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Home : Articles : Supply Chain : Global Supply Chain Management

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GLOBAL SUPPLY CHAIN MANAGEMENT

With increased globalization and offshore sourcing, global supply chain management is becoming an important issue for many businesses. Like traditional, supply chain management, the underlying factors behind the trend are reducing the costs of procurement and decreasing the risks related to purchasing activities. The big difference is that global supply chain management involves a company's worldwide interests and suppliers rather than simply a local or national orientation.

Because global supply chain management usually involves a plethora of countries, it also usually comes with a plethora of new difficulties that need to be dealt with appropriately. One that companies need to consider is the overall costs. While local labor costs may be significantly lower, companies must also focus on the costs of space, tariffs, and other expenses related to doing business overseas. Additionally, companies need to factor in the exchange rate. Obviously, companies must do their research and give serious consideration to all of these different elements as part of their global procurement approach.

Time is another big issue that should be addressed when dealing with global supply chain management. The productivity of the overseas employees and the extended shipping times can either positively or negatively affect the company's lead time, but either way these times need to be figured into the overall procurement plan. Other factors can also come into play here as well. For example, the weather conditions on one side of the world often vary greatly from those on the other and can impact production and shipping dramatically. Also, customs clearance time and other governmental red tape can add further delays that need to be planned for and figured into the big picture.

Besides contemplating these issues, a business attempting to manage its global supply chain must also ask itself a number of other serious questions. First, the company needs to make decisions about its overall outsourcing plan. For whatever reason, businesses may desire to keep some aspects of supply chain closer to home. However, these reasons are not quite as important as other countries advance technologically. For example, some parts of India have now become centers for high-tech outsourced services which may once have been done in-house only out of necessity. Not only are provided to companies by highly qualified, overseas workers, but they are being done at a fraction of the price they could be done in the United States or any other Western country.

Another issue that must be incorporated into a global supply chain management strategy is supplier selection. Comparing vendor bids from within the company's parent-country can be difficult enough but comparing bids from an array of global suppliers can be even more complex. How to make these choices is one of the first decisions companies must make, and it should be a decision firmly based on research. Too often companies jump on the lowest price instead of taking the time to factor in all of the other elements, including those related to money and time which were discussed above. Additionally, companies must make decisions about the number of suppliers to use. Fewer supplies may be easier to manage but could also lead to potential problems if one vendor is unable to deliver as expected or if one vendor tries to leverage its supply power to obtain price concessions.

Finally, companies who choose to ship their manufacturing overseas may have to face some additional considerations as well. Questions regarding the number of plants that are needed, as well as the locations for those plants can pose difficult logistical problems for companies. However, it often helps to examine these issues in terms of the global supply chain. For example, if a business uses a number of vendors around Bangalore, India than it may make sense to locate the manufacturing plant that would utilize those supplies in or around Bangalore as well. Not only will this provide lower employee costs, but overall shipping and tariff expenses should also be reduced. This would then save the company money.

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