Globalization of Logistics and Supply Chain - Case Study Example

Globalization of Logistics & Supply Chain January 1 2015 Type your name here Abstract The paper looks at determining the need and importance of globalized logistics and supply chain strategies by looking at the manner in which operational efficiency and business prospects will be looked at. It shows the different risk which global supply chain presents and will help to bring about the required changes so that business efficiency and performance is altered. This also brings about the manner in which globalized supply chain can be achieved and the manner in which business will be able to garner different gains by working on it. Further the manner in which MNE’s are increasing in BRIC countries provides an opportunity to look at different aspect and through which bigger markets can be catered has increased the need and importance of looking towards developing appropriate supply chain. Introduction Supply chain globalization is the need and requirement of today’s global market as companies are finding it difficult to match the dynamically changing market and creation of new segment of customers. This has thereby made supply chain globalization a natural phenomenon and organizations are taking steps towards achieving those. Supply chain globalization faces different risks from economic and political uncertainties but to sustain and have better future opportunities it is imperative that organizations all around the globe look towards globalizing their supply chain management process. The key to the success here relies on the manner in which different key decisions are taken within the organization in relation to entering different markets, having a balance between the risk and opportunities which the market presents, dealing with the continuously rising cost and complexities which different situations presents and integrating the supply chain management process of a globalized level (Bowersox, Closs and Cooper, 2007). Working on the above stated dimensions helps organizations to act as leaders and creates a path through which the long term success of the organization will be ascertained. Globalized Supply Chain The rapid pace at which globalization is taking place at every sphere and aspect of life has multiplied the different opportunities, developed new challenges and raised new uncertainties which needs to be addressed. World economies are witnessing a rapid growth in business as exports have more than doubled in comparison to the GDP growth which economies have witnessed is being seen to be consistent for all regions and industries around the globe. A complete change in being witnessed in the top players as six destinations of the top ten destination for retail investment and three of the top destination for heavy manufacturing investments are not found in the list of players which was seen in 2007. The economies are witnessing new segment of consumers continuously growing and medium to low income group now constitute around three-fourth of the world population (Scheuing and Johnson, 2009). This has made it imperative for organizations to rely on developing their supply chain management process on a global level so that the different work and activities are carried out in a more integrated manner. The different challenges which the economic and political development poses continue to be a threat in the development process of the business and the economy. A continuous decline in US dollar which is at its all time low has increased the demand for cheaper US imports especially in developing countries like India, China, Middle East and Russia. This is matched by a shift in policy from US which is looking towards adopting a policy of protectionism will result in retaliatory actions from foreign countries which are involved in trade relations with the US (Medute, 2005). The process would also make US become sovereign investment buy out targets by different wealth funds from countries like China and UAE. The situation could worse as the economy is also witnessing a downturn and is not able to pose the same GDP growth rate. The path which will lead towards a particular situation is unclear but what is clearly visible is that economies are becoming more and more interrelated and any shift in the policies will have an impact on the manner investment is made and business is carried out all around the globe. Today, organizations are finding it difficult to design an efficient supply chain management process on a global scale which can deal with the different complexities that globalization presents and withstand the different known and unknown risk. This has made it difficult for organizations to be able to create the required mechanism which will guide them and help them to bring efficiency through a development of process which looks at bringing effectiveness to the supply chain management process (Wan and Jones, 2003). The different challenges which the situation presents have also provided many opportunities which organizations are looking at for the development of their business. Implementing global supply chain management policies which helps to understand and meet the different needs and demands of consumers on a global scale has provided a new direction and opportunities for organizations to grow and improve their prospect for the future. Meeting the Demand for Global Customers The manner in which the demand for global consumers is undergoing change is an aspect which needs to be looked at understood. It is seen that six new nations entered the rank for the top 10 retail destination of the world with regard to the retail investment which will be made in that direction. This is shown in the chart below Country Destination 2011 Rank 2007 Rank Movement India 1 5 +4 Russia 2 1 -1 China 3 3 - Vietnam 4 9 +5 Ukraine 5 New Chile 6 New Latvia 7 New Malaysia 8 New Mexico 9 New Saudi Arabia 10 New The top among the four were India, Russia, China & Vietnam which has reshuffled over the years as some economies have become stronger and moved upwards while some have moved downwards. The push upwards has been attained due to improvement in the living standards of people and continuous increase in the population which has ensured that 75 percent of the world population constitutes of medium and low income group people. The purchasing power parity has moved to $10,000 and constitutes of people from areas like Eastern Europe, Middle East and Central Asia. The product requires that the products are developed at affordable rates where the strategy would be low margin and high volume (Chen, 2009). This will require that working capital is managed efficiently which can be achieved by developing the supply chain network so that they are able to provide the required products on a global scale. One approach which