International Supply Chain Management
Increasingly, organizations are taking advantage of modern communications and transportation technologies in order to increase their competitive edge by producing and selling goods in the global marketplace. To facilitate these activities, organizations utilize supply chain management to efficiently connect the parties involved in a value chain to minimize costs, enhance customer service capabilities, augment the organization’s knowledge base, maximize efficiency, and develop barriers to competitors. Although supply chain management is a complicated process, it is made more so by the compounding factor of dealing with manufacturers, suppliers, and customers in other countries with different cultures, regulations, and tax and legal systems. International supply chain management can help in this process by managing the creation and dissemination of goods and services through specific, coherent connections between processes, structures, and objectives of the members of the supply chain.
Keywords Globalization; Integrated Supply Chain; International Supply Chain Management; Just-in-Time Manufacturing (JIT); Knowledge-Based Theory; Supply Chain; Supply Chain Management; Value Chain
The 21st century has brought with it many advances in the ways that we do things. New technologies have transformed the way that we communicate and have relieved us of many repetitive tasks. One of the results of this trajectory is that for practical purposes, our planet has become smaller. It no longer requires great thought — or great money — to pick up the phone and call halfway around the world. In fact, we do not even have to pick up the phone. We can simply log on to a business's web site and send an e-mail or log on to an Internet phone service provider to speak with friends, family, or business associates anywhere on the planet for little or no cost. The same technologies that make our personal world smaller have made our business world smaller, too. Increasingly, businesses are going international, part of a movement toward globalization. Globalization is the process of businesses or technologies spreading across the world. This allows organizations to have offshore operations that are in countries where production or personnel costs are lower than in the home country. Sometimes these operations are outsourced to foreign countries for the same reason.
Advantages of Globalization
Globalization offers many advantages to businesses. Chief among these are lower personnel and production costs and the ability to have multiple operations in multiple time zones in order to enable around the clock production and increase competitive edge in the marketplace. However, globalization is not without its disadvantages. The organization needs to understand the culture, laws, and regulations of the other country in order to be able to do business effectively. This task is complicated enough as far as production is concerned. However, when the finished product or component needs to be delivered internationally, transportation becomes more cumbersome. Just as employment laws differ from country to country, laws and regulations for international shipping differ from those for national shipping. In addition, a rush order from the other side of the globe is typically more difficult — and expensive — to achieve than a rush order from the other side of the city.
Supply Chain Management
Consideration of these aspects of business logistics are part of supply chain management. A supply chain is a network of organizations involved in the production, delivery, and sale of a product. The supply chain may include suppliers, manufacturers, storage facilities, transporters, and retailers. Each organization in the chain provides a value-added activity to the product or service. The supply chain includes the flow of tangible goods and materials, funds, and information between the organizations in the network. Supply chain management is the process of managing the flow of these things within and between the organizations in the chain. All the parties in the network are linked together into a system. The functioning of each of these affects the functioning of the others.
The purpose of supply chain management is to efficiently connect the parties in a value chain in order to minimize costs, enhance customer service capabilities, augment the organization’s knowledge base, maximize efficiency, and develop barriers to competitors. This process is challenging enough at a regional or national level and encompasses not only manufacturing, but warehousing and delivery of materials, components, and other supplies that are necessary to bring the product to market. Supply chain management not only encompasses such tangible assets, but also the information systems and financial systems that allow the product to be developed, produced, and sold. One of the goals of supply chain management is to develop an integrated supply chain: one in which the component organizations are coordinated and integrated into an efficient system with the dual purposes of meeting customer demands and improving the competitiveness of the supply chain as a whole. This is particularly important in international business operations. However, when this process becomes global in order to support the process in an international market or operation, the complexity of the task increases exponentially.
International Supply Chain Management
Because of the increasing globalization of many businesses and industries, international supply chain management is becoming increasingly important. Even those businesses that do not operate within the global marketplace are likely to have suppliers, customers, or competitors that do. This means that the international aspects of supply chain management must often be considered even when one is not in the global marketplace oneself.
International supply chain management can be defined as the global management of the creation and dissemination of goods and services through specific, coherent connections between processes, structures, and objectives of the members of the supply chain. Although in some ways international supply chain management is the same as domestic supply chain management, it also differs in two important ways. First, in international supply chain management, the competitive arena is larger. This is true not only geographically with the supply chain spread across nations or the globe, but also competitively with the organization experiencing an increase in the number of potential customers, suppliers, and competitors. In addition, international supply management is more complex than the domestic version. When dealing with international commerce, one must take into account multiple regulatory authorities, legal systems, tax structures, and cultures.
Components to International Supply Chain Management
The literature suggests that there are three components to international supply chain management: operations, design, and strategy. The operational component includes the operational structures of the business and any planned activities of the organization's functioning. In other words, the operational aspect comprises the daily operations of the organization including inventory management, production, planning, scheduling, and manufacturing methods. The design aspect of international supply chain management is concerned with the creation of a supply chain that balances and optimizes the organization's objectives with the reality of its operations. Design of the international supply chain includes consideration of the processes of the organization in the furtherance of its goals. The strategic aspect of international supply chain management includes the planning done by the organization to develop its objectives and places boundaries on the processes. Together, these three aspects provide a framework for understanding international supply chain management.
Essential Aspects of International Supply Chain Management
International supply chain management is an emerging field, and many conflicting theories abound. A recent examination of the theories proffered in the literature about international supply chain management led to the conclusion that there are three essential aspects of international supply chain management: knowledge,...
(The entire section is 3674 words.)