Page 251 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Because global supply chain management usually involves a plethora of countries, it also usually
comes with a plethora of new difficulties that need to be dealt with appropriately. One that
companies need to consider is the overall costs. While local labour costs may be significantly
lower, companies must also focus on the costs of space, tariffs, and other expenses related to
doing business overseas. Additionally, companies need to factor in the exchange rate. Obviously,
companies must do their research and give serious consideration to all of these different elements
as part of their global supply management approach.

Time is another big issue that should be addressed when dealing with global supply chain
management. The productivity of the overseas employees and the extended shipping times can
either positively or negatively affect the company’s lead time, but either way these times need
to be figured into the overall procurement plan. Other factors can also come into play here as
well.

Example: The weather conditions on one side of the world often vary greatly from those
on the other and can impact production and shipping dramatically.
Also, customs clearance time and other governmental red tape can add further delays that need
to be planned for and figured into the big picture.
Besides contemplating these issues, a business attempting to manage its global supply chain
must also ask itself a number of other serious questions. First, the company needs to make
decisions about its overall outsourcing plan. For whatever reason, businesses may desire to
keep some aspects of supply chain closer to home. However, these reasons are not quite as
important as other countries advance technologically.

Example: Some parts of India have now become centres 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.

Another issue that must be incorporated into a global supply chain management strategy is
supplier selection. Comparing vendor bids from within the company’s parent-country can be
difficult enough but comparing bids from an array of global suppliers can be even more complex.
How to make these choices is one of the first decisions companies must make, and it should be
a decision firmly based on research. Too often companies jump on the lowest price instead of
taking the time to factor in all of the other elements, including those related to money and time.
Additionally, companies must make decisions about the number of suppliers to use. 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.
Finally, 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.

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.

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