Global Value Chain Management: Globalization

Business today is in international environment where the surroundings force companies to consider rest of the world and potential customers in their aggressive scheme, despite of location or main market base. According to Monczka et al. (2015), globalization and value chain management are interconnected. It is evident that supply chain management enables globalization and globalization, on the other hand, provides access to new customers and new sources of procurement. Therefore, business organizations cannot segregate themselves from or neglect outside factors such as financial trends, aggressive situations or technology modernism in other countries. As a result of globalization, now an organization can build up merchandise in the United States, construct in China and vend it in Europe (Tayur et al. 2012). Organizations now have distorted the ways in which they used to uphold their operations and logistic activities. As a result of globalization, organization are now trying to understand different markets before going global with their supply chain management that includes potential partners, risk and regulations.  New auditing methods along with information are the key in today’s global supply chain management. However, with lots of new opportunity, global supply chain also brings some threats and impacts the required skill set of the supply chain personnel. This study will briefly describe how globalization in supply chain management has affected different segments of a business.

Corporate Consideration

With augmented globalization and offshore sourcing, global supply chain has become a significant issue for many corporate. As mentioned by Ahi and Searcy (2013), global value chain management comes with an overabundance of countries, it also comes with a plethora of new challenges that the corporate organizations are finding difficult to deal with. Most significant problem faced by the corporate organizations is the overall cost. While domestic labour cost is low, organizations are now focusing on the cost of space, tariffs and other expenses which are important in order to maintain a global value chain management. Time is another major issue faced by the corporate organizations that must be addressed when dealing with global supply chain management. Productivity of foreign employees and the extended shipping times can either positively or negatively affect an organization’s lead time. Among other factors, climate circumstances on one side of the globe often vary tremendously from those on the other and can brunt manufacturing and distribution radically (Ginardy and Simatupang 2014). Besides, selecting supplier is another problem of global supply chain supervision. It is evident that comparing vendor bids from inside the organization’s parent-country can be problematic enough; however, comparing bids from an array of worldwide suppliers can be even more composite.

Financial Consideration

Value chain management is now broadening as a result of globalization and offshore construction. That is why; most of the business organizations are experiencing a lessening of capital accessibility. On the other hand, organizations are also facing pressure to enhance cash flow. The new trend toward open account from letters of recognition has further contributed to the problem. This is the reason of introducing global supply chain finance (GSCF) solutions. Market prospect of global supply chain finance is significant. According to Green et al. (2012), the all over universal market for receivables organization is known to be US$1.3 trillion. Payables discount and asset-based lend can add a supplementary US$100 billion and $340 billion (Holweg and Helo 2014).  

GSCF can optimize both the accessibility and price of assets within a given buyer-distributor global supply chain. The system mainly handles all the operations by aggregating, wrapping and utilizing knowledge generated throughout global supply chain performance and comparing this knowledge with the corporal control of supplies. This combination of knowledge and corporal control enables lenders to alleviate monetary risk with in the worldwide supply chain management (Ross 2013). Currently, only a small proportion of organizations are using global supply chain investment methods, however more than half have tactics to implement it within their supply chain processes. According to Schaltegger and Burritt (2014), companies should mostly focus on three key areas of development which are GSCF financing, GSCF expertise and GSCF visibility.

Technological Consideration

Business organizations are continuously trying to survive and flourish in the fiercely competitive global market. That is why; they are looking to invest more in technology and quality operations which will allow them to provide better products to the consumers worldwide (Brandenburg et al. 2014). As supply chain management in most of the leading organization is global, they are implementing new technologies in their system to improve its performance. Some technical additions in global supply chain management are hereby mentioned below,

 Removing geographic and political boundaries: Cloud technology is introduced in global supply chain management that tends to remove physical and political boundaries (Sarkis 2012). As many cloud hosts rely on the general practices for accessing, storing and retrieval of cloud data, the same information can be altered from any place on the globe. Besides, cloud technology is also able to dissolute political debates between business practices; however, rules and regulations of governing entities might limit the internet access such as was seen in Egypt in past years (Forster et al. 2013).

