main factors affecting a sustainable global supply chain. Keep reading to learn more!
Introduction: Pros and Cons of Global Supply Chain
Defending intellectual territories in globalisation studies remains a challenging fete for most scholars. In these studies, the frameworks of supply chain management (SCM), global commodity chains (GCCs), and global production networks (GPNs) have some similarities and differences in their concept and focus. SCMs, GCCs, and GPNs exhibit common chain approach that can help identify their value and competitive advantages. This paper will review the strengths and weaknesses of these analytical frameworks to understand how they affect global supply chains. To achieve this, this paper will review sources that contextualise the three frameworks.
Pros and Cons of Global Supply Chain: Three Frameworks
Supply chain management (SCM) refers to the circulation of goods, money, and information within the internal and external environment of a company or groups of companies. Christopher (2011, p. 3) provides a comprehensive definition of the concept as it is seen in the modern world and argues that SCM is the “management of upstream and downstream relationships with suppliers and customers” aimed at delivering “superior customer value al less cost”.
The provision of goods and services to the customer needs a well-interlinked network that supply chain management serves effectively. Thus, organisations have integrated value-added perspectives in supply chains, and global commodity chains (GCCs) have evolved in globalisation processes. GCCs have introduced governance and institutional frameworks in supply chains. This included a multi-dimensional perspective that engaged corporations, governments, and non-governmental organisations in worldwide supply chains. The power relations associated with GPNs has improved supply chain management of global corporations.
Pros and Cons of Global Supply Chain Management: Strengths
One of the key strengths of SCM is its ability to build a sufficient and competitive infrastructure, which ensures that goods and services reach the end consumer in the best conditions possible. SCM incorporates aspects from different areas of commerce such as logistics, information communication technology, procurement and related subjects, logistical concerns and operational management to create an integrated approach in doing things. Thus, SCM serves several functions in a firm including management of the raw materials entering into organisations, processing of these materials to become finished goods, and, finally, transfer of these finished goods to the end consumer.
It is necessary to add that the approach to supply chain management employed by contemporary companies is elaborate and effective. Thus, Cox (1999, p. 167) argues that firms have adopted an approach that implies “[s]trive for perfection”, just-in-time concept, elimination of waste, development of proper relationships with all stakeholders. Importantly, this approach also leads to the addition of value to the product, which is one of the most beneficial paradigms for all stakeholders involved.
Disadvantages of Global Supply Chain Management
While all these processes focus on ensuring a company’s profitability, SCMs have several shortcomings. First, SCM requires active management control. Failure of this control can cause a breakdown in the company’s operations. The absence of a sound management practice in SCM is one of its major weaknesses. On the other hand, SCM encompasses an interlinked and interdependent aspect, which ensures that the staff and players are competent and reliable in achieving the product in a timely manner and in accordance with the company’s schedules and designs. Incompetence or unreliability of even one staff member or vendor can affect the whole process.
Additionally, the linkage in the SCM exposes all players to all information in the processing and supply line. Where one unscrupulous staff or vendor gets hold of sensitive information, they can disseminate this information to the disadvantage of the firm and the line at large. This can affect the whole process in a very adverse manner. For instance, this information can be provided to competitors who can make use of it to their advantage.
Pros and Cons of Global Supply Chain: GCC Effect
Global commodity chains comprise the linking of household consumers, business enterprises and countries within the global economy. These linkages are usually specific with regard to situations of a company’s operations, the way companies design them and integrate them socially to achieve economic benefits necessary. This linkage of the micro and macro factors approach enables a critical insight into how manufacturers stay connected to the global system.
It is necessary to note that colonialism and capitalism played an important role in the development of these chains as empires occupied territories and imposed their laws while using regional resources (Bernstein 2000, p. 263). Thus, the spread of capitalism is still affecting the way markets are developing, and it often leads to the zero-sum game for stakeholders (Byres 2005, p. 88). Players in some markets focus on their gains and sometimes ignore the need to add value to the product.
