What Is a Global Supply Chain?
Global supply chains are networks that can span across multiple continents and countries for the purpose of sourcing and supplying goods and services. Global supply chains involve the flow of information, processes and resources across the globe.
What Is the Difference Between Global Supply Chain vs Local Supply Chain?
A global supply chain utilises low-cost country sourcing and refers to the procurement of products and services from countries with lower labour rates and reduced production costs than that of the home country.
A global supply chain will usually flow from your own organisation in your home country as a buyer across your supplier tiers; it is these suppliers who will be located in other areas of the globe.
A local supply chain will look to optimise suppliers who are regional to your own organisation, in some instances organisations will look to leverage “home grown” supply routes, so all suppliers feeding into your supply chain will be located within the country in which your organisation is based, or the supply chain can be even closer in to your organisation and may even be within the same state/city/district, which often gives a clearer visibility of the whole supply chain from raw material through to consumer.
However there are both positives and negatives with global supply chains and the total landed cost or total cost of ownership should always be factored into the true costs.
What Are the Advantages of Globally Sourced Goods?
- Reduced cost price - due to lower labour and operating costs linked to the manufacturer of the products.
- Supplier development - it is often possible to support specialist product offerings leading to:
- Opportunity to increase innovation
- Sharing expertise and upskilling a new market/workforce
- Increasing competition – Developing new suppliers will open up your access to suitably skilled supply routes.
What Are the Disadvantages of Globally Sourced Goods?
- Longer lead times – Whilst the production time can be quite quick the lead time can often be much longer as the goods will require shipping which can add to the lad time, this means that forward planning can be a challenge.
- Reputational risks – Risk exposure to modern slavery, brand and financial risk exposure can all be increased.
- Fluctuations in Exchange rates – Global markets are more susceptible to regional influences that can impact trading markets.
- Challenges in communication – There needs to be careful consideration of terminology and the type of communication methods used to interface with a global supplier to ensure information is interpreted correctly.
- Increased risk exposure based on STEEPLED factors - As the supply chain spans over multiple countries there are increased risks of unrest in other countries having a direct impact on your supply chain activities.
- Loss of control – Due to the distance in the working relationship it can be difficult to manage communications and oversee technical aspects of the production process. Quality issues can also be complex to manage.
Is a Global Supply Chain Right for Our Organisation?
Each organisation will need to take a calculated view and weigh up the advantages and disadvantages of operating with a global or local supply chain.
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