organization tends to adopt is to reduce the packaging size which thereby tends to reduce the prices and provides an opportunity to use the supply chain process to reach every nook and corner of the country. The other technique which is being used is to look towards aggregating customers in case they cannot be segregated. For example, it is seen in Mexico that the strategy which has been adopted is towards helping poor group of families to come together so that they are able to make the required weekly payments (Janos, 2002). The overall approach is being developed towards taking advantage of the supply chain network which has been developed and will look towards identifying the different dimensions through which business will be able to gain productivity. This will help to reduce wastages and will provide an opportunity through which the supply chain management will work on a global level and look towards sustaining an environment through which better integration of different activities becomes possible (Easingwood, 2006). The process has looked at redesigning the entire process of carrying out different activities and looking towards garnering a process which is aimed towards building long term relations through the establishment of the required supply chain. Success for Supply Chain Globalization The success of a globalized supply chain network is based on different dimensions and aspects which need to be addressed and looked at. It will require looking at the different aspect and determining the different dimensions through which globalized supply chain can be improved and developed. Some of the mechanisms which will help to improve the supply chain management process are as Understanding the Global Landscape and understanding the opportunities: Having a supply chain network established on a global scale requires understanding the market and gauging the entry time in the market with accuracy. This will help to capture the opportunities which the situation presents and will help to maximize the overall potential of carrying out different activities. This can be seen from the example of Carrefour Group which entered in China in 1995 and by 2006 it had over 112 Chinese hypermarkets and 275 discount stores with annual sales of more than $4.5 billion. This was possible because Carrefour Group had understood the global environment and entered the market at the correct time. In addition to it the strategies which were developed were sound and were aimed towards improving the supply chain so that efficiency could be gained in the entire system (Christensen, and Overdorf, 2010). The process also looked towards removing the different bottlenecks and developing the delivery system which was based towards improving the overall business potential. Balancing Risks & Rewards: The long term productivity and strength of the business is determined by its ability to balance the cost and risk which the business faces with the different benefits which the process will provide. Managing global prices and supply risk by having a supply chain network which is aimed towards improving the manner in which goods are passed from one area to another will determine the manner in which the business will prosper (Krishna, 2007). Organizations which are able to develop and create a sustained supply chain process and network don’t fear about the different volatility which the supply and reserves would present but instead looks at integrating a system through which better effectiveness and efficiency can be attained. Managing Flexibility: The supply chain needs to be flexible and should be able to adjust and shift quickly if new opportunities arise so that efficiency is maintained and the process leads towards better supply of goods and services. It requires measuring all the opportunities by creating a matrix which will help to deal with the different economic and political risk which the business might face (Kim, Ming, Allenby & Williams, 2008). The supply chain principle needs to be basic but the execution strategies are pretty complex and requires navigating through the complexities of the supply chain network so that sourcing, manufacturing and delivering across the different boundaries becomes possible. The logistics need to be such that it quick and efficient and focussed towards optimizing the present network so that wastage reduces and overall productivity increases. Risk to both side with global supply chain Supply chain developed on a global level has to face an array of different risks which arises due to the different factors associated with demand and supply. Some of the prime reasons which will have an impact on the global supply chain and impacts the manner in which different activities are carried out is as under Supply Shortage: Shortage in supply from the manufacturing point has an impact on the manner in which global supply chain is developed. If proper manufacturing is not ensures it will make it difficult to provide the required products which would thereby make even the best global supply chain face issues concerning supply shortage (Gourdin, 2006). This is thereby an area to be looked at as developing the required parameters and ensuring continuous supply will provide efficiency in the supply chain system. Natural Disasters: The supply chain gets impacted if some disaster rakes place at the main region where production takes place. This will impact the overall production and providing the required products in the developed supply chain pipeline will become difficult (Roberto, Charles & Qiao, 2007). This would thereby impact the manner in which different goods and services are demanded and would have an impact on the supply and logistics chain which has been developed Supply Chain Choke Points: The supply chain has very important points and areas which need to be managed properly. Inability to manage the chocking point will disrupt the supply chain (Rushton, Oxley & Baker, 2006). For example, in case the period of transit of goods is not maintained properly would result in disrupting the entire flow of goods and services from one point to another and would thereby choke the supply chain. Challenges posed by Global Supply Chain Manufacturers are looking at developing strategies which is aimed towards tapping the high growing MNE economies so that better return can be ensured. This has also multiplied the different risk associated with carrying out business and the most important area of concern is raising frauds. The manner in which organizations are falling victims to frauds have increased by over 9% over the last year as seven out of ten organizations are seen to be victimized by global fraud (Lingguang Song, Al-Battaineh and AbouRizk. 