Discuss the challenges that a company may experience with a global supply chain.
Businesses and supply chains have become substantiality global over the last decade. Between 1995 and 2007, the number of transnational companies has more than doubled from 38,000 to 79,000 and foreign subsidiaries have nearly tripled, from 265,000 to 790,000. (Ref: IBM report “the smarter supply chain of the future”)
In addition to spreading geographically, supply chains now involve more companies. Nearly 80% of executives surveyed said they expect the number of collaborative relationships with third parties to increase. And ever broader range of activities is being outsourced: (Ref IBM report “the smarter supply chain of the future”)
There is no single definition of a “global” supply chain but as the traditional definition states it is a network of organisations involved through the upstream and downstream linkages, in the different processes and activities that produce value in the form of products or services in the hands of the ultimate consumer. Globalisation has fuelled the new global supply chain and defines the network as being global.
If we consider the well know Barbie doll, Barbie, originally made in Japan but today different parts are made in various countries, hair made in Japan, plastic body comes from Taiwan, cotton clothing from china and mounds and pigments from the USA. If we add the logistics and assembly as well as supporting activities it’s obvious that a global supply chain faces many challenges in fulfilling customer needs and demands.
Challenges of complexity
Christopher (2011) identifies 8 sources of complexity in the supply chain; we briefly mention key complexities that lead to challenges in the global supply chain.
In a global supply chain or network companies through their adopted strategies have indentified core and non core activities and in most cases they have outsourced noncore activities. This has elongated the supply chain and increased the interdependency across the network. This has created a more complex supply chain where actions or unforeseen events can cause disruption and create challenges. The focal company depends on suppliers several tiers away some of which they may have no knowledge of. Dell for example only realised following an earthquake in Taiwan in 1999 that one of their indirect suppliers supplied many millions dollars worth of chips.
Process complexity within the supply chain have also created challenges , Proctor and Gamble suffered delays in their Tide Pods detergent due to “new –to- the- world manufacturing processes”.
Range complexity has increased due to need of variants to satisfy demand; this in turn has lead to more difficult forecasting and has created lower volume demand.
Product complexity continues to cause challenges due to the number of components or sub components and the lack of commonality across the bill of materials. This has led to less flexibility to vary product mix or volume.
Supplier complexity, as discussed above Global supply chains have become elongated with more suppliers involved in the creation and delivery of a product, this creates more relationships to be managed and some that cannot, there is a challenge in the integration of the links in the chain. Issues such as the type of relationship the focal company should have.
Organisational complexity is created with the need for functions, teams and organisations to operate in a cross functional manner to improve efficiencies and reduce costs, if we consider that global supply chains must operate across time zones and different cultures it creates further challenges. Global supply chains are dependent on the flows of information unfortunately this can also cause challenges such as a lack of visibility in the supply chain, incorrect forecasting and language barriers. It’s vital to insure transparency exists...
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