Key Issue in Supply Chain Management

Globalization.

Globalization presents several critical supply chain management challenges to enterprises and

organizations:

First, to reduce costs across the supply chain, enterprises are moving manufacturing operations to countries which offer lower labor costs, lower taxes, and/or lower costs of transport for raw materials. For some companies, outsourcing production involves not only a single country, but several countries for different parts of their products.

However, outsourcing not only extends the production process globally, but also the company’s procurement network. Having suppliers in different geographic locations complicates the supply chain. Companies will have to deal with, coordinate, and collaborate with parties across borders regarding manufacturing, storage, and logistics. Furthermore, they have to extend or maintain fast delivery lead times to customers who want to receive their products on schedule despite the increased complexity in the manufacturer’s supply chains. Finally, they also have to maintain real-time visibility into their production cycle — from raw materials to finished goods — to ensure the efficiency of their manufacturing processes.

Second, as companies expand sales into global markets, localization of existing products requires a significant change in the supply chain as companies adapt their products to different cultures and preferences.  There is an inherent risk of losing control, visibility, and proper management over inventory , especially if enterprise applications are not integrated.  This requires managing diverse structures of data across geographies effectively.

For example: many manufacturers in Asia still handle trading partner communications via fax and email while suppliers in North America and Europe have utilized EDI for decades.  As technology matures, suppliers in emerging markets may skip EDI altogether and move to a more modern API driven approach to communication just as developing countries have skipped land lines in favor cell phones.

Supply chain practitioners need to ask if their enterprise technology is prepared to handle these diverse forms of communication that arise from Globalization, and build a business case to stay prepared.