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4 Benefits & 6 Challenges with a Globalized Supply Chain

Sep 13, 2016 8:00:00 AM

globalizationsupplychain.jpgWith the advent of the internet and other technologies, the improvement of transportation infrastructures, and significant developments in trade, the world has gotten much, much smaller in recent decades. In fact, globalization has affected most facets of our lives, including politics, economics, education, health, employment, and culture. It is no surprise that globalization has also greatly affected supply chain management (SCM).

In today’s post, we will look at both the positive and negative effects of globalization supply chain management, as well as what the future of globalized SCM may look like.

The Benefits of a Globalized Supply Chain

Globalization has unlocked a plethora of new opportunities for supply chain management, from expanded sourcing opportunities to expanded markets. These opportunities beget two larger opportunities: the chance to save money and the chance to increase efficiency. Let’s take a closer look:

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  1. Expanded sourcing opportunities. A world market offers businesses opportunities to secure a diverse selection of workers, materials, and products. This larger selection of goods and services often means the opportunity to select higher-quality or lower-cost options.
  2. The opportunity to reach new customers in new markets. Just as globalization offers more materials and laborers, it also offers new customers in new locations with new needs.
  3. More room to grow. New technologies and a shrinking globe mean that it is easier for companies to grow generally: to produce more, offer more, and sell more. Expanding borders also means expanding businesses and corporations. 
  4. More opportunities to save money. Globalization’s biggest benefit is that increases options: options for source materials, options for workers, and options for transportation. More options mean more chances to save on spending and increase profits.

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The Drawbacks of a Globalized Supply Chain

Although the new opportunities associated with a global marketplace are numerous, globalization also presents a new set of challenges for supply chain management, from how to increase the scale of operations to how to manage the risks that come along with crossing borders and circumnavigating the globe. To successfully take advantage of the positive aspects of globalization, those working in the supply chain must first overcome the following negatives:

  1. Large-scale management issues.  The opportunity to grow business goes hand-in-hand with the issue of greatly increased supply chain complexity when it comes to management. Companies must scale up all aspects of their business as it grows across borders, which can cause problems that stretch the globe. Inventory issues and distribution issues are high on the list of problems encountered by going global.
  2. Greater risk. Having materials, factories, and customers all over the world means being at the mercy of global events, from natural disasters, to port closures, to political uprisings. Globalization requires that supply chain managers have detailed risk management plans in place and that they are prepared when disaster strikes. 
  3. Global competition. You are not the only entity with access to supplies, products, and labor around the world – you now have a lot of competition scattered across the globe. Globalization necessitates that supply chains are highly efficient and and well-run in order to stay competitive in a global market. 
  4. Information collection challenges. With different aspects of your supply chain scattered around the world, and with an increasingly complex process for getting products to customers, data collection and oversight can be huge new challenges. While big data analytics is helping some supply chain managers tackle the issue of information collection, it is still a large problem that has emerged alongside globalization. 
  5. Legal issues. Operating across borders means operating in countries that very likely have different laws and regulations. For example, secret product details may not be safe in China, where they have less stringent intellectual property laws. In another example, a country where you have a factory may have very different employment laws than another where you have an identical factory. 

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Ultimately, it is vital to understand that globalization is not going away time soon. Because this trend is here to stay, supply chain managers must create frameworks and systems that take advantage of the opportunities that globalization has to offer while seriously confronting the parallel challenges that arise.

ContractRoom is a negotiation and deal / contract lifecycle management software system that helps procurement professionals improve the way they do deals and make decisions around the needs of their supply chain.  To find out more about ContractRoom or book a free demo please visit www.contractroom.com .

Sarah Aswell

Written by Sarah Aswell

Sarah Aswell is a freelance writer and content strategist who writes about small business, content marketing, and legal issues, among many other topics. She earned an MFA in creative writing from the University of Montana and has a background in journalism and publishing. She lives in Missoula, Montana with her husband and two daughters.

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