What Is Global Supply Chain Management?
Any company that uses parts and services from another factory overseas faces issues with global supply chain management. Douglas C. Long puts it best in his book, "International Logistics: Global Supply Chain Management" when he explains every business operation incorporates logistics from shipping food to assembling cars. As such, he explains that logistics affects everyone and in his words, can be a matter of life and death.
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History
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Global supply chain management is directly linked to the rise of globalization. Pinpointing an exact date in history as the advent of global supply chain management isn't possible because its origin varies by company. As companies began looking overseas for inexpensive parts and labor, managers were hired to orchestrate these complex operations. Lance Batten states in the book, "Supply Chain Management 100 Success Secrets" that the history of supply chain management is as old as business itself. The process has merely evolved. Batten explains logistics has strong ties to military strategy--just as one failed delivery of vital weaponry could cause multiple casualties and a failed mission, one broken link in the supply chain could affect an entire company's operations.
Trend
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Global supply chain management is evolving as new technologies emerge. Instead of vendors mailing their products and assuring its delivery, companies are now able to track the product's exact location through GPS tracking devices. These devices are imperative for global supply chains. The farther the goods are from the final destination, the riskier its arrival. Before RFID scans, supply chain managers took inventory weekly or monthly to track sales and supplies. Now, many companies like Walmart track their products with RFID technology. The moment a product is purchased, inventory levels are updated to reflect the sale. A third trend affecting global supply chain management is the lowered barriers of economic trade. The General Agreement on Tariffs and Trade (GATT) enabled companies to buy products from other countries for lower costs.
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Benefits
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A lean global supply chain has the potential to save companies millions, and possibly billions, of dollars. John Magan, author of "Global Logistics and Supply Chain Management" states that Dell Computer Company attributes its $36.9 billion profit in 2003 to its lean global supply chain. Companies like Walmart that procure low-cost resources like fabric or labor can pass these savings to customers in the form of lower prices. This competitive cost-cutting can drive other companies out of business if they are unable to match or beat these prices.
Geography
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Geography plays a critical role in global supply chain management. Managers must ensure they buy from vendors in politically-stable regions. As the New York Times wrote in 2007, Mattel learned this lesson the hard way when they came under fire for its Chinese vendors' use of toxic lead-based paint.
Theories/Speculation
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Some companies, especially small or new businesses, do not have the intellectual capital to maintain a global supply chain. Without procuring these huge cost savings from vendors overseas, they will have a hard time competing against large companies.
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References
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- Photo Credit freight train 3 image by robert stahl from Fotolia.com
