Potential problems in using overseas suppliers, especially in developing countries, as a part of a domestic organizations supply chain.
Nowadays with globalization, global supply chain management is becoming a very important issue for most of businesses. The main reasons of this trend are procurement cost reduction, purchasing risks control, revenues increasing and etc. For instance, companies may set up overseas factories to benefit from tariff and trade concessions, lower labor cost, capital subsidies, and reduced logistics costs in foreign markets. Moreover, easy access to abroad markets and close proximity to customers result better organizational learning. On the other hand, improved reliability can be obtained as a consequence of closer relationship with suppliers.
There are some issues that should be considered in managing a global supply chain. First of all, the company should decide about its general outsourcing plan. For whatever reason, businesses may prefer to keep some aspects of supply chain nearer to home.
The second issue that must be incorporated into a global supply chain management strategy is supplier selection. It can be very difficult to comparing bids from a range of global suppliers. Companies usually jump on the lowest price instead of taking time to consider all of the other elements. On the other hand, selecting the right suppliers is influenced by a variety of factors and thus there will be additional complexity in supplier selection due to the multi-criteria nature of this decision.
Additionally, companies must make decisions about the number of suppliers to use. Fewer supplies may result reduced inventory costs, volume consolidation and quantity discounts, reduced logistical costs, coordinated replenishment, improved buyer–supplier product design relationship and thus better customer service and market penetration. However, small number of suppliers could lead to potential problems if one vendor is unable to deliver as...