Globalization of the Supply Chains

Globalization of the Supply Chains

Benefits and Vulnerabilities of Globalization in Supply Chains

Assessing the benefits and vulnerabilities of globalized supply chains needs to take into account the entire spectrum of risks and large-scale interruptions that can impede or even shut down supplies of needed materials and components. As supply chains are the catalyst of economic growth and need to stay demand-driven in order to keep entire industries profitable (Butner, 2010) mitigating supply chain vulnerability is critical (Neureuther, Kenyon, 2009). The benefits of globalized supply chains need to be balanced against the risks and vulnerabilities. The intent of this analysis is to provide a balanced view of opportunities and risks of globalized supply chains and provide prescriptive analysis as to how to mitigate large-scale interruption.

Assessing the Benefits of Globalized Supply Chains

Companies continually pursuing low price, high product availability and rapid product lifecycles are highly reliant on stable, secure and predictable supply chains (Hopkins, 2010). The greater the stability, predictability and securing of their supply chains the higher the potential for profits are. A case in point is Dell, which sources the majority of its components throughout Malaysia, Southwest Asia and Pacific Rim nations to support its unique build-to-order manufacturing strategy (Gunasekaran, Ngai, 2009). Dell illustrates why supply chains are critically important as they are the fuel and catalyst that propels business models that are unique. This is the most commonly cited benefit of having a global supply chain. The agility and quickness to respond to market conditions, versatility of products, flexibility in meeting unique product needs (as is the case with the Dell build-to-order supply chain) (Gunasekaran, Ngai, 2009) and the cost advantages that many business models are predicated on are all benefits of having a global supply chain,

In addition to these demand-driven benefits and advantages, there are also the strategic advantages of being able to create greater sustainability and reverse logistics into supply chains to meet environmental standards and requirements (Lau, Wang, 2009). Reverse logistics is critical as a strategic process supporting sustainability initiatives in many of the worlds' largest high tech manufacturers. Reverse logistics is the process of taking back products and recycling those parts which can best to put to use in existing generation and next-generation products. Hewlett-Packard is a global leader in this area as they have been able to attain over 60% recyclable content in their low-end inkjet and laser printers (Billington, Callioni, Crane, Ruark, & et al., 2004). HP began in 1996(Smock, 2004) with their Partner Planet Initiative, a global program aimed at recycling their laser printer cartridges across all models (Lee, 2008). Global supply chains enable greater efficiency of the reverse logistics process for HP and many other high tech manufacturers who must comply with the WEEE Initiative globally (Kunert, 2005).

Taken together the benefits of a globalized supply chain are quickly being translated into essential competitive advantages for many company's business models and value chains going forward. The implications for Dell and HP in the high tech manufacturing arena, where product lifecycles are extremely fast compared to other industries and the amount of waste produced in packaging and products is significant, a globalized supply chain is critical for their profitable growth. The bottom line is that many of these business models in highly transaction-centric industries must have a global supply chain to exist.

Assessing the Risks of Global Supply Chains

Supply chain disruptions can cost any company their customers first and their businesses. As the course readings and discussions have clearly shown, supply chains are inherently vulnerable as they are comprised of a series of logistics and information-based links. Mitigating the risk of supply chain interruptions due to natural disasters requires the definition of a framework agile enough to detect, respond and recover from an interruption, whether causes by a natural disaster or an act of terrorism (Craighead, Blackhurst, Rungtusanatham, Handfield, 2007). As Helferich's Securing the Supply Chain paper illustrates, there is the need for contingency planning, alternate frameworks for managing the supply chain logistics and collaboration functions while also containing and mitigating the risks as much as possible. The Helferich analysis also supports the findings of other researchers as well in the area of supply chain risk management and security. It has been found that the supply chain design characteristics of complexity of logistics and information sharing, node criticality, density of supply chain partnerships geographically and from a product perspective all influence the capacity for risk mitigation and minimization (Craighead, Blackhurst, Rungtusanatham, Handfield, 2007). Simply put the greater the complexity of a supply chain and its logistics and collaboration functions the greater the need to have an agile, parallel-based supply chain and sourcing strategy in place (Stecke, Kumar, 2009). The need for an integrated framework is crucial if supply chains are able to anticipate and react quickly to disruptions, whether they are from natural disasters or acts of terrorism (Peck, 2005). The need then is for a framework that put agility ahead of formality and response times ahead of overt and exceptionally tight controls. The response of Wal-Mart and other mass merchandisers to the needs of residents in New Orleans after Hurricane Katrina is a vivid reminder of just how critical having an agile supply chain is (Horwitz, 2009). As has been mentioned in the Helferich's Securing the Supply Chain analysis, supply chain security needs to take into account four dimensions and also have role-based access and security privileges by each functional area of supply chain management. These four dimensions include the security of the product or service, security of information flows, security of payments and financial transactions, and security of logistics systems (Pope, 2008). As the Helferich has also pointed out, there needs to be a security structure in place that validates access to each of these four systems and process areas throughout a supply chain. To the extent a supply chain has been able to manage these specific vulnerability areas is the extent to which they can withstand natural disasters and the potential interruptions from terrorist acts and other disasters. The need for an agile, secure and scalable supply chain network to overcome the risks and vulnerabilities mentioned in Helferich's analysis is key. The bottom line is that supply chains are the most critical link logistically and from an information standpoint companies have, and they need to have frameworks in place to secure their ongoing performance.