The issues that plague international supply chains network are often in the news. Aftershocks from the worldwide COVID-19 epidemic, the closure of shipping lanes, and the conflict in Ukraine have all put a strain on global supply networks, resulting in shortages of gasoline, food, and clothes supplied to gas stations, restaurants, and stores.
Long lines at the gas stations are the result of a scarcity that has hit consumers. Certain types of food are selling out quickly at certain stores and restaurants, driving up the price of what’s left. Numerous nations have experienced inflation rates of 20% or more!
What Is Global Supply Chain Management?
Over the last several decades, globalization has been a common practice across all markets as companies seek to benefit from the cheap labor and plentiful supplies offered by emerging nations. Throughout the globe, goods and materials are moved via complex networks of manufacturing, logistics, transportation, and communication companies known as global supply chains.
The goal of global supply chain management is to minimize waste and maximize efficiency across the manufacturing, sourcing, and distribution processes, from raw materials to completed consumer items. Supply chain managers work to save costs, boost productivity, and limit potential losses.
Role of Supply Chain Management
By facilitating the flow of commodities between producers and consumers, supply chain management lays the groundwork for a thriving economy. The entities participating in the supply chain allow for supply chain management to play its crucial function and effect economic progress.
- Materials processors. Companies that extract value from raw materials like metal, rubber, and wood are included here.
- Manufacturers/producers. These businesses manufacture goods for sale by transforming raw resources into finished goods. Some supply networks don’t even produce tangible goods. Raw resources like coal are used by the energy industry’s producers to create a usable form of energy.
- Vendors. In the supply chain, merchants sell their wares to the next participant. Producers may also function as suppliers.
- Warehouses. Products need storage after they have been sold. The next link in the supply chain may easily pick up goods from warehouses in key hubs and transport them to distribution facilities.
- Transportation companies. Shipping companies, trucking firms, and others like them are examples of transportation businesses. When goods reach this stage of the supply chain, their only function is to be distributed to merchants.
- Distribution centers. Products are stored at distribution centers before being redistributed to other locations, such as stores, wholesalers, and even end users. Perishable goods may be kept fresh at a distribution facility equipped with refrigeration.
- Retailers. Retailers, who sell items in places like shops and shopping malls, are at the very end of the supply chain.
If we want to understand what supply chain management is and why it matters, it helps to look at how other areas of company are involved.
- Product development. Bringing a new product to market is what this refers to. It may also include giving a preexisting product a facelift. The ability to design, engineer, and establish the purpose and function of a product depends on the materials that can be used to create it and the creativity of the people who use those resources.
- Marketing. It’s been stated that quality merchandise will sell itself. In truth, businesses need to work to increase demand for their goods. The marketing department steps in here. Promotion and advertising, price, packaging, location, distribution, and choosing a certain demographic are all examples of marketing methods.
- Operations. Operations managers are responsible for ensuring the smooth functioning of an organization’s core systems with the ultimate goal of increasing output while decreasing overhead.
- Distribution. This task is often included in the marketing mix. Distribution is the method of making a product accessible to buyers in commercial and consumer marketplaces via intermediaries such as wholesalers and retailers.
- Finance. This section coordinates with others, such as sales, to determine financial targets, raise necessary funds, and allocate resources.
- Customer service. Customers’ impressions of a business are heavily influenced by this department. The goal of customer service is to aid clients at every stage of the purchasing process, from answering questions and resolving issues to ensuring repeat business.
How Supply Chains Work and Why They Are Important
The term “supply chain” refers to the interconnected networks of firms that work together to manufacture and distribute goods and services. Investopedia details the myriad of actions, organizations, and assets that make up local and international supply chains.
- Processing and transforming raw ingredients into final goods
- Moving the goods to stores and then selling them to end users
- The process of coordinating the efforts of producers, distributors, retailers, wholesalers, and retailers
- Organizing and overseeing every facet of a company’s production, sales, finances, customer service, and distribution processes
Global Supply Chain Examples
There were already three major tendencies in the international supply chain before the COVID-19 pandemic:
- Increased openness and customer-driven, closer links to partner businesses.
