Tuesday, February 18, 2014

Technological and Risk Based Problems’ Impact on Global Supply Chains

While reading about the potential challenges that a company can face during the management of their global supply chains, I came across an article by McKinsey. In the document, authors share McKinsey’s global survey results. You can reach the full article from the link below:

They surveyed operation and other senior executives from around the world about their companies’ supply chain strategies, the factors that influence those strategies, and the ways their companies act on these factors, how they manage their supply chains and the challenges involved in running a global supply chain.

Due to the survey results, following are the leading factors that affect their supply chain strategies:
1-      More complex products and services
2-      Higher energy prices
3-      Increasing financial volatility

Interestingly, reducing costs, improving customer service, and getting products to market faster could not get in to the top 3 of the list. Moreover, it is explored that the companies have tendency towards centralize rather than localization in their supply chains.

56% of the respondents mentioned that supply chains of companies with revenue greater than $1 billion became more centralized. This finding is in compliance with McKinsey’s experience that companies try to make the use of large scales by taking the advantage of synergies and strengthening their operational expertise.  This makes the role of technology and the web on global supply chains more crucial.

However, as the companies’ supply chains become more global, they face some management challenges (See the table below).

Table: The challenges of becoming global

In this context, technological and risk based problems might arise while trying to create a transparent supply chain. For instance, multiple vendors may process a single transaction or there might occur a trade-off between  the extent of visibilty a company’s vendors should have into proprietary IT systems that may represent a source of its competitive advantage.

Here the question “To what extent should a company’s supply chain be transparent?” comes to mind; both in order to prevent  any complication in the transaction process and to guarantee to be at the optimum point of the trade-off mentioned above.

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