February 26, 2019

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Global SCM-Meaning and Definition

What is a Global Supply Chain?

Global Supply Chain is a worldwide network of suppliers, manufacturers, warehouses, distribution centers,  and retailers through which raw materials are acquired, transformed and delivered to customers.

  • It is the design and management of a system, that controls the flow of materials into, through and out of the international corporation.

Read Global Supply Chain case Study

Importance of Global SCM

  • Global Supply Chain has existed, as long as the trade in intermediate products has taken place, but they are now increasingly important.
  • World exports and FDI outward stock, has been growing faster than global GDP.
  • Foreign affiliates no longer only engage, in serving local markets in host countries, but often export more than host country domestic firms.

Some reasons for extending businesses globally.

  • Cost, Access to raw-material.
  • Increase in sales; new markets.
  • Satisfy the shareholders.
  • Wide Range of customers.
  • Falling tariffs.
  • Increase in International Trade.

Objectives of Global Supply Chain.

The global objective of a Supply Chain is customers’ satisfaction.  At the same time, the strategic objectives can be translated into, several short- and medium-term objectives :

Minimizing the time required converting orders into cash.

This objective is much more than reducing the production cycle, which includes the controlling of:

  • The time required to get raw material and components.
  • The quality of the components to handle.
  • Storage of the components until they are used.
  • Storage and shipping of finished products to the retailers.
  • The transportation process of the shipped goods, before delivering to the customers.

Minimizing the Total Work In Process.

The philosophy behind the Supply Chain paradigm is totally different. The goal is to improve the efficiency of the whole system, and thus to reduce the total WIP.

A real-time approach has been proposed that both minimize the completion time, and control the WIP

Improving the Pipeline Visibility.

The evolution of the computer systems from the central mainframe, to local workstations, has drastically changed, the way information is delivered. Nowadays, information can be sent from the place, it is generated to any other place in the Supply Chain in real time.

Theoretically, this allows,

  • close monitoring of product movements, inventories, market changes, logistics, extra.
  • To remove the technical barriers in information systems.

Improving the Quality.

Quality is often defined as, “the set of properties and characteristics of a product, or a service that allows it to meet requirements, that are explicitly or implicitly expressed by the customer”.

Three main aspects should be considered when talking about quality. These are:

  • Quality mastery.
  • Quality insurance.
  • Total quality.

Quality Mastery

Quality mastery involves, evaluating the product or service characteristics’ fit with the specifications, provided by the designers or the customers. Quality mastery implies the ability to measure quality, which in turn, allows measuring the efficiency of the activities performed to improve quality.

Quality Insurance.

The goal of quality insurance is to guaranty the required quality level, for services and products. Quality insurance is often supported by the ISO, (International Standard for Organization). ISO 9004 provides a guide for the management of the quality system, while ISO 9001, 9002 and 9003 aim at establishing quality standards, that guarantee the level and invariability of quality.

Reducing Cost

Cost reduction is a way to improve the efficiency, and profitability of the supply chain activities. Two basic rules are taken into account when evaluating the costs in a Supply Chain. These are:

  • Costs should be attached to projects instead of departments. That is, the approach when evaluating costs should be horizontal instead of vertical.
  • Only incremental costs should be considered. These incremental costs should be evaluated, for each activity of the project, and even for each customer segment.

Improving Services.

Factors that improve customer service are:

    • Reducing the delivery time to the customers.
    • Improving the quality of the products and services.
    • Improving service documentation quality.
    • Reception of customers and.
    • providing proper information about the Supply Chain.

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