Tuesday, February 25, 2014

Impact of globalization on supply chain management

Globalization has created both opportunities and risks for companies, as the more connected economic environment has brought more customers and new markets whereas also bought larger extent of competitors. 
Globalization process along with the emerging of new markets for goods and service, new resources and supplier, and new pools of labor creates opportunities to companies. The more collaborative environment makes it possible for companies to reduce cost and focusing on these core competencies  to participate more profitably in the global trade.

Accompanied with the opportunities, challenges regard to supply chain also presented with the globalization. The global marketplace has made supply and demand more volatile and hard to forecast as there is a greater reliance on different companies spread over great distances. The global network made the supply chain more complex as the increased number of suppliers, customers and plants spread throughout the world. This can make it difficult for managers to maintain an adequate level of control over their operations. 
There is also increased competition from low cost products from overseas markets. Expanded market also means a broader range of competitors, companies devote themselves to explore more efficient technologies, strategies to provide better quality products, faster delivery service, and lower cost  in order to maintain their comparative advantages in the global competition.
Decreased number of information is another factor that may undermine the global supply chain. With large number of partners and franchises, decisions are difficult to be made with full information and therefore brings risk to the supply chain.
Reference http://www.forbes.com/sites/ciocentral/2012/10/04/managing-the-risks-of-a-globalized-supply-chain/

The uncertainty accompanied with the globalization process, companies are seeking for new methods and strategies to mitigate the risk and take control over the uncertainty factors. Have a better understanding of the risks and prepare for an plan to response to the issues coming out is the way to enhance the ability of companies to stand against the challenges.
"Being Successful Means Managing Uncertainty. How will you face so many uncertainties and potential challenges?  You certainly can’t control all external forces (political, natural disasters, energy costs, counterfeiting, and others), but you can start by making SCRM an integral part of your organization’s strategic planning process and redefining your internal practices and processes. As you plan for the future and build on strengths, make sure you understand the risks and threats that could cause you to lose competitive advantage. All of your executives need to be involved in this process. In addition, you will need an emergency plan for new external or internal threats. A proper SCRM plan is not about building fear in the organization, but rather about bringing peace of mind. Your organization will have taken the time to understand what is important and how to protect it, should a crisis happen. This will ultimately make your organization stronger and ready to take advantage of situations that cause others to flounder."

Reference: http://www.thomasnet.com/journals/procurement/globalization-presents-challenges-that-require-supply-chain-risk-management/#sthash.qnpDORJC.dpuf

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