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The world is smaller and at the same time more competitive, trough the internet is possible to purchase any item for the best price anywhere in the world that it belongs to. So from one day to the other one things change and companies from all sizes have to adapt to this called globalisation.
Business before used to do every single step of their operations in their own plant, plan, design, manufacture, marketing, delivery and so on; but today the supply chain has been broken and now spread over several continents in organizations with different cultures, languages, and business objectives.
This time is a time when big economical and environmental changes have coming through and the way that every company try to get advantage or just stopping trying and quit doing it. How businesses can get the best of the new global environment and strength their capabilities or reconfiguration of their business supply chain to penetrate a truly global market.
"Cheaper, faster, better is - and has been - the mantra among supply chain executives". But there are many risks and problems that come together with this, how to sort it out and obtain the best results. The aim is to find how to offer the right product, at the right place, at the right price.
INTERNATIONALISATION AND GLOBALISATION
Internationalisation means the interaction between nations, international trade, international relations, treaties, alliances, etc. The relevance about this term is that no country is able to survive without the contact from other countries, there is no country self-sufficient. In other words, internationalization refers to national goods or services competing in other countries.
And globalisation refers no just to global economic integration, , mainly by free trade and free capital mobility, but also by easy or uncontrolled migration. Globalisation is here and everywhere, goods and services from one country are available all over around the world, people can travel much easier from one continent to another, the barriers between countries has been removed giving more freedom and competitiveness, bigger market and bigger opportunities. With an open world people and businesses can get the best from anywhere in the world, better prices, better quality, increasing technology and more and different variety of products and services.
SUPPLY CHAIN IN A GLOBALISED WORLD
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Before used to be easier for example, a company was able from getting the raw materials throughout the process until it reaches the final customer; they had absolutely control of inventories, the demand changed slowly and the flow of information given as well. But nowadays and thanks to the globalisation the supply chain has becoming more and more complex, because the objective is get better prices, reducing cost production and increasing revenue; finding solutions all over around the globe. Outsourcing and offshore are more frequently used, the demand changes constantly and the information given for the market has been increasing so the work of choosing what information is useful and what it is not, it is becoming part of the process.
For example Apple, Dell, HP, and in general every other computer seller, are called Original Equipment Manufacturers (OEMs), they design their systems but then outsources the assembly to contract manufacturers, also known as original design manufacturers (ODMs). While most of these ODMs have headquarters in Taiwan, their factories are usually in China, where labour costs are lower and environmental standards are lax. In this way, companies are looking for flexibility, lower cost and more profitability.
Many people, when go for shopping usually want to get things that are not made in China, but they do not realise that day by day it is very difficult or almost impossible to find a good made in the UK or USA.
Sources of environmental pressures affecting the supply chain
Regulations: Environmental and health regulations related with industrial production have becoming more strict, and for that reason it increases the cost in the supply chain, because they have to apply and follow them and in some cases change or improve their technologies, standardization, materials and so on to satisfy them.
In other hand, there are some environmental taxes, fees and liabilities that increase the price of the item at the time that the customer is going to purchase it, which affect directly the supply chain.
Supplier instability: There is risk when companies do not rely on their partners, to avoid this, it is necessary to qualify and monitor the behaviour of their suppliers to make sure that they meet the company's requirements and specifications, in areas as: Finance, corporate and environmental responsibility, fair labour, health and safety.
As Larry Lapide said "Trust is a key element because it demonstrates integrated business planning in the supply chain"
Consumers and Ethical Responsibility: The end consumer as one of the most important players in the supply chain, they want quality and every time they tend to ask for environmental attributes like free range, organics, no preservatives, etc. But also they are looking for the most competitive prices as today there are many competitors in the market they have the option to choose and go for the product that better fit their needs.
Customer input (interaction) is relevant in the supply chain because companies will not be able to afford the excess inventory, lost sales and missed innovation opportunities caused by inadequate customer collaboration.
Resources: Today the man realised that there are resources that are not lasting long, that is why they have to act carefully in their use, for example water, energy, oil and so on.
Natural disasters, terrorism, etc: As the supply chain has been broken and spare in different countries around the world, any unexpected change can be affect the inventory, from a natural disaster to and terrorist attack.
Visibility Although more information is available, proportionally less is being effectively captured, managed, analyzed and made available to people who need it. So many times there is no adequate control over their supply chain, suppliers, customers, etc making difficult to respond to changes in the supply and demand. With limited or mistaken visibility into the operations and constraints of third-party partners, it becomes more and more difficult to make decisions or take action on urgent demand spikes, natural disasters, or a component approaching obsolescence.