- Increased use of cutting-edge data analytics to boost supply chain performance.
- Greater emphasis on CSR initiatives
The Gartner report cites three instances of emerging leadership tendencies in the global supply chain:
- Instead of concentrating exclusively on maximizing shareholder wealth, companies are making efforts to become more purpose-driven and socially responsible.
- They’re trying to make the supply chain more adaptable and robust by changing the way they do business.
- By using sophisticated data analytics, RPA, and other AI-based technologies, businesses are investing more in real-time insight and more precise planning.
You may also like reading: Avoiding supply chain data silos
Global supply chains matter because they impact us all
By cutting costs and stimulating corporate expansion into worldwide markets, the global supply chain may boost efficiency, productivity, and profitability for manufacturers and industrial sectors.
For worldwide production, warehousing, distribution, and retail to run successfully, global supply chains must be in place.
There has to be uniformity in the way that businesses, organizations, and governments exchange information. The timely delivery of everything from raw materials to finished consumer goods during their journey from manufacturers and suppliers to wholesalers, retailers, and other distribution points relies on effective communication, interoperability, and the elimination of data silos and bottlenecks along the supply chain.
Stakeholders in the supply chain want more operability so they can decrease costs, boost efficiency, and lessen risk.
1. What are global supply chains?
Global supply chains refer to the complex network of organizations, processes, and resources involved in the production, distribution, and delivery of goods and services on a global scale. They involve the movement of raw materials, components, and finished products across various countries and regions, often crossing multiple borders and involving multiple stakeholders.
2. Why do global supply chains matter?
Global supply chains play a crucial role in today’s interconnected world economy. They enable the efficient production and distribution of goods and services, allowing companies to access a broader range of resources, markets, and expertise. Global supply chains facilitate international trade, drive economic growth, create employment opportunities, and foster innovation and technological advancements.
3. What are the benefits of global supply chains?
Global supply chains offer several benefits, including:
· Cost efficiency: Access to lower-cost inputs, labor, and production capabilities in different countries can lead to cost savings, making products more affordable for consumers.
· Market expansion: Global supply chains enable companies to reach wider markets and cater to diverse customer demands, increasing their potential customer base and revenue opportunities.
· Resource optimization: By leveraging the strengths and resources available in different countries, global supply chains allow for efficient allocation of resources, enhancing productivity and competitiveness.
· Specialization and expertise: Global supply chains enable companies to focus on their core competencies while relying on specialized suppliers and partners in different regions, fostering innovation and quality improvements.
· Risk diversification: Operating across multiple countries and regions helps mitigate risks associated with geopolitical, economic, or environmental factors, ensuring continuity of operations and supply.
4. What challenges are associated with global supply chains?
While global supply chains offer numerous advantages, they also face challenges, including:
· Complexity: Global supply chains involve coordinating and managing diverse stakeholders, regulations, languages, cultures, and logistics, making them complex to oversee and optimize.
· Supply chain disruptions: Disruptions such as natural disasters, political conflicts, trade disputes, or public health crises can impact the smooth functioning of global supply chains, causing delays, shortages, and increased costs.
· Logistics and infrastructure: Inadequate transportation infrastructure, customs procedures, and connectivity can create bottlenecks and inefficiencies in global supply chains.
· Compliance and regulatory issues: Navigating different legal and regulatory frameworks across countries adds complexity to global supply chains, requiring companies to ensure compliance with various standards, certifications, and trade agreements.
· Ethical and social considerations: Global supply chains face scrutiny regarding labor practices, sustainability, human rights, and environmental impacts, necessitating responsible and ethical supply chain management practices.
5. How does global supply chain management impact the economy and consumers?
Efficient global supply chain management positively impacts the economy by promoting economic growth, generating employment, fostering innovation, and facilitating international trade. It allows businesses to offer a wide range of products at competitive prices, providing consumers with greater choices and access to goods and services from different parts of the world. Additionally, global supply chains contribute to technology transfer, knowledge sharing, and the overall development of countries and regions participating in the global trading system.