Using communal media to rationalize worldwide supply chain: Social media is known as a trendy expertise that has swept the globe. Through more than 290 million Twitter users and 1.20 billion Facebook users, there is no doubt that most of the business organizations are using social media to expand visibility or their corporation. According to Walker and Jones (2012), over 60 percent of all Fortune 500 organizations are depending on social media which is a major part of their promotional strategy and global supply chain management strategy. Through social media companies can interact with a huge base of potential customers which will not only increase visibility of that company but will also enhance demand of customers towards the product and reduce operations cost by enhancing overall productivity. Communication through social media can also help organizations to report accidents or weather conditions that may obstruct delivery schedules (Ashby et al. 2012). As a result, it would be easy to create automated updates about the inventory.

Enterprise resource planning: It is known as business course managing software that helps an association to use a scheme of incorporated applications to administer the business. It also allows business organizations to computerize many back office methods related to technology forces and human property (Liu et al. 2014). Incorporation of supply chain management and ERP helps businesses to add better visibility into all operations while escalating speed, customer satisfaction and efficiency. In global supply chain management businesses are required to cooperate with several suppliers and partners in order to achieve raw resource (Marchi et al. 2013). There are several methods of combining supply chain management and ERP system which are,

  • Enhanced efficiency across multiple departments working within global supply chain.
  • Computerization of workflow that can reduce overhead and operational costs.
  • More supple solutions for global supply chain management that may be readily adapted to meet the demands of changing circumstances.

Human Resource Consideration

According to Milberg and Winkler (2013), strong interdependencies can be found amid supply chain management and human recourse management which make it tricky to recognize exact boundaries. Some foremost issues that human resource management face while maintaining a globalized supply chain management are,

Visibility: This is the most important issues faced by human resource workers while managing worldwide supply chain management. As a result, of globalization, supply chain management has become more multifaceted. Human resource personnel are finding it difficult to attain visibility for Tier 1, 2, 3 and suppliers ahead of that (Neilson et al. 2014).

Tracking: Human resource department of any organization is responsible to tracking materials from its source to complete product. As a result of global supply chain management, human resource personnel are finding it difficult to track materials back quickly and resourcefully.

Cost: Reduction of operation cost is another major responsibility of human resource management of an organization. It helps to gain competitive advantage over the market rivals. Global supply chain management strategies are lean that helps to improve efficiencies are reducing cost (Soosay et al. 2012). However, disruptions in global supply chain management can also take place due to lack of communication and mismanagement.

Sustainability: Global supply chain management possesses biggest threat for sustainability goals of an organization. Most of the times, it is not easy to balance the need to exhibit sustainable sourcing while maintaining cost competitiveness (Stadtler 2015). Customers are slowly but steadily are shifting their focus towards sustainable goods; thus, global supply chain management can hamper business growth for an organization.

Cultural Consideration

Globalization is supply chain management also includes major challenges for the culture of an organization. In today’s world of globalization, organizations are looking outsource their manufacturing and related operations to countries where labour cost is comparatively low (Tatoglu et al. 2016). Problem begins from there are cultures of those two organizations are dissimilar from each other; therefore, their working style will be different too. In the United States of America, the main objective behind each decision is to make more money. They always try to recruit minimum number of employees in their workplace as they mostly rely on technology. If an American organization is planning to open their manufacturing unit in China, then they will face major challenges initially. The culture in China is absolutely different as their mentality is to employ as many people as possible. Therefore, before setting up supply chain departments in China, other foreign companies will have to verify production capacity and worker quality to make sure qualified people are working in that organization (Milberg and Winkler 2013).

Another problem that occurs in global supply chain management in terms of organizational culture is different languages and units of measure.

