GLOBALIZATION OF SUPPLY

CHAIN NETWORKS

What are Global Supply Chains

Global
Global Supply
Supply Chains
Chains (GSCs)
(GSCs) are
are worldwide
worldwide networks
networks of
of
suppliers,
suppliers, manufactures,
manufactures, warehouses,
warehouses, distribution
distribution centers
centers and
and
retailers
retailers through
through which
which raw
raw materials
materials are
are acquired,
acquired,
transformed
transformed and
and delivered
delivered to
to customers
customers
(OECD,
(OECD, Supply
Supply Chains
Chains and
and the
the OECD
OECD Guidelines
Guidelines for
for Multinational
Multinational Enterprises,
Enterprises,
2002)
2002)

The objectives of Global Supply Chains

Two main objectives could be identified:

Prompt and reliable delivery of high-quality products and

services at the least cost.

To effectively meet rising customer expectations.

Globalization has changed the way firms do

business
Since the end of WWII, the importance of trade and international investment has

grown steadily.

Large multinational firms have become the main players in all major sectors.
Through FDI and international mergers and acquisitions, they were able to jump

tariff barriers and tap into natural resources, labour, and technology, around the
world.

Production chains were traditionally vertically integrated, i.e. multinational firms

owned an entire production process.

But
But recent
recent phenomena
phenomena are
are fundamentally
fundamentally changing
changing the
the way
way global
global firms
firms operate.
operate.

 driven by key factors

Rapid technical progress
Low and falling telecommunication

costs
Technological advances
Falling transportation costs

The adoption by a large number of

countries of more open economic

policies
(e.g. lower tariffs, lower FDI
restrictions)

The emergence of developing, low

wages economies

Goods
Goods and
and services
services can
can be
be
delivered
delivered globally
globally at
at lower
lower cost.
cost.

 giving rise to GSCs as a more established way of

doing business.
In recent years, we have seen a change in how firms organize

their production into global supply chains:

Firms are increasingly outsourcing some of their activities to
third-parties.

They are locating parts of their supply chain outside their home

country (offshoring)

They are increasingly partnering with other firms through strategic

alliances and joint ventures.

Smaller firms and suppliers are now becoming global

These new business strategies have allowed firms to specialize on

core competencies (vertical specialization) to sustain their

competitive advantage.

Key enablers of Global Supply Chains

Globalization, falling transportation and telecom costs, low tariffs, and

technological improvements have changed global supply chains.

Firms are increasingly:

Outsourcing / offshoring some of their activities.
Relying on alliances and joint ventures for global competitiveness.
Using logistics to improve supply chain efficiency.
Firms are increasingly part of global supply chains, mostly through trade

and investment relationships with the foreign countries.

In order to thrive, firms need:

Smart Borders and world-class transportation infrastructure.
Leading edge communication infrastructure.
Free trade and investment.
Smart Regulations.
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Why integrating a GSC: practicality and usefulness

Help companies compete all over the world
Expand business operations
Offer new services and applications to meet global customers

needs
Give company a competitive advantage
Falling international trade barriers mean rising profits

Recent changes affecting Global Supply Chains

Internet and technological change
Proliferation of trade agreements
Falling Trade Barriers
Increase in international trade groups
New Markets

Advantages of Global Supply Chains

Reduced total costs

Increase intellectual asset

Inventory reduction

Delivery improvement

Improved fulfilment cycle time

Reduce cycle time
Increased forecast accuracy

Diversified business and trading

Competitive advantage

Untapped markets

Productivity increase
Enhance speed and efficiency
Improve capacity
Expand international connexion
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Potential obstacles to Global Supply Chains

Member nations VS. Non member nations

Trade imbalances

Inefficient transportation and distribution

Export surges and recessions

systems

Market instability
Different languages
Differences in currencies
Differences in measurement systems

Greater distance
Tax policies
Operational threats
Strategic challenges

(metric versus decimal)

Technological capabilities
Different customs, beliefs and cultures
Political turmoil

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Combating these obstacles

Duty specialists and trade specialists

Be innovative & Be flexible

Join nation groups

Research

Banding together

New technology

Form consortiums

Infrastructure improvements

Vertically integrate

Reduce the number of stops in the

chain

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Globalization is a driver for GSCs

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So, GSC means making operations globally

Global operations

Suppliers
Global sourcing
- Dealing with
foreign suppliers
- Managing
international logistics
- Managing risks

Operations
Global manufacturing
- Facility location
- Coordinating networks
of plants
- Coordinating networks
of R&D facilities
- Operations in other
countries

Markets
Global distribution
- Local content regulations
- Managing global
distribution
- Managing risk

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Traditional domestic supply chain

Limited border
crossings
Coordinated customs
processes

Regional plant locations

Integrated logistics
centers and cross-docks

Plants

Supplier
Locations

Stable
distances

Static supplier base

Established logistics
networks

Established carrier base

Existing infrastructure
Effective regulatory
agencies

urce: AutoDiversity Management inc. (ADMi) (2009)

National
distribution
capacity
Specialized
equipment

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Extended Global supply chain

Supplier
Locations

Multiple International
border crossings
Complicated customs
regulations
Various data requirements

Multiple mode requirements

Dynamic supplier
Broad and diverse carrier
base
base
Increased number
Multiple language
of supplier options
requirements
Multiple source
Regional customs
countries
High level of coordination
urce: AutoDiversity Management inc. (ADMi) (2009)

Multiple plant
locations
Flexible
manufacturing
Parts commonization
Plants

Increased
mileage
International
dealership
network
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Barriers for SMEs to integrate GSCs

Language barriers and cultural differences
Risks in selling abroad
Competition of indigenous SMEs in foreign markets
Inadequate behaviors of multinational companies against domestic

SMEs/Lack of government supply-supporting programs

Complexity of trade documentation including packaging and labeling

Lack of government incentives for internationalization of SMEs
Inadequate intellectual property protection
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Forces and trends that will impact the Future

Supply Chain
New markets and
a new
economic balance

Sustainability and
the scarcity of
natural resources

Ecological
Ecological

Economic
Economic

Consumer
Behaviour

Driving the value

chain

Regulatory
Regulatory

New rules,
new compliancy
Explosion of
information

Product
Flow

Information
Flow
New
New
technologies
technologies

Redesigning
supply chain

Demographic
Demographic
Graying and
urbanisation

Managing complexity
through transparency

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