The Supply Chain Challenges of Today

Global Supply Chain Design Considerations

Introduction

As Meixell and Gargeya (2005) point out, supply chains expanded significantly into international locations in the latter part of the 20th century. This was true especially in industries like automobiles, computers, and clothing. The result of this globalization was the onset of new supply chain management challenges. Part of the main challenge of global supply chain design is understanding all the factors that impact it and navigating them successfully. This paper examines these factors so as to provide a better understanding and analysis of the global network design that today’s supply chain managers must know.

The Ideal Supply Chain Design

What should the ideal supply chain look like? This is not actually a question with a one-size-fits-all answer. The fact is that every supply chain is going to be different because every organization has different needs. The foundation of a supply chain lies in a company's mission (Helmold & Terry, 2021). This mission is the core purpose of the company. For example, if a company focuses on delivering eco-friendly products, its supply chain should prioritize sources that are sustainable. It should also consider green methods of transportation and delivery.

Objectives are the specific goals a company wants to achieve. These goals guide the design of the supply chain. If a company aims to reduce the time it takes to deliver products, the supply chain should focus on faster operations. This might involve optimizing inventory or choosing faster transportation routes.

Strategy is the broader plan to achieve the company's goals. If a company plans to sell products in new regions or countries, the supply chain should be designed to meet that region's needs. This might involve working with local suppliers or understanding regional regulations. It all depends on the image the company wants to promote, its goals and objectives, its costs, and how it wants to manage risk.

Obviously, these are all challenges in the global supply chain that companies must consider. Some are new, but some challenges have been around for a long time. For example, organizations might need to manage long distances between where products are made and where they are sold. They might also need to understand different cultures or languages. That is nothing new to the field of supply chain management. However, other challenges are new and have arisen due to changes in the world. An example of a new challenge would be the increasing trend of companies outsourcing work to other countries. This was simply not possible before, and there are ramifications even today of this decision. The “Brexit” vote in England recently could be called a direct result of offshoring; in other words, every decision companies make does affect stakeholders and stakeholders will react in one way or another. This is something that has to be considered.

Moreover, research studies have provided insights and shown that organizations can learn much by implementing tried and true best practices to help them in making the best possible decisions (Alzoubi et al., 2022). They can also look at real-world examples from other companies to understand what works and what fails. New technologies like blockchain have helped companies monitor and oversee supply chains, and managers can today use computer models to simulate different supply chain scenarios. These models can help predict outcomes based on different decisions (Nunes et al., 2022). They can give predictions and information about what would happen in situations where there is demand fluctuation, supplier disruptions, logistical events, regulatory changes, and they can even tell about the environmental impact of supply chain decisions.

Moreover, as Meixell and Gargeya (2005) point out, models developed before 1990 focused on corporate taxes, tariffs, and duties using production-distribution models. But between 1991 and 1995, there was a shift towards addressing variability and uncertainty in exchange rates using stochastic programming and option valuation models. Then from 1996 to 2000, researchers looked into transfer pricing and supplier selection decisions to find ways to better manage the supply chain. And after 2000 there was a diversification in the technologies used, with the introduction of network equilibrium models and multi-phase approaches. In short, the complexity of modeling has increased along with computing models and inputs related to the costs of doing business.

On top of all this it is important for supply chain managers to understand that the global environment in which they operate is always changing. This means supply chains need to be designed with flexibility in mind. A flexible supply chain can quickly adapt to new challenges or opportunities. Whether there's a sudden increase in demand for a product, a problem with a supplier, or a change in global trade rules, a flexible supply chain can adjust and keep the company running smoothly.

According to Meixell and Gargeya (2005) ongoing issues include the fact that international manufacturing sources have been pursued due to reduced costs, increased revenues, and improved reliability. However, global supply chains remain more challenging to manage than domestic ones due to factors like geographical distances, cultural differences, infrastructural deficiencies, and unique risks such as currency exchange rate fluctuations. Plus, the business environment around global supply chain design is constantly evolving. Key emerging issues include increased outsourcing and offshoring, the integration of decision processes across supply chain tiers, and a newly broadened definition of supply chain performance that goes beyond just cost reduction (Meixell & Gargeya, 205).

What to Consider When Designing the Supply Chain

When organizations design their supply chain, they have to consider costs, like tariffs and taxes, which are imposed on imported or exported goods. Duties are similar to tariffs. They are taxes that countries charge for importing or exporting goods. Companies need to know the duties they might have to pay when they move products between countries. They have to consider corporate taxes, as different countries have different tax rates for businesses. Companies need to understand these rates when they set up operations in a new country.

Currency exchange rates can change every day, which can impact the company's profits. Transportation time is important to consider, as it affects how quickly customers get their products. Inventory costs have to be known, as companies have to store their products somewhere until they sell them. Plus, the skills and availability of workers are also important. Companies need skilled workers to produce quality products. They also need workers to be available when they are needed.

Ultimately, however, every industry is different, so organizations have to understand their own specific needs. Geographical distances may pose challenges—or they may not, depending on the industry. If suppliers are far away, it can take longer to get products and can increase transportation costs. Cultural differences can affect business relationships—or may not be an issue at all, depending.

Common Problems/Issues, Now and to Come

One of the main challenges in global supply chain design is managing the vast distances between suppliers, manufacturers, and consumers. When suppliers are located in one part of the world and consumers in another, it takes longer to transport goods. This can lead to delays and increased costs. Cultural and language differences also pose challenges. Infrastructure is not consistent across all countries. Some regions might lack good roads, ports, or reliable electricity. Currency exchange rate fluctuations are another concern. The value of currencies can change frequently. Outsourcing is also becoming more common. Many companies are now outsourcing certain functions to other countries to save costs. This can be cost-effective in one way, but there can also be hidden indirect costs in other ways. For instance, companies may find it more difficult to ensure quality control when they outsource. They may also become dependent on third-party providers, which can introduce risks (Arrigo, 2020).

In the future, integration across supply chain tiers will likely be more crucial. Today’s supply chains have multiple levels and include everything from obtaining raw material suppliers to finding end retailers. All these levels need to work together smoothly, which requires communication and coordination among all stakeholders. This will be difficult because, in the past, the focus for stakeholders was mainly on reducing costs. Now, stakeholders are looking at other factors too. They are looking at the environmental impact of their operations. They also look at how ethically they source materials. In the future, this may be just as important as looking at costs.