Political and Economic Consideration

Political risks are always there than can affect an organization’s global supply chain management objectives and goals. Some countries are politically, economically and financially weak. Therefore, in those countries, government officials can easily take decisions that put a negative effect on businesses (Neilson et al. 2014). On the other hand, it is also possible that government of a country where supply chain of an organization is located is facing economic crumple of a fall of currency or an IMF bailout. Consequences of such incidents can cause severe damage for companies that are operating in that market. Biggest example of such situation is British Service Institution that has a number of supplies located in Bangladesh and Cambodia. As a result of political instability and government operations were shut down totally for many days (Soosay et al. 2012). This affected the operations British Service Institution along with all other global organizations that had their supply chain branch in those countries.

Competitive Advantage Consideration

Global value chain management helps an organization to better understand the best segments, price points, selling propositions, and distribution channels and value chain configurations that will yield greatest competitiveness (Stadtler 2015). Some methods through which competitive advantage can be gained by Value chain management are,

Internal cost analysis: It helps to decide sources of productivity and comparative cost positions of interior value-creating methods. Global value chain approaches help to figure out sources that can provide profitability (Ahi and Searcy 2013). It also helps to appreciate the price of their internal methods and actions. Some important steps under internal cost analysis are,

  • Identifying an organization’s value-creating methods
  • Determining the segment of the total price of a artefact or service which are attributable to each value developing process
  • Figuring out cost drivers for each method
  • Figuring connections between processes that can help to calculate the opportunities in order to achieve virtual cost advantages

           Internal differentiation analysis: It allows a global company to appreciate the sources of demarcation together with cost within interior value-creating process.

Vertical linkage analysis: Global value chain analysis helps to appreciate the connection and linked costs among external suppliers and consumers in order to maximise the value delivered to consumers and to minimize cost (Monczka 2015).

Besides these factors, global value chain management is also capable of providing competitive advantages in areas such as transport, information and facilities.

Corporate Social Responsibility Consideration 

While implementing global value chain management it is important that organizations should maintain their corporate social responsibilities properly. In order to comply with corporate social responsibility, it is important to address global value chain management. Some of the most relevant elements of corporate social responsibilities that must be followed while implementing global supply chain management are,

Responsibility towheads environment: Each organization that is thinking to implement global supply chain management or have already implemented it must observe the ecological impact of suppliers and establish an ecological purchasing policy that targets to minimise or eliminate ecological impacts.

Human rights: Business organizations must maintain human rights in their global value chain management that includes slavery, child labour, condition of working and wages, freedom of association and non-discrimination.

Equal opportunity: Equal opportunity should also be implemented in global value chain management which will address acts of unfairness on the base of race, sexual orientation, religion and disability.

Diversity: Global value chain management should include supplier diversity that aims to boost the number of diversely controlled businesses that supply products and forces to both civic and personal division organizations. It is expected that if an organization can implement supplier diversity then that organization will enhance their admission to people with aptitude and become more conscious of the requirements of the consumers. If that organization can understand needs of a customer then they will be able to create valued services.

Corporate Governance: In case of corporate governance, supply chain governance is an essential part (Monczka 2015). It must include powerful and translucent methods across supply networks and supplier responsibility.

Ethics and ethical trading: When an organization is operating in a global market, then it is essential to develop core principles of conduct. The code of conducts will be applied to suppliers and employees worldwide.

Sustainability: Sustainability means working and living in particular methods that convene and incorporate active ecological, economic and social needs without compromising the welfare of the future generation (Green et al. 2012).  This process is extremely significant in supply chain management that can make useful contribution to sustainable development, risk minimisation and resource reduction.

