Firms are creating truly global supply chains because it enables them to reduce their costs. Companies can take advantage of lower production costs and they can outsource to free capital from non-core activities and generate large-scale efficiencies. In addition, the costs of shipping, communications and tariff-related charges have come down over the years.
Going “global” through global supply chains helps facilitate entry into new markets, enables business growth and provides firms with access to new technologies through partnerships with foreign firms.
Global supply chain management involves planning how the entire supply chain will function as an integrated whole, with the aim of generating an optimum level of customer service while being as cost efficient as possible.
Other aims include increasing the speed by which your product reaches your customers, as well as flexibility in dealing with customer transactions.
It incorporates management processes that integrate the network of suppliers, manufacturers, warehouses and retail outlets so that the right type of goods are sourced, supplied, produced and shipped in the right quantities, to the right locations, at the right time and are received in sound condition.
To achieve successful integration, flows of information (such as purchase orders, shipping notices, waybills and invoices), materials (including raw and finished products) and finances (payments and refunds) through the supply chain must be co-ordinated effectively.
What are the three things all successful supply chain management needs?
Supply chain management touches all of an organization’s functions. To be successful, it requires focused effort across the entire company and collaboration with all outside suppliers and service providers. This means that supply chain management must have a multidimensional approach, involving people, processes and technology.
People are key to supply chain management because they are the core of organizations. For successful supply chain management, the people involved must have the skills and knowledge to manage sourcing, manufacturing, storage and transportation of products. They must have a solid view of the company’s strategic business vision and know how their role fits into the overall functioning of the supply chain.
The processes in supply chain management are the actions taken with the aim of satisfying customers. They include all functions involved in the supply chain: sourcing, distribution, transportation, warehousing, sales and customer service. They also include all actions performed by external companies that are part of the supply chain.
Technology is used in the supply chain to connect people and processes. However, people involved in the supply chain will not use technology unless they find it easy to adopt. Careful selection and implementation of the supply chain technologies a company uses is essential for supply chain success.
The benefits of global supply chain management
In the modern global marketplace, advances in communications and transportation technologies have led customers to expect a steady and regular supply of products in good condition at the lowest possible price, despite the long distances most products, commodities and foodstuffs are shipped.
Companies must always be looking for ways to improve the functioning of their supply chains to ensure that their supply meets projected demands cost effectively. If they do not produce sufficient product to meet demand, they will lose customers. If they produce too much product, they must pay for expensive warehousing of the excess inventory, which they might not be able to sell.
If supplies are not sourced carefully and production is not monitored, companies might be faced with mass product recalls or returns. These can result in financial ruin for a company.
By managing their supply chains carefully, companies can select the most cost-effective solution at each stage in the chain and can avoid business costs. This provides a company with a real competitive edge.
The cost savings provided by supply chain management enhance additional cost-cutting manufacturing methods and strategies that many international companies have already instituted. These strategies include the following:
- Just-in-time (JIT) manufacturing (reducing inventory levels, overall costs, product variability and production times, and also improving product quality)
- Lean manufacturing (producing goods using less manpower, raw materials, time and space)
- Total quality management (embedding awareness of quality in all operational strategies)
Global supply chain management has many benefits for a company. It enables business processes to be organized using international organizations that be reduced, companies can react rapidly to unforeseen market conditions, transport strategies can be improved, costs can be minimized and waste can be eliminated. You can get your product to market substantially more quickly.
Small- and medium-sized businesses benefit as well. These smaller organizations, especially with niche technologies or specializations, can now sell to multinational organizations or to their suppliers. Many of these large firms have started outsourcing activities that were carried out internally in the past.