Challenges of Globalization in Supply Chain

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Global supply chains use cargo vessels to ship goods between continents.
Global supply chains use cargo vessels to ship goods between continents. (Image: ship image by Terry Duchene from Fotolia.com)

Global supply chain managers must keep track of products manufactured in multiple countries, distributed throughout warehouses in several nations and shipped to millions of customers throughout the world. Managing a global supply chain is an entirely different endeavor than overseeing one based in just one country.

Coordination and Communication

Supervisors wishing to get a hold of a worker in a foreign country because of a delayed shipment or issues they have with inventory, must do so based on the business hours of the country. Although many organizations mandate a 24-hour communication option as part of their contract negotiation with foreign vendors. Larry Guinipero, Rob Handfield and Robert Monczka, authors of “Purchasing and Supply Chain Management” state companies achieve smooth communication and manage data through the use of coordinated tech systems and databases. Managers, however, must discern relevant information and make pertinent decisions based on the copious amount of data available to them.

Outsourcing

Large companies often exploit the option to outsource manufacturing operations overseas and consequently, receive a significant reduction in cost. Domestic businesses often pay more for laborers, manufacturing plants, real estate for its warehouses and raw materials. However, big corporations must ensure foreign vendors meet quality standards and will produce the goods in a timely fashion. Domestic companies may still utilize third-party vendors, but the business can be comfortably assured that local vendors meet or exceed the legal quality control standards in the United States. A company using a foreign vendor, on the other hand, has no such guarantees about their methods of production. Dr. Wolfgang Kersten, author of “Global Logistics Management” cites one foreign vendors' use of poisonous plastic used in toy production as an example of how one bad supplier with low standards can jeopardize a business’s reputation.

Delivery

A global supply chain incurs significantly more issues with delivery and transportation than domestic companies. A global organization that has manufacturing plants in three different countries, inventory warehouses located in 30 states and customers throughout the globe, utilizes different modalities to transfer raw materials, finished products and customer orders. For example, the company might use rail to transfer raw materials within South America but aircraft to deliver finished goods to a warehouse in New York. A delivery truck might then transport the order directly to the customer’s doorstep. A small, domestic company may utilize third-party mail carriers to deliver orders or may have a handful of trucks and vans to transport goods. Water-based shipments are almost never a concern with domestic supply-chain operations as well.

Economic Concerns

Global managers must consider the economic conditions of foreign countries when selecting a vendor from abroad. For instance, a shipping company in Somalia might offer a company the lowest prices, but the unreliability and piracy rates of that area compel many organizations to choose a safer, yet more expensive alternative.

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