Conclusion

In the end, it can be concluded that, global supply chain management it not only helping companies to explore in different countries in order to expand their brand image and acquire new customers, but also creating lots of trouble. Initially it look good as companies could reduce their operational costs by outsourcing their manufacturing unit or any other unit to any third party logistic organization located in a country where labour cost is comparatively low. For example, Apple has their manufacturing unit located in China. However, later organizations realized that with lower labour costs, lots of problems related to ethics are hampering the goal and objective of the organization. Besides, handling a global supply chain management through several technologies is not an easy task to do. Almost regularly new technologies are invented with a goal to support global supply chain management and most of them are ailing to do so. K-Mart is the biggest example of that. That is why; before going global, an organization will have to decide whether it will have a positive or negative impact on its productivity and organizational goals as global supply chain management is an opportunity for some organizations where it is a pain for others.

References

Ahi, P. and Searcy, C., 2013. A comparative literature analysis of definitions for green and sustainable supply chain management. Journal of Cleaner Production, 52, pp.329-341.

Ashby, A., Leat, M. and Hudson-Smith, M., 2012. Making connections: a review of supply chain management and sustainability literature. Supply Chain Management: An International Journal, 17(5), pp.497-516.

Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research,233(2), pp.299-312.

Forster, C., Zapp, M., Aelker, J., Westkämper, E. and Bauernhansl, T., 2013. Collaborative value chain management between automotive and semiconductor industry: An analysis of differences and improvement measures. Procedia CIRP, 12, pp.312-317.

Ginardy, R. and Simatupang, T.M., 2014. A New Framework of Value Chain Thinking for Business Development. In Proceeding of 6 th International Conference on Operations and Supply Chain Management.

Green Jr, K.W., Zelbst, P.J., Meacham, J. and Bhadauria, V.S., 2012. Green supply chain management practices: impact on performance. Supply Chain Management: An International Journal, 17(3), pp.290-305.

Holweg, M. and Helo, P., 2014. Defining value chain architectures: Linking strategic value creation to operational supply chain design. International Journal of Production Economics, 147, pp.230-238.

Liu, S., Moizer, J., Megicks, P., Kasturiratne, D., and Jayawickrama, U. 2014. A knowledge chain management framework to support integrated decisions in global supply chains. Production Planning & Control, 25(8), 639-649.

Marchi, V. D., Maria, E. D., and Micelli, S. 2013. Environmental strategies, upgrading and competitive advantage in global value chains. Business strategy and the environment, 22(1), 62-72.

Milberg, W., and Winkler, D. 2013. Outsourcing economics: global value chains in capitalist development. Cambridge University Press. Cambridge.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015.Purchasing and supply chain management. Cengage Learning.

Neilson, J., Pritchard, B., and Yeung, H. W. C. 2014. Global value chains and global production networks in the changing international political economy: An introduction. Review of International Political Economy, 21(1), 1-8.

Ross, D.F., 2013. Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Springer Science & Business Media.

Sarkis, J., 2012. A boundaries and flows perspective of green supply chain management. Supply Chain Management: An International Journal, 17(2), pp.202-216.

Schaltegger, S. and Burritt, R., 2014. Measuring and managing sustainability performance of supply chains: Review and sustainability supply chain management framework. Supply Chain Management: An International Journal, 19(3), pp.232-241.

Soosay, C., Fearne, A., and Dent, B. 2012. Sustainable value chain analysis-A case study of Oxford Landing from “vine to dine”. Supply Chain Management: An International Journal, 17(1), 68-77.

Stadtler, H. 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Tatoglu, E., Bayraktar, E., Golgeci, I., Koh, S. L., Demirbag, M., and Zaim, S. 2016. How do supply chain management and information systems practices influence operational performance? Evidence from emerging country SMEs. International Journal of Logistics Research and Applications,19(3), 181-199.

Tayur, S., Ganeshan, R. and Magazine, M. eds., 2012. Quantitative models for supply chain management (Vol. 17). Springer Science & Business Media.

Walker, H. and Jones, N., 2012. Sustainable supply chain management across the UK private sector. Supply Chain Management: An International Journal, 17(1), pp.15-28.

 

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