Chapter 7 - Global Supply Chain PDF

**CHAPTER 7-GLOBAL SUPPLY CHAIN** DEFINITION A global supply chain is the worldwide system a business uses to produce products or services. A global supply chain refers to an international network of supply chain components. These include suppliers, manufacturers, and logistics. Global supply cha...

**CHAPTER 7-GLOBAL SUPPLY CHAIN** DEFINITION A global supply chain is the worldwide system a business uses to produce products or services. A global supply chain refers to an international network of supply chain components. These include suppliers, manufacturers, and logistics. Global supply chain management relies on four areas of focus. These include: 1\. Marketing 2\. Supply Management 3\. Logistics Management 4\. Operations Management **[Marketing]** refers to aspects concerning customers and competitors. To develop a global supply chain you need to consider the location of your target markets. You also need to consider the presence of competitors in those locations. **[Supply management]** concerns the availability of raw materials for manufacturing. It also concerns the availability of manufacturing resources. These include space, equipment, labor, and so on. In supply management, you also need to consider the relative cost of sourcing and manufacturing products in different markets. **[Logistics management]** refers to the storage and transportation of goods.  Global logistics and supply chain management requires you to consider several factors. These include international trade regulations, shipping costs, storage resources, labor charges, and so on. **[Operations management]** refers to the management of supply chain processes in different countries. Global operations and supply chain management require sourcing, process management, labor management, equipment management and so on. **[Global Supply Chain Benefits]** The global supply chain is important as it creates business efficiencies and cost savings. By cutting costs on product development through less expensive labor, technology, or resources, businesses have greater capability to expand and enter new markets. Amongst the benefits of a global supply chain is lowered costs. At first glance, you might not think going global with a supply chain would help a business bring down the price of their final product or service. Freight and transportation obviously will always add numbers to the bottom line. But many countries have lower production costs that make it attractive to expand a supply chain to other parts of the world. You also may be able to bring down expenses by purchasing goods and services from a supplier when the dollar is stronger against the national currency of the country, you're doing business with. Another benefit is that a global supply chain can make it easier to sell to customers around the world. If your company has outposts in the supply chain throughout, say, Asia and Europe, your business may find it easier to start selling to those parts of the world as well. Despite the risks and challenges, companies still thrive to achieve a streamlined global supply chain. This is because a global supply chain also has a lot of advantages 1**[.Multinational Market]** A global supply chain is crucial for targeting customers in different countries. You can sell more products and expand your operations. This also allows you to capitalize on different opportunities that might be missing in a given country. 2\. Lower Costs-If you are selling more products, you also need to produce a larger volume. According to economies of scale , a greater volume can help you reduce costs. You can buy raw materials in bulk to get a lower price per unit. Similarly, you can also reduce the cost of transportation by shipping larger volumes.  In a global supply chain, you can also expand manufacturing operations in the target market. This way you can reduce the distance between the source of production and the customer location. Hence, you have to save money on logistics. 3\. Supplier Diversity A global supply chain also brings the opportunity to diversify your source of supply. You can source your raw materials from different countries. This will protect you against unforeseen supply shortages in one country. 4**[. Demand Management]** A global supply chain gives you the opportunity to diversify your manufacturing operations as well. If one of your manufacturing units falls short. Then you can offset it by supplying products from another manufacturer. This will help you meet market demands regardless of shortages in a country. 5\. **[Risk Management]** A global supply chain also serves as a hedge against environmental, social and political upheavals. If your operations are damaged in one country, you can divert your resources to another country. This will ensure that your company remains operational regardless of problems in one nation. A global supply chain also brings flexibility as you can diversify your assets in different markets. **[What Does a Global Supply Chain Need to Succeed?]** There are a lot of factors that come together to make a global supply chain successful. The global supply chain works by leveraging different goods and services from various countries to create a more cost-efficient product than if produced in a single country.  There are many challenges in the global supply chain, which may include:  Lack of equipment availability  Labor constraints  Geopolitical turmoil  Environmental disasters  Technological disruptions  Subpar quality control  Language barriers  Delays in lead time and deliveries A solid good financial plan is obviously vital. If your business doesn't have enough working capital and can't pay for its own infrastructure, it probably won't stay in business very long. **[Characteristics Found in Global Supply Chain]** 1\. Global supply chains require long-distance shipping The long distances between points in global supply connections require different kinds of shipping techniques and systems. It also introduces different concerns than local shipping. Lead times are longer, the equipment is different, and the complexity is greater whether using air, sea, or rail routes between countries. "Across thousands of miles of open ocean, there's a lot that can go wrong with any shipment." 