Supply chain globalisation

Mullin, R. Shock to the system. Big questions about drug safety arise in the wake of rampant supply-chain globalisation. Chemical and Engineering News, 89 (2), 2011, 11-15. 

Figure 9.5 A schematic outline of the wine industry s value chain. In a globalised economy in which quality is defined as sustainable customer and consumer satisfaction, it is important to most producers to anticipate market trends and changing consumer preferences. A paradigm shift from a supply-chain approach to a demand-driven one has occurred over the past decade...

The development conditions of modern supply chains fundamentally change the vision of their future. Globalisation, the development of digital markets, the growing and more visible individualisation of demand, create - even force - a different model of collaboration within the supply chain. Attempts to improve competitive advantage and to limit the internal potential in this area more often than not encourage companies to review the nature of contacts with entities along the specific product s economic path. 

Globalisation also tends to lengthen supply chains as companies increasingly move production offshore or source from more distant locations. The impetus for this trend, which in recent years has accelerated dramatically, is the search for lower labour costs. However, one implication of these decisions is that end-to-end pipeline times may increase significantly. In time-sensitive markets, longer lead times can be fatal. 

The globalisation of industry, and hence supply chains, is inevitable. However, to enable the potential benefits of global networks to be fully realised, a wider supply chain perspective must be adopted. It can be argued that for the global corporation competitive advantage will increasingly derive from excellence in managing the complex web of relationships and flows that characterise their supply chains. 

Usually the motivation for offshore sourcing and manufacturing is cost reduction. Flowever, that definition of cost is typically limited to the cost of purchase or manufacture. Only rarely are total supply chain costs considered. The result of these cost-based decisions is often higher levels of risk as a result of extended lead times, greater buffer stocks and potentially higher levels of obsolescence - particularly in short life-cycle markets. A further impetus to the globalisation of supply chains has come from the increase in cross-border mergers and acquisitions that we have witnessed over the last decade or so. 

In the relatively short time that companies have been focusing on managing supply chains, the world has changed dramatically. Over the last three decades or so since the phrase supply chain management was first coined we have witnessed a major trend to globalised supply chains, with activities that were once performed in-house now outsourced, accompanied by a dramatic increase in volatility in the business environment creating ever higher levels of uncertainty in both demand and supply,... 

The globalisation of supply chains and the trends to outsourcing and offshore manufacturing in the search for low labour costs have paradoxically exposed businesses to new risks. For example the abolition of the Multi Fibre Agreement which has removed quota restrictions on low labour cost economies, has enabled those countries to increase their penetration of the market with cheaper imports thus increasing competition for UK manufacturers. 

Braithwaite, A. (2003) The Supply Chain Risks of Global Sourcing. LCP Consulting Supply Chain Strategy and Trends - Globalisation.LCP Consulting Ltd. UK. 

---