Regional production takes place in regions, where manufacturers produce goods with a quantity that is proportional to the size of the regional market. This particular system depends on area convenience rather than on trends existing in the global market. It applies well in known manufacturing technologies and in products that have high distribution expenses (for instance, soft drinks). Together, these aspects of global production networks involve the certain division of manufacturers of goods based on comparative advantage. Thus, every region specialises in the production of specific goods and imports from other regions what it cannot produce.
These include an input-output structure, which involves means that link unprocessed materials, technical knowledge, and other service functions together in a particular industry or conglomerate of industries. Secondly, there is territoriality, which refers to the longitudinal modelling of the chain related events, and especially the degree to which these are spatially focused or isolated and whether or not they are territorially circumscribed (either within a state or within other organisations).
Finally, an institutional framework delivers the national and global settings that influence the chain. At the same time, a major limitation of the GCCs framework is that it has not been able to accomplish the aspects that make it up empirically. As a result, the ambitious composition of the GCCs plans has not achieved results in various sectors as intended. One of the major causes of this failure is the lack of a sound conceptual framework definition.
Pros and Cons of Global Supply Chain: GPN Effect
The global production networks are concerned with operations in the market where services are independent. This involves products that are easily replicable but are additionally expensive to transport over a long distance. It is necessary to note that many countries have utilised the paradigm for centuries. Again, colonialism and spread of capitalism played an important role in the process. For instance, the slave trade and cotton production can be regarded as examples or rather prototypes of global production networks as many countries and regions were involved (Capps 2001, p. 17). Clearly, the paradigm has evolved considerably since then and acquired such features as cooperation, social and environmental responsibility, and so on.
Hence, while marketing is multi-domestic, firms cooperate internationally to reflect ethnic and customer partiality alterations. The objective is to respond to the wants and needs of each market better. This suggests certain independency inefficiency and denotes that the efficacies and efficiencies attained in each market are unconnected to those experienced in other markets. This aspect is a weakness since every aspect of the supply chain affects the cost of production as well as the nature and quality of the final product.
Advantages and Disadvantages of Global Supply Chain Management: Conclusion
Despite these shortcomings of the three processes, successful SCMs, GCCs and GPNs are an invaluable asset to a company. The three processes can depend on the highlighted strengths since the multilinked aspect can create increased contact between various players, developing active and competitive participation in the global supply chain. This would ensure profitability for every firm. Additionally, since this exposure connects firms to customers and other players to common information frameworks, adapting to the chain allows them to meet customers’ needs more efficiently.
Companies are also able to monitor any failure of compliance by the players within their domains. Therefore, the success of a business hinges on enhancing operations of the supply chain to create value to consumers. Therefore, companies strive to construct effective supply chains that can compete against others. These processes are also important at operational levels due to the technological revolution of the information age. With SCM, GCC and GPN, companies can also lower the costs of running business considerably.
This is achievable through keen observation and timely procurement procedures as well as manufacturing and movement of the goods and services. Companies can also improve performance by ensuring better coordination with business partners and all the involved partners in the SCM, GCC and GPN. Finally, a close and proximate connection with partners in global supply chains ensures that the business is abreast with these strategies and priorities in the SCM, thereby, is improving the organisation’s performance.
Reference List
Bernstein, H 2000, ‘Colonialism, capitalism, development’, in T Allen & A Thomas (eds), Poverty and development in the 21st century, Oxford University Press, Oxford, pp. 241-270.
Byres, TJ 2005, ‘Neoliberalism and primitive accumulation in less developed countries’, in A Saad-Filho & D Johnston (eds), Neoliberalism: a critical reader, Pluto Press, London, pp. 83-90.
Capps, G 2001, ‘The expansion of Europe: mercantile trade 1500-1750’, in P Panayiotopoulos & G Capps (eds), World development, Pluto Press, London, pp. 13-19.
Christopher, M 2011, Logistics and supply chain management, Prentice Hall, New York, NY.
Cox, A 1999, ‘Power, value and supply chain management’, Supply chain management: an international journal, vol. 4 no. 4, pp. 167-175.