2\. Global supply chains span language and cultural expectations. Although English is the international language of trade, there are plenty of regional interactions that happen in other tongues. There are also significant cultural communication challenges to be addressed, where words and concepts may have different meanings. Global supply chain management requires wrapping your head around these challenges and making translations that get the point across anywhere in the world. 3\. Global supply chains deal with customs and international regulatory processes Crossing borders means dealing with a whole new web of considerations in regulation and legal requirements. Clearing customs can be such a significant challenge that entire expediting firms exist to address it in some countries. In any case, global supply chain managers must ensure their shipments meet several different sets of legal requirements, some of which may conflict, at any given port. They must also understand and comply with treaty-driven international regulatory structures. 4.Global supply chains need international communications capabilities When you start making connections a half-dozen time zones away, timing becomes a problem in communication. The internet has all but done away with the scratchy international undersea cable phone calls that global supply chain managers used to endure.  5\. Global supply chains are impacted by geo-political issues. Finally, the global supply chain is wrapped up in larger issues of international relations. A perfectly sensible, mutually advantageous supply connection between companies in two countries can be completely up-ended when politicians in either place decide to throw their weight around. International tensions, protectionism, and competition can jam a wrench into the best-planned global supply chain. WHAT IS SUPPLY CHAIN GLOBAL CYCLE? A supply chain cycle is a series of operations and transactions that take place between two stages of a supply chain. A global supply chain is a worldwide system that businesses use to produce and deliver products or services, and it involves multiple stages and cycles:    - **Procurement**: The process of acquiring raw materials  - **Production**: The process of creating the product  - **Assembly**: The process of putting the product together  - **Shipping**: The process of transporting the product  - **Customer delivery**: The process of delivering the product to the customer  - **Customer order cycle**: The process of processing, preparing, and shipping orders  - **Replenishment cycle**: The process of re-supplying outlets from distribution centers and wholesalers  - **Manufacturing cycle**: The process of scheduling production based on demand from distributors  A global supply chain can involve many stakeholders, including distributors, manufacturers, and overseas suppliers. Global supply chains can span language and cultural expectations, so companies need to be able to address these challenges and make translations that get the point across.   . **The Supply Chain and its Cycles** ===================================== The Supply Chain and its Cycles A simplistic representation of a supply chain involves a sequence of five stages, from suppliers to the final customer. Each of these stages has its own cycle, which is a sequence of operations and transactions taking place between two stages. A **customer order cycle** takes place when orders are processed, prepared, and shipped. For retail, the customer is often picking orders from the store inventory (shelves), which represents the point of final demand. In a  ===============================================================================================================================================================================================================================  - - - - - [[pull logistic]**The Supply Chain and its Cycles**The Supply Chain and its CyclesA simplistic representation of a supply chain involves a sequence of five stages, from suppliers to the final customer. Each of these stages has its own cycle, which is a sequence of operations and transactions taking place between two stages.**[A customer order cycle]** takes place when orders are processed, prepared, and shipped. For retail, the customer is often picking orders from the store inventory (shelves), which represents the point of final demand.**[The replenishment cycle ]**concerns the steps involved to re-supply outlets from distribution centers and wholesalers. Each outlet places orders to distributors based on its own fluctuation of demand. It involves inventory that has already been manufactured and stored in different locations and parts of the supply chain.**[The manufacturing cycle ]**concerns the scheduling of production in light of the demand from distributors.**[The procurement cycle i]**nvolves the scheduling of the components required in the manufacturing of a good.[s system]](https://transportgeography.org/?page_id=4443) The frequency of the cycles varies, which is reflected in their respective inventory levels. Usually, retailers have significant fluctuations in their inventory levels since stores only carry a limited amount of inventory (on shelves and in the limited back store area). Once the inventory reaches a critical level, a new inventory is ordered from the distributor, which triggers a replenishment cycle. Since distributors have a higher level of inventory, the replenishment cycle tends to fluctuate less. This is even more so for manufacturers since they tend to have a relatively stable output due to the fixed capabilities of their equipment, labor, and tools. Still, flexible manufacturing systems are able to accommodate higher fluctuations. **[Five Components of Supply Chain Management]** 1**[. Planning and Analysis]** You can't put a solid plan into motion without proper planning. Supply chain management begins with crafting a thoughtful strategy that's built around identifying and studying a company's current and future needs. A good plan consists of strategies aimed at:  Negotiating supply and demand  Assembling and organizing the resources, people, and materials required to meet a company's needs  Minimizing operating costs  Streamlining operations There are several steps within the  planning and analysis component of supply chain management:  Demand Planning: The planning process considers supply and demand, with most companies kickstarting the process with demand planning -- determining supply and demand based on historical data, projected sales, market conditions, and other factors. The information gleaned through demand planning is passed down to all teams within the supply chain, who then coordinate their efforts to achieve an organizational goal. Demand planning serves as the foundation off which all other supply chain processes operate. Much of today's demand planning is accomplished using advanced technologies like AI and machine learning that apply real- time data, historical sales, and market conditions to make accurate predictions.  