Globaliation Effect on Supply Chain Management

What is Globalization

Globalization is the word used to describe the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Countries have built economic partnerships to facilitate these movements over many centuries. But the term gained popularity after the Cold War in the early 1990s, as these cooperative arrangements shaped modern everyday life.

What is Supply Chain Management

Supply chain management is the management of the flow of tangible goods and services and includes all processes that transform raw materials into final products. It involves the active streamlining of a business's supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.

Basic Views

Globalization has been a popular term in the business world within the last few decades. A word that started to pick up around the 1980s, globalization is the process in which businesses and/or organizations operate on an international scale and develop influence based on this.

With technology developing at an increasing rate, it is becoming easier and easier for businesses to expand their reach. But what does that mean for your supply chain? Here we discuss some pros and cons of globalization on supply chain management.

Pros of Globalization on Supply Chain Management

More than ever before, the sky is the limit when it comes to connections. With the rise of the digital age and the Internet of Things, connecting with others has become so accessible. It is easy to form and maintain relationships across the globe. Globalization has simplified the communication between business owners and clients, allowing for better transparency throughout the supply chain process.

Growth of Business

Globalization has created more opportunities for businesses to grow in all aspects. With communication being so effortless, companies can sell more, produce more and offer more choice. But growth is not limited solely to business owners. Globalization has also allowed for markets to expand and diversify. More competition stems within this growth, which promotes companies to continually think outside of the box. This benefits consumers greatly, since this boosts standards. It acts as a sort of quality control for businesses to continue to outdo themselves and strive for excellence.

With the community-like feel globalization can offer, it has allowed people all over the world to collaborate. An example of this is co-branding. Especially in fashion and design, we regularly see brands working together to release special, limited edition designs. This act of sharing and joint effort not only boost sales for each brand respectively, it also attracts a lot of media attention and promotes creative and innovative thinking.

But as we all know that every coin has two side. Same like that globalization has also its disadvantage. So here we have also discussed some cons of globalization.

Cons of Globalization on Supply Chain Management

Possibility of Risk

When companies operate on a global scale, there’s a higher risk of supply chain being affected by external factors. Things like political uprisings, natural disasters and economic recession can have a big impact on your business. For example, political uprisings in the Middle East have made it harder for gas companies to access petrol and oil. As a result, gas prices went up as supply dropped. Business owners who operate outside of their home country need to keep that in mind and have strategies to implement when problems do occur.

Less Predictability

A growing market means more demand, which leads to a greater need for supply. This may be good for businesses in a lot of ways, but something that is often overlooked is that it also makes trends less predictable. One of the biggest contributors to this is data collection. As the amount of data increases every day, it becomes harder to analyse all of it. As a result, it becomes more challenging to keep track of trends.

Channels and problems

As the number of supply channels increases, so does the chance of errors. With more steps and destinations added in the supply chain timeline, without proper management and organization, it is easy to lose track of where everything is going. Supply chain management is more complex than ever before, therefore having a strategic ecosystem is key. One small mistake can be disastrous.

A company that had a bad experience in the past was Toys R Us. By accepting more orders than they could fill, they were unable to deliver toys for customers in time for Christmas, therefore ruining their reputation and public image. On a lighter note, a company that demonstrates good inventory management is Amazon. With so many products and delivery destinations to manage, they are leaders when it comes to supply chain. Overall, globalization has changed the world and continues to help society move forward. Like many things, it does have its pros and cons, but there is no denying that globalization has not just changed the supply chain, but business as a whole.

As commerce and trade have become truly global over the past half-decade or so, keeping your supply chain contained within the country where you’re located has become less and less common. Since it’s become easier to source products more economically from other countries, more companies - small businesses, mid-size companies, and mega corporations - have embraced global sourcing. While this can result in cost savings and greater choice of materials, it also requires more intensive logistical management - and this is often where a company can run into limitations.

Thesis

Today’s supply chains have to be leaner, more efficient and more flexible than ever before. Ensuring the right materials and goods arrive at the right point at the right time. Supply chains are becoming much longer and more complex, increasing the risk of failure or disruption at any point.

However, by understanding global supply chain management and outsourcing where necessary, you can help increase your product’s chances of success. Coordinating all the moving parts of the supply chain becomes more challenging when parts of the supply chain are handled internationally. Outsourcing supply chain management to a firm experienced with dealing in other countries can be a huge help.

The success of your product depends on the quality, demand, and price of your product. Here’s how a global supply chain affects all three.

Product quality can be at risk when you have a global supply chain because you can’t always monitor what’s happening in other countries. Here’s where outsourcing your supply chain management can be a huge benefit. Pivot International provides full support at all stages of the supply chain including product manufacturing through our Manufacturing Resource Planning system so you’re guaranteed a resulting product that’s top quality.

A global supply chain allows you to meet product demand in emerging markets. Once you’ve done the market research and know where the highest demand is for your product, sourcing materials globally can help you deliver it efficiently and economically. Partnering with a foreign vendor, or sometimes multiple foreign vendors, will help make selling your product in a new country much easier.