What are Global Supply Chains?
"Global supply chains are networks that can span across multiple continents and countries for the purpose of sourcing and supplying goods and services. Global supply chains involve the flow of information, processes and resources across the globe1. "
Global supply chain has the advantage of sourcing from low-cost country. It has the advantage of procuring services and products by locating the countries with comparatively lower labor rates and also low production costs. Thus, the suppliers may be located anywhere on the globe.
Critical features of Global Supply Chains
Some identified characteristics are:
Another set of characteristics are:
Benefits of Global Supply Chains:
It is feasible to quickly source, products with the highest standard of quality and efficiency at a good price. This benefits the firms to reduce inventory and save costs in many ways, especially storage, probable thefts and frequent transporting of goods etc. It facilitates easy procurement of almost any item, anywhere from world as the chain never sleeps. It gives an opportunity for organizations to learn current trends in doing business, effective production methods, and optimal distribution methods as they interact with multiple global vendors. 3
An Example of Global Supply Chain process:
The following visual shows a narrative of global supply chain process cycle:
Challenges posed by the Pandemic on Supply Chains:
84% of organizations are reportedly feeling the impact of the COVID-19 virus. It was an established fact that, many companies are reliant on Southeast Asia, other low-cost jurisdictions, especially production and supplies in China. Trade analytics have analyzed that, China lost global export market share at quick pace in 2019, as many companies moved to outside of their country. The disruption is particularly acute in the pharmaceuticals, metals, electronics and automobile industries, consumer and industrial products. 10
Operational disruptions caused by the effects of reduced supply need to be mitigated. Disruptions to logistics suppliers has to be managed. Meeting contractual obligations to customers is high priority. 4
Diversifying Supply Chains in Asia Pacific and Beyond, The Shifting Investment Landscape during COVID-19, Shock Proofing Supply Chains – these podcasts can be accessed for more better understanding5.
Low-cost production is moving mainly to Mexico and Vietnam. The gain is seen at Vietnam’s clothing and Smartphone exports.
Mexico’s automobile parts and computer exports also showed good growth 8.
Gartner, Inc. has developed three prevaccine scenarios to help chief supply chain officers and other leaders of supply chains and logistics networks anticipate how the future may unfold.
The three scenarios:
Scenario 1 – Short-term disruption
Scenario 2 – Long-term disruption
and Scenario 3 – Secondary crisis.7
Changes forecasted in Global Supply Chain:
Trade wars emerging out of aftermath of Covid, changing global politics with bigger Nations and allied emerging new national policies are bound to influence the future of supply chain structures. Companies will be increasingly considering China +1 strategy. Other countries need to focus on investments to boost manufacturing capability.
The winning strategy will be when they can provide attractive offers for labor, land and logistics. Free trade agreements (FTAs)3 also need focus.
Companies need to go digital and translate it into movement in the supply chain9. They also need to develop second sources or additional safety stocks and rethink scale and product mix.
When the organizations are flexible, they have a strong risk assessment program, intelligent decision support systems and are demand driven supply system. Next generation supply chains can thrive in even the most challenging and competitive environments.2
In the post Covid scenario and industry 4.0 initiatives, new technologies like augmented reality and advanced analytics are sure to bring positive and influential changes in global supply chains.