Conceptual Approaches to Global Supply Chains - Differences and Similarities - Essay Example

Compare three different conceptual approaches to global supply chains examining their differences and similarities Introduction A group of interrelated processes, organizations and resources that are meant to manufacture and deliver services and products to the end users constitute a global supply chain. The process starts from the suppliers and is facilitated by a number of agents till it ends at the ustomers/consumers. Although the process appears simple, there are a number of factors that affect this process and in turn contribute to the complexity of this practice. The supply chain management (SCM) approach involves the controlling of products or information flow that may occur through supply chain; the purpose is to align this process with customer’s needs while allowing reduction of costs simultaneously. Effective supply chain management is made possible by the use of effective communication, information, trust and cooperation. Global commodity chain (GCC) approach consists of “set of interorganisational networks clustered around one commodity or product, linking households, enterprises and states to one another within the world economy” (Gereffi & Korzeniewicz, 1994). The global production network (GPN) approach involves the existence of circuits that function in an interconnected way to conduct operation and transactions for the production of specific services and products for distribution and consumption (Dicken, 2011). Main Body As opposed to the concept of ‘chains’ which follow a vertical mono-linear structure, the GPNs are ‘networks’ that spread in multiple directions i.e. vertical, horizontal, diagonal etc. Christopher (2011) asserts that it should be kept in mind that supply chain is different from ‘vertical integration’. As far as the complexity is concerned, the structures of GPNs are far more complex and inter-woven when compared to chains. This extreme complexity is driven by the patterns of demands that exist worldwide. Global supply chain management is more inclined towards addressing the issue of supply to the end users of products. As a result of this, the competition between different firms can be seen at grass root level. This is due to the fact that every firm is striving to achieve the aim of reducing costs in a competitive market to maximize profits. The GPNs on the other hands are more concerned with the issues of supply that are faced by producers of the products. At this end, the problems are more related to the matters regarding acquisition of raw materials on lowest possible prices from suppliers around the world. The areas of focus related to GPNs include territoriality, domestic actors like labor, firms and institutions, actors’ agency and institutional framework. Contrary to this, the four dimensions related to GCCs include territoriality, an input-output structure, institutional framework and the governance structures. GCCs are strongly under the influence of a selected few governance structures, which are in most cases huge firms that determine the parameters for others to operate accordingly. Gereffi (1993) argues that the GCCs may be producers driven or buyer driven. In most cases where extensive involvement of technology and capital is involved, the GCC is producer driven. Contrary to this, the buyer driven GCCs are predominantly governed by large trading companies or retailers. A very basic yet prominent difference between the buyer driver GCCs and Producer driven GCCs is that the buyer driven GCCs generally lack facilities to produce. We have seen the differences between these three conceptual approaches; now we are going to see their similarities. The GPNs take into consideration the differences of priorities that exist worldwide. Similar is the case in global Supply Chain Management. These priorities may be due to a variety of influences relating to social, cultural, environmental or political reasons. These influences may directly affect the functioning of both GPNs and GSCs. The architecture of GPN framework is elevated on Value, Power and Embeddedness. Similar is the case of GCC which also demands a higher level of social embeddedness. According to Henderson et al. (2002), an example of the social embeddedness is seen in the case of triangle manufacturing where manufacturers have invested in countries of their choice depending upon their ethnic, cultural or linguistic similarities. The success of such business ventures in foreign lands is strongly supportive of the notion that success in a business is a multifaceted phenomenon that is influenced to a great extent by forces like ethnicity, politics and social setup. The notion of territoriality is an overlapping area between the GCCs and GPNs. Cox (2003) asserts that, in order to maintain their say in a given territory, companies need to create critical assets for the purpose of which dominance in exchange relationships is essential. Herderson et al (2002) are of the idea that GPNs connect the firms in multiple ways; these connections may be in the form of territorial connections, social connections or strategic connections. As far as the limitations are concerned, the bias that exists in terms of ‘governance structures’ is common to both the GCCs and the GPNs. For this reason, firms that apply these methods for the promotion of their products in the global community, have to bear the risks associated with this aspect. In some situations, this can be a matter of life and death for a business firm. Conclusion Having discussed the different concepts related to the supply of services and products on international level, we have come to the conclusion that a single mode of supply is not suitable for all purposes. The different frameworks discussed above have their own pros and cons. There certainly are areas that overlap between these frameworks; yet the differences are also significant. The impact of social, political and ethnic identities on the process of supply cannot be overlooked. Additionally, the role of governance structures is also critical in determining the success of any chosen method of supply. Whatever the chosen method, the ultimate aim of the process is to achieve customer’s satisfaction while maximizing profits for the firm. With the growing concept of globalization and with increasing awareness among buyers about their own right, the buyers around the world are becoming more and more challenging. This has aggravated the conditions for the followers of traditional and old methods of supply. It is therefore vital that these modern frameworks are adopted to achieve customer satisfaction while minimizing firms’ risks. References Christopher, M. (2011). Logistics and supply chain management: Strategies for reducing cost and improving service. New Delhi: Person. Cox, A. W. (2002). Supply chains, markets and power: Mapping buyer and supplier power regimes. London: Routledge. Dicken, P. (2011). Global shift: Mapping the changing contours of the world economy. Sage. Gereffi, G. (1993). The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks. Internet Resource. Gereffi, G., & Korzeniewicz, M. (Eds.). (1994). Commodity chains and global capitalism (No. 149). ABC-CLIO. Henderson, J., Dicken, P., Hess, M., Coe, N., & Yeung, H. W. C. (2002). Global production networks and the analysis of economic development. Review of international political economy, 9(3), 436-464. Read More