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The global supply chain helps make manufacturers and industries more efficient and profitable by reducing costs and encouraging businesses to expand into international markets. The goal of global supply chain management is to ensure that the international networks of manufacturers, vendors, warehouses, transportation companies, distributors, and retailers operate smoothly. An important element of that goal for business managers is to mitigate the risks entailed in relying on suppliers and other partners whose operations are a world away and who are subject to rules and regulations of different governments. One risk few businesses calculated was the impact of a pandemic on global supply chains. A November 2020 study by the U.S. Cybersecurity and Infrastructure Security Agency (CISA) reports on the disruptions to the global supply chain as a result of COVID-19:
What Is Global Supply Chain Management?Globalization has been a prevailing trend in nearly every industry for the past several decades as manufacturers and other businesses attempt to take advantage of the abundant raw materials and low-cost manufacturing available in developing countries around the world. Global supply chains are the sophisticated networks of manufacturing, logistics, transportation, and communication firms that move products and material through worldwide production and distribution channels. Global supply chain management is the process of ensuring the secure and timely delivery of everything from raw materials to finished consumer goods as they travel from manufacturers and suppliers to wholesalers, retailers, and other distribution points. The goals of supply chain managers are to reduce costs, improve efficiency, and mitigate risk. How Supply Chains Work and Why They Are ImportantSupply chains are the networks that link business partners as they produce products and services and deliver them to their customers, whether consumers or other businesses. Investopedia describes the many activities, entities, and resources that are involved in domestic and global supply chains:
Global Supply Chains Before and After the COVID-19 OutbreakThe critical importance of supply chain management to the global economy was evident to businesses and industries long before the COVID-19 pandemic struck, yet many manufacturers across industries continued to rely on a single source for their supply of vital products and materials. The widespread use of just-in-time (JIT) production models that minimize inventory in an attempt to reduce costs also made companies more vulnerable to potential supply chain disruptions, as the law firm Foley & Lardner reports. The results of an executive survey released by Foley in September 2020 indicates that businesses have already begun to deemphasize cost savings in favor of improving their resilience and reducing their dependence on production or sourcing from China:
Back To Top Manufacturing company executives are reexamining their global supply chain strategies, according to a 2020 survey conducted by the law firm Foley & Lardner. The survey uncovered the following strategy shifts: 70% of respondents are reducing their focus on sourcing from lowest-cost suppliers to emphasize resiliency; 62% are placing less focus on just-in-time inventory models; 43% have withdrawn or plan to withdraw from China; and 42% plan to strengthen relationships and increase supply chain transparency. Back To Top Why Global Supply Chains Are Increasingly Important to ManufacturersThe globalization that opened supply chains to countries around the world created tremendous economic opportunities for many regions and industries. The trend toward open international markets progressed steadily in the period after World War II, but recent political shifts have combined with pressure from the pandemic to disrupt established supply chain links across countries, continents, and political systems. High-tech manufacturers in particular rely on raw materials that are available primarily through global partners. Foreign Policy reports on intensifying efforts by U.S. technology firms to find more accessible sources of the rare earth elements needed to produce the sophisticated equipment that drives the computer, electronics, and defense industries. At present the U.S. relies on China and other foreign countries for supplies of these vital raw materials. Back To Top Global Supply Chain Issues Caused by the PandemicBusinesses’ emphasis on cost savings in their global supply chain management strategies has led to them relying on a single supplier or manufacturer for all their resource needs, from raw materials to finished products. Single sourcing all the components needed to assemble a product saves manufacturers money. While natural disasters, extreme weather, and other events have affected the global supply chain in the past, the movement of people and goods around the world has never been impacted by a catastrophe with the breadth and scope of the COVID-19 pandemic. Supply & Demand Chain Executive lists four global supply chain issues that explain why the pandemic’s impact on global trade is so devastating:
How Manufacturers Are Affected by and Are Responding to the PandemicEvents such as the COVID-19 pandemic highlight just how fragile global supply chains can be.
