The globalization process includes an increase in the geographic scope of economic activities of international companies. In today’s marketplace, companies realize that it is important to participate in the international market. Even though supply chains have become more international, they have also become more interdependent. That is why global supply chain management is a core business process of exceptional importance to a company’s success. In the given essay, several key aspects of supply chain management are discussed from the perspective of a decision-maker.
Global Market Forces
Market forces (in particular, supply and demand) are the factors that influence the price and output levels in the global market economy. Global market forces involve the pressures created by foreign competitors on companies who do not do business overseas, along with the opportunities created by foreign customers. Market forces for globalization consider the importance of settling a global presence in foreign markets to get revenue from foreign demand and decrease external threats into the domestic market through a competitive balance. For example, globalization has led to the homogenization of customer needs.
Therefore, production facilities that benefit from the economy of scale replace dispersed production facilities that consider regional particularities. Globalization of market forces also promotes technological advances as the companies should develop cutting-edge technologies and products to maintain market positions.
Risks
The advantages and opportunities associated with global supply chains lead to an increase in risks faced by companies. In particular, the risks include geopolitical risks, currency fluctuations, port delays, market changes, supplier performance, and execution problems. According to Manners-Bell (2017), supply chain disruption accounts for a 5% loss of annual revenue. This might be explained by the fact that global manufacturers evolve supply chains and economic strategies, which leads to the rebalancing of risks. External (regarding demand, supply, and environment) and internal (regarding manufacturing, business, planning, and control) risks are distinguished.
Small chains might be adversely affected by external events, contrary to complex supply chains, which possess several supplier options. However, complex supply chains might have other risks, such as a decrease in visibility, management control, and difficulties in decision-making.
Development Chain
A development chain is associated with a set of activities that should be implemented to introduce a new product. Stages of a development chain include planning of the product, which involves deciding on the operations strategy, organization and procurement of raw materials and components, and production plans. It should be mentioned that within the development chain, the following aspects should be considered: product architecture, make/buy decisions, early supplier involvement, supplier selections, and strategic partnerships. Thoughtful formulation of a development chain will have a positive impact on a supply chain.
Supply Chain
A supply chain is a complex network of facilities, people, activities, data, and resources which are involved in moving a product from supplier to the customer (Kozlenkova, Lunk, Hunt, & Kekec, 2015). Modern supply chains are developed in accordance with Just-in-Time, remote manufacturing, increased velocity, and omnichannel strategies, which make them a complex environment (Manners-Bell, 2017). When evaluating the performance of a supply chain, reliability, responsiveness, flexibility, cost, and efficiency are usually measured (Bookbinder, 2013). However, it is also important for a supply chain to be connected to the strategic goals of an organization.
Due to several factors, creating a supply chain might become a difficult task. In particular, the supply chain is a network of dispersed facilities, which might have conflicting aims. For example, suppliers want manufacturers to buy big volumes of raw materials. However, manufacturers, in their turn, have to consider the changing demands of customers. The supply chain is a dynamic structure in that supply chain relationships and client demand change over time.
For instance, with an increase in customers’ influence, manufactures and suppliers face a challenge to produce products of higher quality and customize them. The planning process should take into account demand and cost regarding the seasonal fluctuations, advertising, and pricing strategies of competitors. One may note that the development chain and supply chain overlap at the production point; that is why decisions made in the development chain influence the supply chain.
Strategies
Supply chain strategy is an iterative process that evaluates the compromise between costs and benefits; it also defines the combination of activities and functions within the value chain. These strategies can improve the organization’s performance and secure its competitive advantages over others (Kamath, Kamath, & Saurav, 2016). The four key elements of supply chain strategies are the marketplace, the unique proposal of an organization, supply chain processes, and its managerial focus.
Depending on the company, there are supply chain models which are oriented at efficiency, whereas others are aimed at responsiveness. Efficiency-oriented supply chain models include three models depending on specific features of a company. The “efficient” supply chain model is used by industries with increased market competition. The “fast” supply chain model is used by companies that produce products with a short lifestyle. The “continuous-flow” supply chain model is mainly used by companies with a mature supply chain with a little variation in customer demand profile (Mangan & Lawlani, 2016). Responsiveness-oriented supply chain models include the “agile” supply chain model, the “custom-configured” supply chain model, and the “flexible” supply chain model.
Conclusion
To sum up, in the given essay, issues specific to global supply management, such as global market forces, risks, development chain, supply chain, and strategies, were examined. Supply chain management promotes an integrated view of relations and processes in and between companies. Nowadays, in the accelerating process of globalization, supply chain management is an integral part of most organizations which is essential to a company’s success.
References
Bookbinder, J. H. (2013). Handbook of global logistics: Transportation in international supply chains. New York, NY: Springer.
Kamath, N. S., Kamath, N., & Saurav, S. (2016). Handbook of research on strategic supply chain management in the retail industry. Hershey, PA: IGI Global.
Kozlenkova, I. V., Lund, D. J., Hult, T., & Kekec, P. (2015). The role of marketing channels in supply chain management. Journal of Retailing, 91(4). Web.
Mangan, J., & Lalwani, C. (2016). Global logistics and supply chain management. Chichester, England: John Wiley & Sons.
Manners-Bell, J. (2017). Introduction to global logistics: Delivering the goods. New York, NY: Kogan Page.