GLOBAL PRODUCTION SYSTEMS
Global production systems as a essential part in the supply chain, refers to the distribution of the different productions processes into different stages, locate these in different parts of the world, and take advantage of the new information and communications technologies; this is as a result of globalisation where companies can find meaning work, quality, income and regulations that can be easily adapted into their own context.
But as the production gets globalised the costumers are looking for customised items, a study conducted by Berry and Cooper (1999) has shown that productivity of a production system decreases when the product variety is increased. So in this way the supply chain should be able to produce different products to become competitive in the market place in an acceptable speed and cost. Also, for example, when there is an unexpected short term supply shortage of a raw material, an inflexible production system would incur high costs due to its inability to reschedule production or to decrease the production capacity temporarily.
This implies that flexibility is an important competitive advantage a supply chain should pursue to win the intense competition.
For example, BMW As their global production systems become increasingly complex and integrated, firms need sophisticated models to allocate production throughout world, in this case BMW counts with plants in South Africa, United States, India, China, Canada, Austria, United Kingdom, Germany, etc., As Fleischmann, Ferber, and Henrich explain in their "Strategic Planning of BMW's Global Production Network" they describe an application of mathematical programming at BMW to address its time-phased planning problem, including obtaining materials and distributing finished cars to global markets. The model determines the investments needed by the three production departments-body assembly, paint shop, and final assembly-for every site and the financial impact on cash flows.
OPPORTUNITIES FOR FIRMS TO RECONFIGURE THEIR SUPPLY CHAINS AND GLOBALISE PRODUCTION SYSTEMS
Globalization helps to discover some redundancies from their business processes,
These findings suggest globalization has contributed more to revenue growth than efficiency
And on the positive side, far more leaders report increased sales and improved performance.
For example, some parts of India have now become centers for high-tech outsourced services which may once have been done in-house only out of necessity. Not only are provided to companies by highly qualified, overseas workers, but they are being done at a fraction of the price they could be done in the United States or any other Western country.
Fewer supplies may be easier to manage but could also lead to potential problems if one vendor is unable to deliver as expected or if one vendor tries to leverage its supply power to obtain price concessions.
companies who choose to ship their manufacturing overseas may have to face some additional considerations as well. Questions regarding the number of plants that are needed, as well as the locations for those plants can pose difficult logistical problems for companies. However, it often helps to examine these issues in terms of the global supply chain. For example, if a business uses a number of vendors around Bangalore, India than it may make sense to locate the manufacturing plant that would utilize those supplies in or around Bangalore as well. Not only will this provide lower employee costs, but overall shipping and tariff expenses should also be reduced. This would then save the company money.
"Globalise or be globalised." Businesses that seek growth, innovation, and talent must begin to look
beyond their own borders-and be prepared to defend those assets that they already have.
The Gross Domestic Product (GDP) of emerging countries in the East is growing significantly faster
than the GDP of developed countries. Many businesses, including Cisco, view the East as a
significant source of growth. For example, India's emerging middle class represents 300 million
people, which is more than the entire population of the United States.
Innovation and adoption are accelerated in the East because everything is relatively new. For
example, technology-enabled smart buildings can be deployed more rapidly without having to
migrate entrenched IT infrastructure or retrofit buildings.
Fighting for Talent
Populations in the West are aging, the workforce is shrinking, and the supply of engineers,
scientists, mathematicians, and technical talent has not kept pace with demand. Businesses that
require the best, brightest technical employees must seek talent where it can be found. India and
China are educating millions of talented young people, and the five major IT companies in India,
including TCS, Infosys, Wipro, Satyam, and HC, plan to hire 100,000 people in FY08.1
Large potential markets represent a tremendous opportunity. However, there are other
opportunities that globalisation offers:
â- Business transformation: Globalisation motivates innovation in processes, approaches,
and products, which can be used to transform the business.
â- Faster growth: Globalisation can accelerate growth by placing more resources closer
â- Profitable partnerships: Globalisation offers opportunities to partners with strong
organizations and multiplies the business's impact.
â- Optimized talent: With a global range of resources to draw on, businesses can improve
their abilities to bring the best talent to any given customer offering.
â- Superior customer service: Businesses can access resources from regions where people
are culturally service-oriented, using high-quality video or interactive solutions to deliver
superior customer service.