To counter the economic impact of COVID-19, manufacturers and other businesses are taking advantage of opportunities to make meaningful changes to their operations. Accenture identifies five priorities for improving the supply chain:
Keeping Supplies Flowing While Protecting WorkersThe U.S. and other countries face serious challenges as they work to keep critical manufacturing and other supplies flowing while protecting workers and preventing the spread of the virus. Restrictions on human travel to minimize virus transmission didn’t extend to the shipment of goods through U.S. ports. The challenge for manufacturers is to maintain operations without imperiling their employees’ health. PricewaterhouseCoopers reports that U.S. manufacturers employ 13 million workers, with few who can work off-site. The heightened risk of virus spread among workers has led many manufacturers to investigate automation technologies such as robotics and autonomous materials movement to separate workers in manufacturing environments. How the Pandemic Laid Bare Global Supply Chain VulnerabilitiesPrior to COVID-19, manufacturers stressed reducing costs above all other goals. This led to an overreliance on single-source suppliers, too much emphasis on the lowest bids, and a lack of transparency in the supply chain. National Defense Industries Association vice president David Chesebrough states that JIT and other cost-saving approaches “introduced a great deal of fragility” into the global supply chains that manufacturers depend on. The supply of products and materials such as medical equipment and supplies, critical security equipment, and electronic and computer components quickly dried up when the pandemic struck in early 2020. In addition, supply chains were vulnerable to vendors selling counterfeit products due to the lack of transparency in the operations of international partners, as Institute for Supply Management CEO Thomas Derry points out. Economic and Social Impact of Supply Chain DisruptionsMost large multinational corporations have the resources they need to weather the disruptions caused by the pandemic. In some cases, large firms have seen profits increase, such as Amazon and Walmart. Conversely, small businesses have taken the brunt of the economic fallout resulting from COVID-19. In his testimony to a congressional hearing on supply chain resiliency, Brookings senior fellow Eswar Prasad stated that the pandemic has had “a much sharper deleterious effect on small businesses than on large corporations.” Prasad points out that small businesses represent 40% of the U.S. gross domestic product and employ half of all workers in the U.S. The pandemic has also affected the financial stability of U.S. manufacturers’ trading partners. The Organization for Economic Cooperation and Development (OECD) forecasts the long-term impact of COVID-19 on international trade:
The pandemic has also deterred efforts to thwart child labor and address poor working conditions. UNICEF USA reports that in many countries declines in household incomes put added pressure on children to join the workforce. The organization states that roughly half of the 152 million children currently working are doing so under hazardous conditions, such as working in farm fields and picking through trash. Back To Top Global Supply Chain ExamplesPrior to the COVID-19 outbreak, Gartner’s Supply Chain Top 25 for 2020 identified three key trends in the global supply chain:
The Gartner study highlights three global supply chain examples of leadership trends:
How the Global Supply Chain Operates in Specific IndustriesWhile supply chains across industries share many characteristics, industry-specific elements can present unique challenges in the event of disruptions such as the COVID-19 pandemic. For example, the food industry must ensure the freshness of the products it ships, while high-tech industries’ primary supply chain goals include securing adequate reliable sources of rare materials.
