Suppy Chain

Globalization Economy (I)

What are the causes of economy globalization? What is the role of supply chain in economy globalization?

Posted: Jun 2009

The trend of global economy globalization gives a real challenge to the supply chain management. A global company is more than a multinational company. In the global business materials and components are shipped worldwide and products may be produced offshore and sold in many different countries.

Due to competitive pressure and trends of mergers and acquisitions, the global companies will dominate all markets The only role left for national companies will be to deal with specific and  local demands, like food industry.

For global companies the management of the supply chain process has become an issue of the greatest importance. The difference between profit and loss for an individual product depends upon global supply optimization, since the manipulation costs are significant.

The global company seeks to achieve competitive advantage by identifying world markets for its products and then to develop a manufacturing and supply chain strategy to support its marketing strategy. For example, the global companies outsource and disperse production of product parts. Later, all parts are shipped to main assembly facility. 

Economy globalization also tends to extend supply chains as companies increasingly move production offshore or source from more distant locations. This trend is caused by lower labor cost in offshore countries. On the other hand, this is increasing the supply chain complexity. The issue of supply chain complexity becomes even bigger in the light of shortening of product life cycles.

Therefore, precise timing, coordinated supply and just in time deliveries are crucial. The globalization of economy is inevitable. Therefore, supply chain needs to keep the pace with this trend. This require flexibility in supply chain planning.