PowerPoint Presentation: Global Supply Chain in the 21st Century

Global Supply Chain
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Global Supply Chain
Introduction
Over the turn of the 21st Century, there has been increasing interest over supply chain management both from an academic and real-life perspective. A global supply chain is “a series of firms networking and outsourcing throughout the globe” (Ibrahim, Zailani, & Tan, 2015, p. 1430). Global supply chains arose because of the advancement in globalization. More importantly, companies sought to create a competitive advantage through this process amidst stiff competition. Sourcing from low-cost nations was a necessary market response because the corporations would mitigate astronomical production costs in develop nations and expand their revenue growth through selling internationally.
Companies are continuously seeking strategies in which they can exploit the global supply chain to improve their efficiency and effectiveness. In this regard, it is very much likely that in the quest to attain more understanding on this topic, one will come across several concepts in global supply chain management (GSCM). These include the value chain concept as outlined by Michael Porter, the concept of GSCM, and international logistics, which encompasses global sourcing of commodities. Eventually, a more profound competitive advantage is attained. The GSCM is a broad and expansive discipline, which utilizes various concepts such as Michael Porter’s value chain, management, and international logistics to determine strategies to improve their competitive advantages through effective and efficient delivery of goods and services.
Michael Porter’s Value Chain Concept in GSCM
The popularity around Michael Porter and more so, his value chain concept has extended for over three decades. Porter, a professor at Harvard University, coined the term ‘value chain’ in his renowned book “Competitive Advantage: Creating and Sustaining Superior Performance” (1985). According to Sweeney (2009, p. 13),
“The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or service) organization as a system, made up of subsystems each with inputs, the transformation of processes and outputs involve the acquisition and consumption of resources such as money, labor, materials, equipment, buildings, land, administration and management.”
This predisposition conveys the fact that it is a company’s costs and profits are predominantly dependent on how it conducts its value chain activities. In the simplest manner of expressing this concept, value is a collaborative effort. Every company desires to own the entire value chain, but even then some of these efforts may be futile because of the limited level of resources or minimal returns for the activities thereof. Nevertheless, the end-goal remains to provide value to the customer. In this regard, the meaning of value is derived from the customer’s perspective. According to Porter, the value would be “the amount a buyer is willing to pay for what a firm provides to them” (Ibrahim, 2015, p. 1457).
In the quest to ensure optimal customer satisfaction, a firm will engage in many activities as they endear to convert inputs to outputs. They are broadly categorized into primary or support activities. Primary activities include inbound logistics, operations, outbound logistics, marketing, and sales as well as after-sales services. On the other hand, support activities comprise of procurement, human resource management, technological development, and infrastructure. When it comes to supply chain, inbound logistics, operations, and outbound logistics become equally important facets. Inbound logistics encapsulate supplier relationships and thus, every activity required in receiving, storing, and disseminating inputs. Activities under inbound logistics would include procuring parts, raw materials, components, inputs as well as related services. Progressively, operations as a primary activity will take into account activities that are fundamental to the transformation of raw materials (inputs) into finished products (outputs). Finally, there is outbound logistics that integrates customers’ relationships with the firm as well as activities surrounding the collection, storage, and distribution of output.
The supply chain provides the firm with a significant competitive advantage when it organizes and performs discrete activities based upon these activities. They will create phenomenal value when they perform these activities competitively. Eventually, the number of buyers willing and able (demand) to purchase the product determines the ultimate value the company provides in the product thereof. The firm becomes profitable when the value in performing the required activities exceed the collective costs. Consequently, the need to manage global supply chains becomes essential as a strategical approach in achieving competitive advantage as well as defining the success of the enterprise.
As highlighted earlier on, supply chains could either be domestic or global, in which case the latter is more challenging to manage than the former. Substantial geographical distances increase in transportation costs tremendously. Moreover, they attenuate the decision-making process considering the inventory cost tradeoffs arising because of increased lead-time in the supply chain. Besides, material planning and demand forecasting are highly predicated on the local cultures, languages, and practices meaning that they are instrumental to the effectiveness of business processes. On the other hand, developing countries have infrastructural deficiencies apparent in the transportation and telecommunication sectors. Also, these countries have adequate equipment and technology, supplier quality, supplier availability, and worker skills (Meixell & Gargeya, 2005). These are predicaments rarely experienced in developed nations. Such a situation implies that a manufacturer is incapacitated in meeting an exquisite competitive advantage.
Outsourcing or Insourcing Elements of the Supply Chain
A company faces significant milestones from where its ability to establish clear and solid decisions is tested. Among them is the decision on whether to outsource or insource necessary resources. Kalinzi (2016, p. 3) defines it as “a strategy by which an organization contracts out major functions to specialize and efficient service provides who become valued business partners.” Outsourcing comes in handy particularly in situations when the company’s resources are limited or in the event of insourcing that specific task, the company would be underperforming relative to the optimal value it could offer the market. On the other hand, insource could be understood as a “business practice performed within the operational infrastructure of the organization” (Beers, 2020). Insourced operations are the primary activities at the very heart of the organization’s primary goal. The company has exceptional re...