Supply Planning: Once supply and demand are determined, supply chain management professionals must begin creating the strategy that will put the plan into motion. Just a small sampling of the issues considered during the supply planning stage include: What raw materials are needed? Where will the materials be sourced? How and where will manufacturing take place? What equipment is needed to produce the product? Who will provide warehousing and distributing activities, and how will the product make its way to the supplier, retailer, or consumer?  Production Planning: What does the production of the product look like? How will the company produce what is needed without creating an inventory surplus?  Sales and Operation Planning: During the sales and operations planning stage, the sales and marketing teams come together to ensure their plans match operational objectives. **[2. Sourcing (Procurement)]** Sourcing is often seen as one of the most critical components of the supply chain management process, as it is where some of the most significant cost savings can be achieved.  Sourcing encompasses the entire procurement process , which includes selecting suppliers, ordering, receiving, and managing inventory, and then authorizing supplier payments. For many companies, the sourcing process is highly complex, with large organizations sometimes working with thousands of suppliers. For example, Starbucks works with some 300,000 coffee growers around the world to source its coffee beans. Supply chain management professionals identify suppliers that meet a company's needs and negotiate contracts to receive the necessary goods. They also focus much of their efforts on nurturing supplier relationships and maintaining a diversified network of suppliers to mitigate risks and quickly remediate issues that could affect supply shortages. **[3. Manufacturing and Production (Operations)]** The manufacturing and production component of supply chain management is where the magic happens, when planning and sourcing efforts come to fruition to allow the company to transform raw materials and components into the finished product. During this central stage of the supply chain process, it's the responsibility of supply chain management professionals to oversee all activities associated with the in-house production of goods, including product testing, production output, packaging, inventory optimization, and quality assurance. Supply chain managers are also on the lookout for any issues and for opportunities to fine-tune the sourcing or manufacturing process. **[4.Distribution (Transportation, Warehousing, & Logistics)]** The  distribution stage of the supply chain management process  encompasses the activities associated with getting the finished product to consumers. At this stage, supply chain management professionals (1) determine the logistics of how the product will move efficiently to the next step in the supply chain; (2) implement formal distribution plans; and (3) work with distribution partners to move the finished product through one or more distribution channels:  **[Direct sales]** -- Manufacturers sell directly to the consumer.  Wholesale -- Wholesalers purchase products in bulk from manufacturers to resell to retailers.  **[Brokerage --]** Manufacturers use brokers to act as middlemen to negotiate sales with retailers. [ Dual distribution] -- Some manufacturers and vendors employ different distribution channels for getting their products into customer's hands. This could mean B2B sales, selling to wholesalers, and directly to consumers. The distribution component of supply chain management explores how inventory will make its way into the hands of wholesalers, distributors, and retailers. Inventory and warehousing management software and leading-edge technologies allow supply chain managers to better plan the distribution process and put plans in motion that make it more resilient and reliable. [5. Returning (Reverse Logistics)] Also often referred to as reverse logistics, the returning component of supply chain management is the process of receiving returned products and the protocol for assigning refunds. Returns may be associated with product recalls, damaged or defective products, or simply consumer dissatisfaction. This stage has the potential to create a ripple effect throughout the entire supply chain, particularly when dealing with products that don't meet quality or safety standards. Strong supply chain management leaders during this stage work to identify product issues and coordinate the actions necessary to remediate them. **[Global Supply Chain Issues]** Owing to distance and international borders, a company might face a variety of global supply chain issues. Some of the biggest problems include: 1\. Long Lead Times 2\. Supply Chain Visibility 3\. Shipment Delays 4\. Fluctuating Prices 5\. Environmental Uncertainties 6\. Regional Compliance 7\. International Trade Compliance 8\. Compliance and Accountability 9\. Quality Control 10\. Transactional Costs **[What Is a Global Value Chain?]** The term global value chain refers to an international supply chain of people and activities that go into creating and offering goods or services when the supply chain needs to be managed across different countries. The subtle difference is that a global supply chain generally is referred to when discussing the manufacturing and distribution steps. For example, you probably wouldn't include your research and development or marketing team when talking about your global supply chain. They add a lot of value, but you could probably produce or distribute your goods without them. A global value chain, however, describes it all as one entity. Even your custodial service might be considered part of your global value chain, especially if your product or service is in the food or medical industries. Basically, if a partner, vendor, or supplier adds value to your business, and could hurt your supply chain if something broke down, then that's an important part of your global value chain, even if it's only indirectly part of the supply chain.