Supply chain management in the aspect of

globalization

Zdenka Vidrova*
University of Zilina, Department of Economics, Slovakia

SHS Web of Conferences 74, 04031 (2020)

Globalization and its Socio-Economic Consequences 2019
 Agenda

Introduction Methodology

Basic Definitions Results

Conclusion
[Link]

Globalization and its socio-economic consequences is an international scientific

conference, thematically focused on the process of globalization and its impact
on the economic, social
and cultural life of human society.
Its main aim is the cooperation with domestic and foreign educational and
scientific-research institutions to present and transfer the newest knowledge in
•the relevant field:
Global Impact of COVID 19 on Economy and • Corporate Social Responsibility and Consumer
Society Claims
• Behavioral Economics and Decision-Making
• Industry 4.0

• Innovation, Collaborative, and Circular Economy

 Abstract

Considering the globalization in the world, SC activities has changed drastically and
managing it became more and more complex.
SCM is an integral part of businesses and is essential to company success and
customer satisfaction. In order to reach as many markets as possible, these
products must cross international borders.
Therefore, Marketing plays an important role in the process; it balances
procurement by providing essential demand information and building the
relationships that help improve the efficiency of SC operations.
The aims of this paper are:
• to define the concept of SC and SCM,
• to list what advantages arising from participation in global supply chain,
• to refer the mistakes made by companies operating in international markets in SCM.
 Introduction
• Historically, High expense of transportation was one of the main obstacles
in transporting G&S from place to place. That’s why it was used to be
produced locally.
• When transportation became more economical and labour rates climbing in
more developed countries, much more manufacturing has moved where cost is
lowest.

• As global markets grow increasingly efficient, competition no longer takes

place between individual businesses, but between entire value chains.
• SCM has evolved from an initial focus on improving simple, but very labor-
intensive processes to the present day engineering and managing of
extraordinarily complex global networks.
 Basic definitions

Supply chain describes it as a network of multiple relationships where value can be added. They can be
between processes, products, companies and industries.
The below figure represents
A hierarchal perspective of the value chain and complexity of supply chain systems.
Moving up the chain to the industry level, there is increased complexity and value added activities.

At the bottom of the value chain hierarchy there are reduced complexity and value added activities

• Another definition of the supply chain was introduced by the author:

it is the integration of information and resource flows through a series of value added activities.

• Previously, the industry was localized, cluster-based concept.

• In present, it morphed to a value chain form that exhibits greater spatial dispersion.
• Therefore, the industrial level-perspective of the global supply chain can be described as being
characterized by increased complexity but also associated with increased levels of value added activities.
 Basic definitions
Globalization and supply chain management
• “Supply Chain" has become widely recognized primarily as a result of the globalization of manufacturing
since the middle of 1990s, particularly the growth of manufacturing in China. Import from China to U.S.
grew from about $45 billion per year in 1995 to more than $280 billion per year in 2006.

Globalization has been the cause of need ever since for logistics strategies to deal with
complex networks including multiple entities spanning multiple countries with diverse control.
• SCM is increasingly used to refer to strategic issues and logistics to refer to tactical and operational
problems.
The Council of Supply Chain Management Professionals in 2005 strictly differentiate the terms logistics and
supply chain management:
• “Logistics is that part of the supply chain process that plans, implements, and controls the efficient,
effective forward and reverse flow and storage of goods, services, and related information between the point
of origin and the point of consumption in order to meet customers’ requirements” while
• “Supply Chain Management is the systemic, strategic coordination of the traditional business
functions and the tactics across these business functions within a particular company and across businesses
within the supply chain for the purposes of improving the long-term performance of the individual companies
and the supply chain as a whole.”
 Experts comments…….!
Many experts have already commented on theme of globalization and supply chains:
• Greg Shnerer, supply chain and logistics professional based in Toronto,
claims that to understanding the role of globalization in the supply chain, it is necessary to first
understand what a supply chain is and how it works. A key component of supply chain logistics is
global transportation and supply chain would not be possible without it in our global and
interconnected world.
 Greg defines the supply chains as the paths between suppliers and receivers.
 Then he calls supply chains like the "behind the scenes work" that gets a product from inception all the way
into a consumer’s hands.
 In order to reach as many markets as possible, these products must cross international borders.
 Without supply chains the products that suppliers produce would not efficiently get out into the world markets,
therefore they are vital for markets all around the world.

• Ani Mithra, supply chain analyst, is following:

Globalization and Supply Chain Management (SCM) are interconnected. In other words, they
cannot exist separately, without each other. Globalization gives access to new customers and new
sources of procurement. However, the worldwide reach requires the understanding of the
different markets, including the potential partners, risks, and regulations.
 Methodology

• The article used the analysis as a scientific method to divide the research problem into
individual parts, elements and their examination in order to reveal their essence.
 First, we defined the subject of the solution - the global supply chain,
 then its individual elements to which we want to address - the benefits of being integrated into the
global supply chain; also the disadvantages.
 Lastly, we wanted to highlight the main mistakes companies do within global supply chain
management.
 The aim of the analysis was therefore to exclude from the whole mass of facts and contexts the main,
essential, necessary, which could illuminate the essence of the phenomenon examined.

