Ah, globalization. One of the great buzzwords of the 21st century. Although we see the term brought up less frequently nowadays, globalization is still very much an ever-present phenomenon, and it has profound implications for international supply chain management.
So what exactly is globalization?
In simplest terms, globalization is the process by which organizations gain an international presence by expanding across borders. In a broad sense, it is really the movement of anything between countries.
For global businesses, globalization often means having warehouses or manufacturing facilities overseas, otherwise known as outsourcing. You know that tag on your shirt that says, “MADE IN CHINA?” Yup, that’s a product of outsourcing.
Why is everyone outsourcing?
Outsourcing functions overseas poses several benefits, but also creates some obstacles in the midst. Deep Patel at Forbes writes that some of the biggest advantages for corporations to outsource are being able to bring on new hires as contractors instead of employees, having access to talent that is not in your immediate vicinity, and being able to pay wages that are accordant with whatever nation you are recruiting from. This spells out to lower costs, which is ultimately what all businesses are after. Additionally, outsourcing brings jobs and opportunities to different parts of the world, which is especially significant for developing companies. That said, outsourcing can create some issues as well.
Globalization means that while you have access to fresh talent, you are also exposing yourself to new competition. Additionally, having team members in different countries and timezones means that there isn’t always an easy or effective way to communicate. Therefore, companies are putting a lot of trust into their overseas workers to handle tasks that they may not be available to help with in real-time. And so, while globalization has made outsourcing extremely popular (just about every Fortune 500 company is doing it), it needs to be executed with great attention to detail in order to see returns.
How does this all tie in with international supply chain management?
As you can imagine, globalization has made international supply chain management all the more complex. With various operations happening in different parts of the world and customers sprinkled throughout, there is quite a bit to keep track of and monitor. A once relatively-simple supply chain becomes tougher to navigate once product is going overseas.
According to Milosz Majta at Forbes, “in an environment that has become increasingly global in nature, there are more parties involved and less information available at any point in the production process. This makes it much harder to identify, quantify, prioritize, and mitigate risk for better decision making…The ability to anticipate and address risk effectively has been severely handicapped by complexity. Now that manufacturers are outsourcing more work to suppliers across the globe and are managing second and third-tier suppliers, it has become difficult to track, trace, and monitor production.”
Additionally, there are unique regulations and restrictions that must be obeyed in each country. This further complicates the narrative as those in international supply chain management must pay close attention to ensure that all operations are within compliance.
What this all means moving forward
Ultimately, globalization and diligent international supply chain management will join forces to further stimulate the economy, leading to more jobs, goods, opportunities, and companies crossing borders.
Stephen DeAngelis of SupplyChain247 argues that the greatest beneficiary of globalization is the global middle class. Middle-class citizens have extra spending money, which they use to buy more goods, and more goods purchased will lead to companies needing more manpower and facilities, which will increase outsourcing, and so the pattern continues. That said, this chain reaction can only take effect when goods are going where they need to when they need to, which can only be achieved by optimal international supply chain management.
If you’re interested in learning more about what you can do to enhance your supply chain management strategy, get in contact with us!