This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain Globalization Impact adding some additional support as well. I made an update to this post 12Oct13.
Supply Chain: The Globalization Impact
APICS defines globalization as the interdependence of economics globally that results from the growing volume and variety of international transactions in goods, services, and capital, and capital, and also from the spread of new technology. Supply chains and globalization will continue to influence each other throughout the 21st century. A global strategy focuses on improving global performance through the sell and marketing of goods and services with minimal variation by country. This is not to be confused with multi-country strategy which has variation by country utilizing local capabilities.
The interdependence of economies around the globe creates a number of opportunities for supply chain managers:
- New markets for goods and services
- New Resources and suppliers
- New pools of labor
Trade between nations has been around for a long time but has increased in recent years due to enablers such as transportation and information technologies. Nations and companies alike are focusing on these core competencies in order to participate more profitably in the global trade. A combination of the competencies makes globalization possible at a competitive price.
Globalization creates challenges just as it has created opportunities. Cultural differences between nations come into sharper focus creating potentials for terrorist attacks, piracy, and illicit trafficking of goods and services. Other challenges are the introduction of disruptive technologies that create a competitive advantage for one supply chain become a must for the others which then moves towards commoditization.
The 10 Keys to Global Logistics and Trade Management:
- Focus on total delivered cost management
- Further automate global logistic processes
- achieve end-to-end visibility
- Leverage supplier portals and achieve advanced ship notice compliance
- Commit to total identification and regulatory compliance
- Maintain transportation flexibility
- Embrace variability management
- Build integrated international and domestic workflows
- Adopt and integrate planning and execution platforms
- Focus on financial supply chain management
Companies and nations must become involved globally in order to remain competitive. Additionally, the advent of complex economies opens markets for local resources while introducing new products and service not locally available. Overall, global supply chains must be adaptable and responsive to the global system while cooperating on a local level. National markets must be chosen wisely in order to limit variation.
Regionalization vs Globalization
While business is globalizing the world is regionalizing. Globalization of industry and business means that companies are becoming either multi-national or multi-cultural organizations. Multi-national companies retain a unique identity across nations and cultures. Whereas multi-cultural companies assume the culture and identity of their hosts. Management is dramatically different between the two types of companies. However, another challenge is thrown into the mix - regionalization. Regionalization blurs cultural and national boundaries generally into larger regional economic centers of influence. I discuss this movement in the post Reflecting on the Character of Business and the Economy.
Regionalization has the effect of reducing nationalistic opportunities for industry to a few regional opportunities for industry to leverage. As part of regionalization, freedom of movement within the region is increased and trade barriers are decreased. Trade between regions has yet to be determined but on the surface appears to become more standardized. Currently, there are only five major regionalization efforts with more developing. Some regionalization efforts will be very tumultuous and even belligerent as the case with the Middle East. Other regionalization efforts will just happen overnight.
With the increased freedom of movement and reduced trade barriers, supply chains will dramatically change. In some cases, components in the chain will move to new regions and other component will move into areas previously not possible. Overall, the supply chain challenge will increase as the world order regionalizes.
References:
(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.
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