What Is a Global Supply Chain?

Global supply chains are networks that can span across multiple continents
and countries for the purpose of sourcing and supplying goods and services.
Global supply chains involve the flow of information, processes and resources
across the globe.

What Is the Difference Between Global Supply

Chain vs Local Supply Chain?
A global supply chain utilises low-cost country sourcing and refers to the
procurement of products and services from countries with lower labour rates
and reduced production costs than that of the home country.

A global supply chain will usually flow from your own organisation in your
home country as a buyer across your supplier tiers; it is these suppliers who
will be located in other areas of the globe.

A local supply chain will look to optimise suppliers who are regional to your
own organisation, in some instances organisations will look to leverage “home
grown” supply routes, so all suppliers feeding into your supply chain will be
located within the country in which your organisation is based, or the supply
chain can be even closer in to your organisation and may even be within the
same state/city/district, which often gives a clearer visibility of the whole
supply chain from raw material through to consumer.

However there are both positives and negatives with global supply chains and
the total landed cost or total cost of ownership should always be factored into
the true costs.

What Are the Advantages of Globally Sourced

Goods?
 Reduced cost price - due to lower labour and operating costs linked to
the manufacturer of the products.
 Supplier development - it is often possible to support specialist
product offerings leading to:
o Opportunity to increase innovation
o Sharing expertise and upskilling a new market/workforce

 Increasing competition – Developing new suppliers will open up your

access to suitably skilled supply routes.
What Are the Disadvantages of Globally
Sourced Goods?
 Longer lead times – Whilst the production time can be quite quick the
lead time can often be much longer as the goods will require shipping
which can add to the lad time, this means that forward planning can be
a challenge.
 Reputational risks – Risk exposure to modern slavery, brand and
financial risk exposure can all be increased.
 Fluctuations in Exchange rates – Global markets are more
susceptible to regional influences that can impact trading markets.
 Challenges in communication – There needs to be careful
consideration of terminology and the type of communication methods
used to interface with a global supplier to ensure information is
interpreted correctly.
 Increased risk exposure based on STEEPLED factors - As the
supply chain spans over multiple countries there are increased risks of
unrest in other countries having a direct impact on your supply chain
activities.
 Loss of control – Due to the distance in the working relationship it can
be difficult to manage communications and oversee technical aspects of
the production process. Quality issues can also be complex to manage.

Is a Global Supply Chain Right for Our

Organisation?
Each organisation will need to take a calculated view and weigh up the
advantages and disadvantages of operating with a global or local supply
chain.

SUMMARY

Learning the definition of (and best practices for) global supply chain now can help
when your company is ready to go global.

BENEFITS OF GLOBAL SUPPLY CHAINS

A global supply chain definition is pretty straightforward: It is the worldwide system that a
business uses to produce products or services.

That sounds simple enough, yet a global supply chain can be anything but. There are so
many facets that need to be in sync.
Employees—the information they need to keep the system running, the resources that
they use—and even the tools businesses use to stay compliant with government
regulations can be considered part of a global supply chain.

Global Supply Chain Benefits

One of the benefits of a global supply chain is lowered costs for businesses.

Granted, at first glance, you wouldn't think extending a supply chain around the
planet would help a business bring down the price of their final product or service.
(Freight and transportation obviously will always add numbers to the bottom line.) But
many countries have lower production costs that make it attractive to expand a supply
chain to other parts of the world.

You also may be able to bring down expenses by purchasing goods and services from a
supplier when the dollar is stronger against the national currency of the country that
you're doing business with.

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But another benefit is that a global supply chain can make it easier to sell to customers
around the world. If your company has outposts in the supply chain throughout, say,
Asia and Europe, your business may find it easier to start selling to those parts of the
world as well.

You’re also potentially spreading your risk by having a global supply chain. Let's say you
didn't have a global supply chain, and your supply chain was relegated to one particular
region. If that area had a severe natural disaster, you could see your entire business
come to a halt for a few days, weeks or even longer, depending on how bad of a
disaster we're talking.