• We used the scientific method of synthesis to find out the links between these earmarked
elements, contradictions, their interconnections, and then we could reproduce the phenomenon
under investigation with its essential features and relationships.
The synthesis of knowledge consisted of joining individual parts into wholes - from the information
sources we separated the advantages of joining the global supply chain, also the disadvantages and
mistakes in the management of global supply chains.

• The literature was collected by using various sources, including World Bank report and research
papers from database Web of Science and gathered opinions of some experts in the field.
 Results
The results of the paper were divided into the following subchapters:

The main advantages of participation

in the global supply chain.
Common mistakes in management
of global supply chains
1- Availability of excellent products
2- Reducing costs
1- Low transparency of SC 3- Motivation to be better in business
2- Ignorance of business and delivery conditions(Incoterms) 4- Reducing amount of stock
3- Poor forecasting and inventory management 5- Securing of almost any item in easy way
4- Excessive cost on urgent shipments 6- Continuous operation of the supply chain
5- No Action plan in case of Supply chain disruption 7- New opportunities and markets
8- Learning from others
9- Flexibility
10- Greater chance to survive
Common mistakes in management of global
supply chains
• Global supply chains represent new challenges to maximize opportunities and
minimize risks.
• For example, a recent study by the University of Tennessee found that 25% of
corporate supply chains were not screened for risk management, WHY? .
In the following paragraphs, we have outlined the main mistakes made by companies operating in
international markets, as well as the types of how to deal with them and thus reduce the risks
involved.

• Information was obtained from company DB SCHENKER, which is professional

provider of global transport and logistics network for businesses .
• It delivers nearly a million shipments annually only by road transport, making it the
largest road transporter in Europe.
• It operates not only in road transport, but also in air, sea and rail transport, in
territories such as Europe, Asia, America, Australia and Africa.
 Common mistakes in management of global supply
chains

1 Low transparency of supply

chain
For example, extending the supply chain by

replacing a local supplier with a supplier from China

may mean increasing the volume of goods in chain,

extending delivery times, the need to reassess

stock levels, etc.

Companies can reduce the risks associated with a

How much should organizations know about their extended
complicated international supply chain by involving
supply base, and what should they do with this information?
a logistics partner (3PL - third-party logistics
This question has become of urgent practical significance for
provider), which has distribution centers in place, a
firms across industry sectors, as they square up to the
functioning global logistics network and contacts to
complex inter-connectedness of the modern world. We present
foreign transport service providers. It can be helpful
a series of challenges that firms can use to frame an initial
for managing suppliers and setting up processes to
review of their own practices.
keep track of all logistics operations and be able to

plan efficiently.
2 Ignorance of business and delivery conditions
(Incoterms)
A company that starts business in international markets without taking the
time to understand the Incoterms and studying its partner's business
conditions, is risking serious problems and financial losses.

This fact is confirmed by Felix Miletich, Air and Maritime Transport

Manager at DB Schenker in Slovakia, statement: “It is incredible how
many companies overlook these important details.

Businesses must verify the rights and obligations arising from the agreed
delivery terms before entering into trade. Otherwise, this can mean an
increase in costs but also a significant increase in delivery time”.

Therefore, Miletich recommends to verify in advance the responsibilities of

the parties with the partner in detail, to agree everything in writing and to
send the information to logistics partner or carrier.

If everything is not discussed in detail with the business partner before

sending the first shipment, various inconveniences may arise. Businesses
will have contradictions between themselves, who has to pay for what and
the goods will be detained with the carrier.
3 Poor forecasting and inventory management
Nowadays customers expect to receive their shipments on the second or at the
latest on the third day of the order. Companies that often solve problems with
shipment delays or long transit times, lose business opportunities. If production is
outsourced, for example, to China, delivery times can be quite long and it is worth
considering anything that will help to companies shorten this time.
We recommend focusing on forecasting, solid inventory management, and
searching for alternative suppliers. It may also be helpful to work with an
experienced logistics provider, which has its own representation in the country,
knows local legislation and processes that can help to reduce the risk of shipment
delays, for example, by avoiding problems with customs authorities.
Common mistakes in management of global
supply chains

4 Excessive cost on urgent shipments

Companies, that rely 100% on shipping by sea transport, usually do not have a backup logistics plan.
Occasionally there may be a shipment that misses the time of embarkation or needs faster delivery.
Miletich claims, at that time, most companies will automatically choose for the most expensive option - air
travel, without even considering other alternatives. However, there are other possibilities. For example, rail
transport from Asia to Europe, various combinations of air and sea transport, but also the possibility of
using preferential rates for air transport if the client gives the carrier the opportunity to deliver the goods
within a certain time span. Shippers, who are sure about the requirements for the transport time and do
not take unnecessarily the fastest and most expensive option immediately, have the best position.

