People are consuming more and more goods every year. Businesses and companies are moving their operations globally by using the latest technology, AI, and tracking systems. Customers have become cautious about the speedy shopping experience and on-time delivery. Today, we’ll discuss what is global supply chain; how it’s different from the local supply chain, its advantages, and disadvantages.
What is Global Supply Chain Management?
Global supply chain management comprises all the processes included in the lifecycle of the product starting from creation, development, and distribution to the end customers. GSCM amplifies the growth and productivity of every stage, removes inefficiencies, and delivers the product on time. GSCM has four main stages in its process supplier, manufacturer, retailer, and consumer.
Technology helps companies to predict customer demand in order to amplify the total number of order placements. For instance, Nike won the Company of the Year Award in 2019 for its unique approaches in GSCM, and the company has achieved enough visibility throughout the network.
Global Supply Chain vs. Local Supply Chain
GSCM allows companies to go to other companies and outsources various operations in order to advantage of low production costs, cheap labor, and procurement of products/services. It starts from flowing from your home country and your company and hiring suppliers in other areas of the world.
The local supply chain works with the suppliers that are operating their business in the same region where you are. Local suppliers have the advantage of the home country, and they are familiar with all the supply routes. You can observe and verify the source of the raw material.
Advantages of Global Supply Chain
Some of the main advantages of global supply chain management are as follows;
Companies can forecast the customer demand analysis by tracking the availability of products in the storage and then ordering the needed raw material. It helps the company to lower the customer dissatisfaction level and avoids delays.
For instance, a medical apparel company has lowered the walking time roundabout 75% and improved growth and productivity by applying mobile robots in its warehouses. The company made the decision by combining customer data and the right tools to improve the company’s image, better customer experience, and avoid delays.
As we know that SCM plays a significant role in the operations of the company, but predicting the customer demand is a very tricky part. Every leader has to deal with the bullwhip effect. This effect means the increase and decrease in customer demand, and it causes to impact the company’s supplier of the raw material.
If the company is using the SCM software, then the management would have the access to the data. They can predict customers’ demand and market trends by using the data, and they can defeat the challenges of the bullwhip effect.
Better Transportation Management
GSCM has been increasing at a great rate, and companies are investing in delivery systems and transportation. According to an estimate, the US companies invested roundabout 1.64 trillion dollars in transportation in 2018. It has been increasing approximately 11% annually. According to another study, 25% of the SCM think that shipment cost is the main problem for e-commerce companies.
Often GSCM uses transportation management software (TMS) in order to optimize the control and lower the costs. The investment in TMS in 2018 was 1.8 billion dollars, and it would reach roundabout 4.8 billion dollars by the end of 2023. TMS can offer you to communicate with suppliers, route planning, fuel spending, fleet maintenance, better control, and tracking shipment.
Improved Threat & Risk Management
Managers could forecast upcoming disruptions that could impact your business by using the SC analytical data so that they could develop a backup plan. Companies can achieve better control and transparency over their operations by implementing IoT (internet of things) solutions.
Telematic devices help you to lower the risk factor relevant to inventory management, transportation, quality of products, product losses, and delays. You can also use IoT to recognize vulnerabilities in the GSCMS by using cryptographic hardware monitoring, machine learning, and other techniques in order to deal with unexpected events.
Low Overhead Cost
The exact customer demand forecasting helps companies to lower the company’s overhead expenses relevant to the overstocking. In simple words, we can say that you would have to pay more for keeping excessive quantity in the storage. If you keep the right products in the storage, then it would increase the company’s profitability.
The automated system could help the company to lower the cost. For instance, WMS (warehouse management system) helps the company to increase operational efficiency and shipment speed.
Automated tools like conveyor systems and sorters optimize the inventory by amplifying the picking rate roundabout 5 times. The WMS software application helps management in sorting, storing, inventory shipment, day-to-day handling, and controlling inventory.
Positive Cash Flow
When business leaders make good decisions in terms of forecasting demand, resolving transportation issues, inventory, managing warehouses, and effectively dealing with disruptions. All of these elements help you to achieve positive cash flow.
Disadvantages of Global Supply Chain
Some of the main disadvantages of the global supply chain are as follows;
When your supplying partners are located in other countries, then it becomes difficult to handle the technical areas of the production processes, maintain quality, and manage communication. Resultantly, the complication in the quality arises.
High Exposure to Risk
When you have suppliers pervaded in various countries, then the political and economical condition of every country is different, and it could put your business at great risk.
Challenges in Communication
When you’re dealing with suppliers in different countries, then you have to be very careful about the terms that you’re using. You should make sure that they’re interpreting the same meaning whatever you meant it.
Fluctuating Exchange Rate
When taking your business globally, and then you have to deal with fluctuating currency exchange rates. It’s different in different countries and markets, and it could greatly impact your profitability.
High Lead Times
You can maximize the production time, but the lead time would be longer because it relies on transportation and shipment from different countries. It means that you have to do forward planning before time.
Conclusion: What is Global Supply Chain? Advantages & Disadvantages
After an in-depth study of what is global supply chain; its advantages and disadvantages; we’ve realized that GSCM could be very highly beneficial to your business if done effectively.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.