Of course, you could argue that you're increasing your risks by having a global supply
chain. Odds are, something will go wrong somewhere along the chain. But the better the
supply chain management, the lower those risks can be.

What Does a Global Supply Chain Need to Succeed?

There are a lot of factors that come together to make a global supply chain successful,
and it's almost impossible to pinpoint one as the most important.

Cash flow and a good financial steward is obviously vital. If your business doesn't have
enough working capital and can't pay for its own infrastructure, it probably won't stay in
business very long.

It's important to run the supply chain well so that you don't lose money on it. Daren
Samuels is practice director of operations at Patina Solutions, which offers on-demand
executives in all industries and is headquartered in Brookfield, Wisconsin. According to
Samuels, a supply chain can consume up to 85 percent of a company's revenue.
“So getting it right is really important," he says.

Things such as managing waste and avoiding employee theft is also very important, so
you want to have policies that prevent loss, says Mark Struss, practice director of
manufacturing operations at Patina Solutions.

For instance, Struss says that if you have valuable components being made or stored in
warehouses, your manufacturing plants may require using “only clear trash bags and,
depending on the size and value of the components, lunch box inspections at clock out
may make sense."

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That may sound extreme, but hire the wrong people, and you could lose a lot of money
over the years.

A clear plan for your logistics is also imperative. Especially if you're dealing in e-
commerce, “it's critical for businesses to be able to reach as many customers as
quickly—and cheaply—as possible," says Jake Rheude, vice president of marketing
at Red Stag Fulfillment, a third-party logistics (3PL) company headquartered in
Knoxville, Tennessee.

“We're in a very competitive industry, as there are lots of warehouses all over the
country, placed strategically near urban centers to minimize delivery distance," Rheude
says. “Just because you, the customer, got free shipping on that order from [a
department store] doesn't mean shipping was actually free. So a major component of
supply chains is to use 3PLs to help fill that cost gap by minimizing the resources sunk
into moving orders from point A to point B."

Again, it all comes down to cost. A global supply chain needs to be as efficient as
possible, so costs don't go out of control. For instance, say you produce too many
goods, and they end up sitting in a warehouse for an extended period of time.

You can start to see how things could start to add up.

What Types of Business See the Most Success

From Global Supply Chains?
Many manufacturing companies can benefit from a global supply chain, and certainly
any business that wants to be an international force and sell to countries around the
world is going to need a robust system for getting its products or services from Point A to
Point B.

It's critical for businesses to be able to reach as many customers as quickly—and

cheaply—as possible.
—Jake Rheude, vice president of marketing, Red Stag Fulfillment
Food and beverage, mining companies, oil and gas, electronics and the textile industries
are just a few of the many that thrive with global supply chains. If your business
produces a product to sell to the public on large scale, you may do well to have a global
supply chain, if you don't have one already.

How Is a Global Supply Chain Related to Global

Value Chains?
The term global value chain refers to an international supply chain of people and
activities that go into creating and offering goods or services when the supply chain
needs to be managed across different countries.

This, of course, sounds like the definition of a global supply chain.

The subtle difference is that a global supply chain generally is referred to when
discussing the manufacturing and distribution steps. For example, you probably wouldn't
include your research and development or marketing team when talking about your
global supply chain. They add a lot of value, but you could probably produce or distribute
your goods without them.

A global value chain, however, describes it all, and when you have a global supply
chain, you need to be thinking about it all. Even your custodial service might be
considered part of your global value chain, especially if your product or service is in the
food or medical industries.

Basically, if a partner, vendor or supplier adds value to your business, and could hurt
your supply chain if something broke down, then that's an important part of your global
value chain—even if it's only indirectly part of the supply chain. And if you don't have the
working capital or resources to quickly fix a problem that suddenly surfaces, you could
quickly have a problem that doesn't go away any time soon.

But that's why it can be smart to think about a global value chain along with your global
supply chain. If you place importance on every piece of the system that produces your
goods or services, your business is less likely to be inefficient and run into trouble in the
future.

There's a lot of value in thinking about a global value chain.