Tuesday, February 25, 2014

Global versus Local Supply Chain Network

Manufacturing processes are the heart of all supply chain networks. But does that mean that simply opening a manufacturing centre in a location with cheap labour and tax evasions will be enough to create a strong supply chain management network? The following  you tube video clearly describes how it is not the best thing to simply assign amateurs based on only the above hypothesis. It could be extremely harmful to global supply chain management.

This video describes the analogy of global supply chain networks with that of a human body. It describes if the manufacturing centre is the heart of the supply chain network, you simply cannot do offshoring and attempt to have a world class supply chain network by building a manufacturing plant in a location where manufacturing in itself is less expensive. Your network might not even be sustain the burden of the global supply chain management network.

Amul – “The taste of India is a worldwide example of a supply chain network based locally which not only gives efficiency to the supply chain network of the industry but also creates a strong correlation between the rural people who manufacture milk and the urban population who consume the milk. Dr Verghese Kourien pioneered the idea of this network. He is described as the “Milk Man of India”.

Amul is a Cooperative dairy industry which was founded in 1946. In 2008 to 2009 , it had a total revenue of 67.11 billion. It created the white revolution in India. The idea was to make milk produced in rural regions, available in all parts in India. Amul had an 13,328 villages associated with it and its total milk handling capacity was 11.22 million litres per day. It was a huge success, which later on became the business model to create “Operation Flood” i.e. the business model of manufacturing and packaging good quality milk within two or three days to every nook and corner in India.

This business model was successful only because the manufacturing centres and the distribution centres were not very far. The transportation was also very cheap. But will the same model of cheap labour and transfer of goods be successful in a global delivery model? Probably not. It all depends upon the cost of transfer of goods and raw materials. Therefore, it is best to look into the matters of supply chain manufacturing goods from a variety of perspectives before selecting whether to go for a global supply chain or a local supply chain.

References :
      1) http://www.youtube.com/watch?v=Eh04dsSOK00&list=PLFynRLNQ03H3T53DQkXyvReZ-CD3zzfrD&index=2

2    2) http://www.slideshare.net/lucky7shimla/amul-logistics

      Question - What other factors other than transportation and logistics can be of hindrance to global supply chain network ?

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