5 No action plan in case of supply chain disruption

Anything can happen during the shipment of consignment to the buyer - for example, a factory of the
supplier will burn; airport or port staff shall declare a strike or problems with customs clearance. To avoid or
prevent supply problems, there is a need to go beyond suppliers Tier 1 knowledge. claim that companies
should take a closer look at the solvency of Tier 2 and Tier 3 suppliers that supply their main suppliers. If
businesses want to manage their international supply chain effectively, they should know where each
component comes from and who produces it. If there is a problem with one of the suppliers, the logistics
partner may also be helpful in creating a backup plan.
The main advantages of participation in the
global supply chain
1 Availability of excellent products

Global supply is extremely competitive and it is possible to obtain a really good price for supplies that will all be produced to
excellent standards, without even having to search widely .

2 Reducing costs

Companies involved in a global supply chain are able to push their costs right down and therefore ensure stable position on
the market and the economic viability of their business.

3 Motivation to be better in business

In the case, the businesses that previously only acted locally in the domestic market, are involved in the global supply
chain, they are forced to improve their performance. There is a real incentive to do things right, at the first time and all the
time .

4 Reducing amount of stock

There is a possibility to reduce the amount of stock that it is necessary to retain, if companies have sufficient contacts and
suppliers internationally. It means that they can save costs in terms of storage, thefts, transporting goods etc. Reduction of
sum of these costs certainly helps sharpen the competitive edge that comes with a global supply chain

5 Securing of almost any item in easy way

Thanks to the global supply chain, it is now easy to secure almost every item because there is a likelihood that it is
produced or manufactured somewhere in the world. In the past, any item that was not a standard item, from a standard
range could take ages to produce.
The main advantages of participation in the
global supply chain
6 Continuous operation of the supply chain
The chain never sleeps and is constantly on the go, simply because of the time differences in different countries.
7 New opportunities and markets
If a company decides to obtain its items from China, for example, it is likely that it will also want to discover other markets
that it would like to penetrate because it has already established sources in China. It is almost as if once a company has
taken the first step to source supplies globally, new markets and opportunities follow .
8 Learning from others
One of the most interesting factors of the global supply chain is that companies can learn from others, because they
cooperate with businesses from around the world. Therefore, it is possible to learn new ways of doing business, new
production methods and new distribution methods, if representatives of companies keep an open mind and have a
willingness to learn.
9 Flexibility
A global supply chain has to be flexible or will be simply applied. With a global supply chain the flexibility is always given a
higher priority and as such, flexibility within the chain is maximized, allowing for the chain to be as effective as possible
10 Greater chance to survive
Companies within framework of global supply chain have a chance of success and being able to even grow during the
economic downturn. If they are not part of it, their chances of survival are lower. There exists a simple rule - if company is
not operating within a global supply chain framework, certainly it is well behind those who are .
 Main problems and recommendations

Many companies lack a transparent supply chain

Companies rely 100% on maritime transport and

• recommendation: to include a logistics partner choose the most expensive option - air transport in
the event of failure
• recommendation: to consider other alternatives, for example rail
Businesses are overlooking important details about transport from Asia to Europe, various combinations of air and sea
Incoterms and partner's business conditions transport and others (listed above).

• recommendation: to verify in advance the responsibilities of the Businesses are overlooking important details about
parties with the partner in detail, to agree everything in writing and Incoterms and partner's business conditions
to send the information to logistics partner or carrier
• recommendation: to verify in advance the responsibilities of the
parties with the partner in detail, to agree everything in writing and
Companies solve problems with shipment delays to send the information to logistics partner or carrier
or long transit times;
Companies are usually not prepared for
unexpected events can happen during the
• recommendation: to focus on forecasting, solid inventory shipment of consignment to the buyer
management, and searching for alternative suppliers, also to work
with an experienced logistics provider. • recommendation: to take a closer look at the solvency of Tier 2
and Tier 3 suppliers that supply their main suppliers, to know
where each component comes from and who produces it, to
create a backup plan with the logistics partner.
 Main Benefits
The main benefits that the businesses can gain from participating in the
global supply chain:

Because global supply is extremely competitive,

Companies involved in the global logistics chain are
there is a possibility to source excellent products
able to push their costs down, resulting in a stable
completed to the highest standard of quality
market position and increased competitiveness
controls quickly and efficiently

Companies can learn from others, because they

There is a chance of success and being able to
If businesses that previously only acted locally in cooperate with businesses from around the world.
even grow during the economic downturn. There
the domestic market are involved in the global Therefore, they learn new ways of doing business,
is no doubt that involving a business in the global
supply chain, they are forced to improve their new production methods and new distribution
supply chain is a very good choice if companies
performance. methods, if representatives of companies keep an
want to grow and increase their competitiveness.
open mind and have a willingness to learn.
Thank you