How Companies and Industries Are Responding to Supply Chain DisruptionsCompanies and industries are taking many different approaches as they work to overcome disruptions to their global supply chains caused by COVID-19 precautions. For example, Maryville University associate professor Richard Kilgore tells transportation news service FreightWaves that the automotive industry may require “months or years … in terms of ramping up production levels to anywhere near pre-pandemic production levels.” Professor Kilgore goes on to state that “with long-term uncertainty on the demand side, it is likely that capacity reduction, as well as consolidation,” will be part of automobile manufacturers’ plans for a post-COVID recovery. He notes that since the industry was “already seeing sales and production declines in 2019, some may see this as the appropriate time to negotiate closures with union, government, and other stakeholders, whereas in normal times those might have been more of an obstacle.” Domestic vs. International Supply Chain Management ChallengesThe initial response of many U.S. policymakers to the supply chain disruptions resulting from COVID-19 restrictions was to call for “reshoring” supply chains for goods deemed critical, such as medical supplies and high-tech products. However, pandemic-related disruptions also affected domestic supply chains. The reality of domestic vs. international supply chains shows that relying solely on domestic sources for such products would put U.S. firms at a competitive disadvantage in global markets. The efficiencies and benefits of moving goods within the U.S. as compared to transporting them between the U.S. and other countries depends in large part on the characteristics of the products:
Resources on the Impact of COVID-19 on Global Supply Chains
Back To Top Global Supply Chain Management in a Post-Pandemic EconomyAs manufacturers and other businesses around the world struggle to maintain their operations under restrictions mandated by the battle against the deadly coronavirus, they must also prepare their supply chains for the post-pandemic economy. Harvard Business Review forecasts that in the pandemic’s aftermath, manufacturers will be under “greater political and competitive pressures to increase their domestic production” and promote employment in their home countries. However, many aspects of the global supply chain will remain unchanged once COVID-19 has been tamed, such as competitive price pressures and the drive to improve operational efficiencies. The first step in creating a robust global supply chain is to identify hidden vulnerabilities, many of which exist not in the first or second tier of the supply chain but at lower levels that are often invisible to manufacturers. How Recent Changes Will Impact the Post-Pandemic Global Supply ChainRecent COVID-related trade rules and procedures will impact the economy for many years to come. Many of the changes to supply chain management resulting from the pandemic were underway before the virus struck. The pandemic served to speed up the shift among manufacturers to responding more quickly to changing customer values and purchasing habits, for example. This applies whether their customers are consumers or other businesses.
Supply Chain Problems Exposed by the PandemicCISA’s report on the supply chain disruptions that resulted from the pandemic identifies three areas of weakness that COVID-19 exposed:
Back To Top A 2020 survey conducted by Interos identified supply chain risks made more vulnerable by COVID-19, according to the following percentage of executives across a range of manufacturing industries: data breaches, 38%; cyber attacks on suppliers, 30%; vulnerabilities created by distributed workforce, 29%; open source software, 28%; shadow IT, 27%. Back To Top How New Technologies Will Impact the Global Supply ChainSupply chains have become so complex that “only machines can do the work of keeping track of all this information,” according to the World Economic Forum. Predictive Analytics Today describes the ability of supply chain management software to automate all the transactions and activities that are involved in connecting manufacturers with their suppliers.
These are among the leading supply chain management software vendors:
Resources on the Outlook for Global Supply Chain Management
Back To Top The Skills Managers Will Need to Thrive in Tomorrow’s EconomyThe magnitude of COVID-19’s supply chain disruption caught manufacturers unprepared. The inability of the statistical models and modern data analytics techniques to anticipate such massive breaks in business processes highlights the importance of business managers in helping companies plan for unexpected industry-shaking changes to their operations in domestic and international markets. Countries will continue to trade, and supply chains will continue to span nearly all corners of the globe, despite the pandemic’s expected repercussions. In the catastrophe’s aftermath it will be more vital than ever to ensure global supply chains are resilient enough to anticipate and respond to natural disasters, disruptive events, game-changing technologies, and other industry-altering phenomena. Back To Top Infographic Sources Foley & Lardner, “Global Supply Chain Disruption and Future Strategies” Interos, “COVID Resilience Report: The Impact of COVID-19 on Supply Chains and How Businesses Are Preparing for the Next Shock” What are the three 3 components that needs to be manage in supply chains?Generally the key aspects of Supply Chain management are Purchasing (sourcing), Planning (scheduling) and Logistics (delivery).
What are the 3 global supply chain issues?the three critical challenges facing global supply chains: labor shortages, equipment availability, and the ripple effect of global bottlenecks.
What are the 3 activities performed in supply chain management?Supply chain management (SCM) is the management of operations that are involved in the procurement of raw materials, its processing into finished goods, and distribution to the end consumer.
What are the factors to consider in supply chain management?The major factors identified as supply chain structure, inventory control policy, information sharing, customer demand, forecasting method, lead time and review period length. The optimum selection of parameters of these factors improves the supply chain performance.
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