Strengths and Weaknesses of Different Analytical Frameworks to Global Supply Chains - Essay Example

GLOBAL SUPPLY CHAINS Introduction 2 Discussion 2 Strengths and weakness of supply chain management 2 Strengths and weakness of global commodity chains 4 Strengths and weakness of global production networks 5 Conclusion 7 References 8 Introduction Every successful company owes major portion of its success to its effective logistics and supply chain management. These processes comprise of flow of information and goods from sourcing raw materials to distribution channel and finally to the end customer. In today’s competitive scenario, competitive advantage can be developed and customers can be satisfied through managing transportation, production schedules and plans, information flow and inventory. There are organizations competing on global platform by collaboratively working with various international suppliers, outsourcing as well as marketing to consumers located across the globe. The global reality puts more emphasis on supply chain management to be successful. Global supply chains mainly focus on global business and there are different analytic frameworks that support the process. There is operational and strategic way of thinking about supply chains so as to identify the appropriate mechanism in a particular context. For an entrepreneur or an organization to be successful it is essential that innovation is incorporated within supply chains in order to achieve desired outcomes. This study will focus on three major analytical frameworks related to global supply chain such as supply chain management, global commodity chains and global production networks. Their respective internal strengths and weakness justify their suitability in a significant global business framework. Discussion Strengths and weakness of supply chain management When organizations get involved in supply chain they need to make effective decisions regarding ways of handling primary supply chain activities. For instance, Toyota is an ideal example when it comes to describing the concept of supply chain management. This company outsourced certain factors of supply chain in which they were not proficient. Toyota was able to design a JIT system since it had a strong relationship with its suppliers. Often for an effective supply chain management it is essential to have all components aligned to common goals and objectives. There are certain major strengths associated with supply chain management such as it enhances level of profit margins (Christopher, Payne and Ballanthyne, 2002). Due to supply chain management an organization can coordinate well with its suppliers and end customers to achieve high margins of revenue. A supply chain management even facilitates less of time delays that help in sustaining business operations in a competitive environment. On the other hand, flexibility can be regarded as other strength of supply chain management. It enables a company to work in collaboration with a team of vendors rather than operating through subsidiaries and web of branches. This factor supports a company to decrease or increase order size as per the demands in market without any such overhead costs. Supply chain management even controls the flow of information and goods that reduces the scope of operational errors (Bair, No Year). Vendors can be changed as and when required by an organization according to internal or external market pressures. On the contrary, supply chain management of bulk goods result into limited leverage and limited options. Most agricultural products and chemical products are perishable goods and need to be delivered within a fixed interval of time. Inventory management and demand planning cannot be integrated in most cases due to cost factor and uncertain conditions (Cox, 1999). An inbound supply chain network solution is designed by a firm but incorporating essential innovative changes is often an issue for majority companies. Supply chain management cannot be profitable for both suppliers and companies as it encompasses huge amount of costs and risks. The greatest weakness of this mechanism is that there is possibility of supply chain breakdown if the entire procedure is not managed effectively. Staffs need to maintain healthy relationship with all suppliers in order to deliver products on time and quickly resolving any operational issue. Unscrupulous vendors can even leak patented designs or trade secrets to counterfeiters and competitors (Christopher, Payne and Ballanthyne, 2002). While flexibility is major strength of supply chain management but vulnerability proves to be a weakness in context of suppliers. Management of supply chain develops unequal bargaining situations between clients and suppliers, whereby clients pose certain regulations to be strictly obeyed by suppliers. Often to maintain low costs in the system, human rights are violated by forcing workers to perform more tasks. Strengths and weakness of global commodity chains Global commodity chains can be stated as a process used by companies to collect resources, transform them into commodities or goods, and finally distribute them to global customers. It is termed as a chain since there are series of links connecting different places of distribution and production. The resulting commodity of the entire procedure is then exchanged on to the global market. It is a connected path through which goods travel to consumers from producers. However there are certain internal factors associated with global commodity chains that are regarded as their strengths and weakness. Firstly commodity chains can be unique that is depending on product type or market type. On the other hand, different commodity chain stages encompass various economic sectors that are handled by same business. With the evolution and growth of Internet age, commodity