When it comes to manufacturing, there’s one thing that is abundantly clear. The more suppliers you can source from, the more efficient your manufacturing process can be.
If you’re able to source material from multiple suppliers, then the increased competition in the industry drives costs down. That, in turn, allows you to produce your products at lower costs, which in turn causes lower price tags when the goods hit the consumer market.
That’s precisely why a global supply chain is so important to the world economy. In this article, we’ll take a closer look at how important it is for supply chains to be global.
What Is a Global Supply Chain?
To understand the importance of a global supply chain fully, it’s important to first have a good grip on what exactly is meant by the supply chain.
The supply chain is the series of suppliers that are involved in producing the products that a manufacturing plant outputs. For instance, consider a car. The car is typically not built from scratch in one manufacturing plant, as that would be incredibly inefficient.
Instead, the car is assembled in one plant. Its transmission comes from another plant. Its engine comes from another plant. And its headlights may come from yet another plant.
Thus, supply chains are all about keeping track of what components are being supplied from where. Changes in supply have a massive impact on the output of products that use the supply.
Global supply chain management means that these components are sourced from companies all over the world. This, in turn, allows the countries that have cheaper labor to price their products more competitively than countries with more expensive labor. The final result is a lower price tag on the components, which typically translates into a lower price tag on the final product.
Many of the items that you use in your household today, from the casters on your portable dresser to your refrigerator, take advantage of global supply chain management in order to drive costs down.
Challenges of Global Supply
All these benefits of global supply chains are not to say that the concept is without its cons. Some negative side effects do exist.
For instance, those countries with expensive labor may see their industries decrease when supply is outsourced to factories in countries with cheaper labor. In addition, importing products across national borders introduces taxation and customs costs and complexity.
However, as a general rule, the advantages of the global supply chain far outweigh the disadvantages. Consequently, one can expect to see global supply chain management being used for decades to come in all kinds of manufacturing.
Understand Where Products Come From
There you have it. Now that you know what global supply chain management is, you should have a far better understanding of where the products that you use every single day come from.
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