2005). The major reason here could be the global supply chain which has provided different dimensions and increased the overall likely hood of frauds. Move towards having a global supply chain which looks at developing the business model through which more reliance on different suppliers and partners increases results in multiplying the overall chances of frauds. Since, manufacturers are looking towards carrying out business in overseas market which is riskier they look at taking the help of third party logistics provider results in outsourcing some of their major activities which thereby increases the overall chances of frauds (Gray & Khalid, 2006). It was identified that one in foe company was found to be a victim of either a vendor, supplier or other aspect associated with the manner in which global supply chain is developed. Corruption and bribery is another important aspect which poses threats to business especially in markets like Africa, Latin America and India. This forces companies to abstain from expanding their business in other countries as it multiplies the overall risk and results in creating new complexities for the business (Nagporewalla, 2007). This aspect results in destroying the present supply chain network and would thereby result in impacting the manner in which different activities are carried out. The chart below present the manner in which frauds have impacted the manner in which global supply chain is impacted and is an aspect which needs to be looked at so that proper strategies will help to bring about a change in the manner different business decisions are taken. This makes it imperative that organizations look at determining the risk profile so that they are able to find out the different possible risk and identify the mechanism through which risk can be controlled. This will help to improve the different bottlenecks which the global supply chain presents and will have to improve operational efficiency in carrying out different business activities. A major hindrance is the fact that companies don’t have timely access to the different information about the global supply chain partners which thereby impacts performance. Companies need to develop a process where information is timely available so that the bottleneck can be removed and the business efficiency can be improved (Delfmann, Albers & Martin, 2002). This will help the global supply chain to be better executed and will help to reduce the impact on the business. Global Supply Chain Strategy Organizations and MNE need to look at determining the path through which the overall risk will be reduced and effectiveness can be gained in the supply chain process. This will require understanding the different dimensions through which overall productivity will improve and the aspect which will help the business to be carried out on grounds through which productivity increases. Yip (1989) stated that organizations to be successful while working in the international arena need to develop strategies which will help them to work on the global scale and is shown below The most imperative is to identify the core business strategy so that the strength can be nurtured towards internationalization. This has to be followed by having different strategies for different countries as each country is unique and has its own needs and requirements which need to be properly measured and identified. Identifying the markets and developing logistics and supply chain strategies which helps to fulfil the different investment needs will determine the long term success and will garner a path through which overall business potential will be achieved (Arbulu, Tommelein, Walsh and Hershauer, 2002). Businesses have thereby looked at identifying strategies where they look towards developing lean supply chain management process which will help to work on different aspect and improve the overall mechanism to be successful. Since, organizations are looking towards identifying the dimensions based on which the supply chain process and logistics can be improved and developed so identifying the different factors and looking towards improving the overall mechanism which provides efficiency is a must. It is also seen that in the phase of globalization small MNE’s are looking toward BRIC countries as the opportunities to maximize the gains and to have a market which is ready to cater towards the different needs is continuously rising. People of developing countries are looking for products which are cheap as they have a low purchasing power but provide a high volume which is making organizations to work in that direction (Ballard, Tommelein, Koskela, and Howell, 2002). This has thereby ensured that organizations are able to bring about the required changes and improve the overall process of carrying out business. This thereby makes it imperative that organizations look towards BRIC countries and develop the required supply chain and logistics management system which will help them to cater to new market which is emerging. The process of dependence and reliance on supply chain for developing and underdeveloped countries need to looked at. This will help to find out the manner in which goods and services can be provided across the globe and will act as a defying point through which business development for the future will become possible. This will also help to reduce risk and will optimize the overall process of carrying out different business activities. Conclusion Global logistics and supply chain is an important aspect for organizations looking to work on the global arena as it provides them the required dependence based on which business can be developed. Global supply chains provides an opportunities provides an opportunity to improve efficiency and helps to develop a process through which better gains can be achieved. This will help to bring about the required change and will provide an opportunity through which business efficiency and performance will improve. This will also help to bring about the required check and will drive the different dimensions through which goods will be available at every nook and corner of the globe. With the continuous rise in competition it has become imperative that organizations look at developing lean supply chain strategies and work on the global needs and requirements so that overall business prospects multiply and helps to improve the long term future performance. References Arbulu, R. J., Tommelein, I. D., Walsh, K. D., and Hershauer, J. C. (2002). Contributors to lead time in construction supply chains: Case of pipe supports used in power plants. Proc. Winter Simulation Conference 2002 (WSC02). Exploring New Frontiers, 8–11 December, San Diego, California, 1745–51. Ballard, G., Tommelein, I., Koskela, L., and Howell, G. (2002). Lean construction tools and techniques. In Best, R. and de Valence, G. (eds) Design and Construction: Building in Value. 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