chains tend to become transparent. This kind of transparency is beneficial for suppliers, the firm and end consumers (Gereffi, 1994). Global commodity chains are usually vertically dis-integrated into specific layers comprising of contractual relations. This in turn reduces the overall labour costs and even prevents the growth of any such transaction costs. The other strength of this framework is that it clearly outlines the differences between buyer-driven and producer-driven global commodity chain. Its geographical coverage and input-output structure is essential to highlight configurations of specific supply chains. On the contrary, this analytical framework comprises of certain loopholes which has not been addressed appropriately. There is always a confusion regarding whether commodity chains are exclusively buyer-driven or producer-driven (Porter, 1985). All the driving buyers in this framework do not have similar significance in context of commodity chain’s governance structure. Global commodity chain framework in most scenarios provide a partial view regarding institutional contexts and social relations that mediates developmental impacts and shapes overall global production. This framework also does not take into consideration the social construct element of markets. There is a high dependency of social construct element on other social institutions encompassing property rights, relationships of trust, money, collective behavioural norms and various other forms of information provision and institutional regulation. Strengths and weakness of global production networks Global production network is a conceptual framework that possesses the capability to grasp local, global and regional social and economic dimensions of varied processes related to economic globalization. It is an interconnected approach of operations and functions on basis of which goods are manufactured, distributed and later consumed. These networks are not only responsible to integrate firms into specific structures but even integrate national economies. Global production networks can effectively cut through state boundaries in an innovative manner (Taylor, 2007). However this particular framework is influenced by non-regulatory and regulatory barriers and different local socio-cultural conditions in order to develop differentiated structures. The major strength of this framework is it is able to explicitly recognize that government, firms and other economic elements from various societies have distinct priorities in terms of growth, economic development, profitability, etc. Within the network, input-output structure is most important as this is the position where working condition variations existing across the globe is delivered. Global production network has its strength attached with its attention given to different perspectives. Firstly it identifies the firm’s network in production, marketing, R&D, and design for a particular product and ways in which it is organized regionally and globally. It even highlights the corporate power distribution within specified networks. The focus on technological upgradation and economic prosperity can be regarded as another vital strength of global production network (Henderson, Dicken, Hess, Coe and Wai-Chung Yeung, 2002). However there are certain weaknesses associated with this approach such as its dependency on suppliers whether low cost or high cost. The local supplier’s absorptive capacity is a factor that governs the entire framework. Often this factor is greatly associated with intensity of effort and existing knowledge base of the suppliers. This greatly impacts the framework as often such intricacies are not taken into consideration. The perspective of local suppliers has not been highlighted in the global production network. These local suppliers are usually located in developing countries and small or open economies. Global production network is able to internationally disperse certain components of value chain whereas certain percentage remains concentrated. Conclusion As per the study global supply chain is highly responsible for success of many organizations. It can be stated that in global business it is essential that there is continuous flow of information and goods from suppliers to firm to end customers. Global supply chain is a mechanism through which operational procedure of a global business is managed effectively. In global context, it is essential that trained staff of an organization maintains strong relationship with suppliers so that there is no delay in delivery time. There are different analytical frameworks related to global supply chain such as supply chain management, global commodity chains and global production networks. These entire frameworks outline the various dimension related to supply chain activities taking place in global business. References Bair, J., (No Year). Global Commodity Chains. Genealogy and Review. Christopher, M., Payne, A., and Ballanthyne, D., 2002. Logistics, the supply chain and competitive strategy. UK: Butterworth Heinemann. Christopher, M., Payne, A., and Ballanthyne, D., 2002. The synchronous supply chain. UK: Butterworth Heinemann. Cox, A., 1999. Power, value and supply chain management. Supply Chain Management: An International Journal, 4 (4), pp. 167 – 175. Gereffi, G., 1994. The organization of buyer-driven global commodity chains: How U.S. retailers shape overseas production networks. Westport, CT: Praeger, Henderson, J., Dicken, P., Hess, M., Coe, N., and Wai-Chung Yeung, H., 2002. Global production networks and the analysis of economic development. Review of International Political Economy, 9 (3), pp. 436-464. Porter, M. E., 1985. Competitive advantage: creating and sustaining superior performance. New York: Free Press. Taylor, M., 2007. Global economy contested. New York: Routledge. Read More