Classic versus Modern Supply Chain
Focus of organizations on having an integrated supply chain started at the end of the 1990s. The integrated supply chain is significantly different from other previous models. The classic supply chain considers the individual companies and elements of the supply chain as separate units that represent the functional entities of the supply chain. The organization of this supply chain resembled the silo concept. The modern supply chain concept is more progressive that previous models such as the traditional model. According to the classic supply chain model, different parts of the supply chain oppose each other since they have conflicting objectives. This factor made the supply chain become very inefficient and unresponsive to the needs of customers. The above problem necessitated companies to improve the level of integration across the supply chain. This led to the development of the modern supply chain concept. As such, the organizational concept of the modern supply chain is significantly different from the organizational concept of the classic supply chain (Van Weele, 2009).
The development of the modern supply chain concept led to the development of new layout of relationships, which unlocked the full power of the supply chain. The modern supply chain is one of the major tools that help in the creation of value among organizations. It is not simply a tool for saving money like the classic supply chain. In the contemporary business practice organizations use highly advanced information technology to refine their supply chain structures. Information technology also helps in the supply of new customer segments and in the expansion of the customer portfolio services of an organization. As such, modern supply chain is one of the major sources of competitive advantage of an organization. Some of the major activities of the modern supply chain include procurement, order processing, demand and supply, inventory management, warehousing, transportation, and customer service.
The development of global supply chain is directly linked to globalization. It is impossible to determine accurately the exact date in history when global supply chain developed since the origin of global supply chain varies from one company to another. Global supply chain came into being due companies’ quest for inexpensive parts and labor. The companies started looking overseas for the parts hence leading to the development of global supply chains. The companies hired to help in the management of the complex activities of the global supply chain (Branch, 2000).
In the contemporary world, global supply chain is evolving due to the development of new technologies. Companies can now track the location of their products in real time using GPS instead of mailing the product and assuring its delivery as companies used to do in the past. As such, GPS is critical in global supply chains. The development of RFID scans has also helped in improving inventory management. Prior to the development of RFID scans, companies took inventory weekly or monthly to track the sale of its products. However, in the contemporary world, companies track their products using RFID technology. When a product is purchased, the inventory levels are updated automatically to reflect the sale of the product. Lowered barriers of economic trade also affect global supply chain management. The General Agreement on Tariffs and Trade (GATT) has enabled companies to purchase products from other companies at a significantly reduced price (Branch, 2000).
Global supply chains have several benefits to organizations. Global supply chains enable organizations to go global. This increases the likelihood of the organizations increasing their sales as going global opens the market of the company to consumers all over the world. This enables the organization to increase its profits, which is the main reason as to why businesses exist. Global supply chains also enable organizations to reduce their dependence on local and national economies. This is because the organization sources its raw materials and labor from different countries around the globe and sells its products globally. Global supply chains also necessitates organizations to ‘up their game’ since if they do not do so, other businesses from other locations across the globe would provide the goods and services efficiently. This increases the incentives for organizations to get things right the first time and all the time (Hult, Closs & Frayer, 2013).
The development of the internet is one of the major factors that have helped in revolutionizing how organizations undertake different activities. The number of internet users in the contemporary world is on the rise. The increase in the number of internet users would enable global businesses to conduct their activities at all hours of the day since they would have consumer from different time zones around the globe. Another major benefit of global supply chain is that it increases the potential for expansion of the businesses since it enables them to move enter into more markets. It enables the organizations to move into untapped markets. Global supply chains also enable organizations to reduce their cycle time. It also enables organizations to increase their speed and efficiency. Generally, having an efficient global supply chain provides organizations with a competitive advantage over other companies in the industry. In fact, in the contemporary world, it is one of the major sources of competitive advantage (Hult, Closs & Frayer, 2013).
Despite the above benefits, it is a fact that global supply chains face several challenges. Maintaining high quality levels and reducing defects is one of the major challenges of global supply chains. Having a global supply chains enables an organization to use products manufactured in different locations in the manufacture of its final product. Since manufacturing processes are not perfect, a certain level of quality that is acceptable in the industry. therefore, choosing different suppliers may lead to disputes on which party is responsible for the rise in the percentage of defects above the accepted level (Van Weele, 2009).
Time zones of different locations across the globe also pose challenges to organizations that have a global supply chain. It is a fact that certain American companies face several issues when dealing with companies on the other side of the country. Therefore, the 13-hour difference between the U.S. and Asia would pose a significant challenge to companies. The waking and working hours of various parties in the global supply chain do not coincide. This may pose a significant challenge when a major issue arises. Having to wait for one day for order processing may be too long for companies that strive to run efficient operations (Kouvelis et al., 2011).
Long-range logistics is also one of the major challenges of global supply chains. One may purchase an item at the delivery price. However, the shipment of the product may be delayed due to various reasons. Therefore, any company that uses a global supply chain should not ignore the complexity of long-range logistics (Kouvelis et al., 2011).
Language barrier also pose a challenge to organizations that have a global supply chain. This is because global supply chains necessitate organizations to conduct their daily businesses in different languages. In some instances, words may be lost in translation. Errors may also occur if communications re not translated or interpreted properly (Branch, 2000).
Global supply chains also face several risks. The types of risks involved in global supply chains include supply risks, demand risks, and operational risks. Supply risks occur when the supply chain is incapable of meeting the demand in terms of quality and quantity of raw materials and finished products. This leads to supply chain disruption. On the other hand, demand risks occur when the extent or fluctuation of demand is unexpected. It leads to demand disruption. Finally, operational risks occur when the supply chain is incapable of supplying services, parts or finished goods according to the standard requirement of time, cost, and requirement of an organization. Transportation is one of the major operational risks. The above risks are caused by environmental, geopolitical, economic, or technological factors. Environmental factors include natural disasters and extreme weather. Geopolitical factors include conflicts and trade restrictions. The probability of geopolitical factors affecting a global supply chain is very high. Economic factors relate to demand shocks, which usually occur due to sudden political or economic changes. Finally, technological factors relate to the failure of technological support of global support chains. ICT disruption is one of the major technological risk factors of global supply chains (Szymczak, 2013).
Critically analyzing the impact of environmental, geopolitical, economic, and technological factors on the challenges, risks, and benefits of global supply chain may enhance the research topic on challenges, risks, and benefits of global supply. It is a fact that the above factors have a significant impact on global supply chains.
Research on this topic may have a significant impact on the field of global supply chain management. It would enable organization to determine how to maximize the benefits of its supply chain. It is a fact that inefficiencies in the global supply chains of some organizations makes it difficult for them to maximize the benefits of their global supply chains. Identifying the sources of the inefficiencies is the first step towards reducing the inefficiencies, which would ultimately enable the organizations to maximize the benefits of their global supply chains. Research on this topic would also enable organizations to determine the risks and challenges that their global supply chains face. Therefore, it would enable the organizations to formulate strategies that would help in mitigating the risks and challenges. This would ultimately help in improving the efficiency of the global supply chain of the organizations.Order Unique Answer Now