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Introduction
The movement of goods and services from one point to another is one of the major factors that contribute to the success of organisations. Organisations need to ensure that goods and services are at the right location, at the right time so that customers can access them easily and conveniently.
Goods are moved from one point to another through the help of a system known as the supply chain. This is a system that facilitates not only the movement of goods and services, but also the movement of information, people, activities, as well as resources (Cox 1999).
Supply chain activities also aid in the conversion of raw materials into finished goods. Supply chain activities have become more significant in the last couple of years, especially with the development of globalisation.
Globalisation has resulted in a larger scope of supply chain management and the evolution of the global supply chain. This involves the movement of goods and services across the borders.
Global supply chains can be analysed using three frameworks, which are supply chain management (SCM), global commodity chains (GCCs), and global production networks (GPNs).
Supply chain management is the management of movement of goods along the supply chain to ensure effective and efficient movement (Gereffi & Korzeniewicz 1994).
Global commodity chains, on the other hand, are the processes through which an organisation manages raw materials and converts them into commodities, before distributing them to the global market.
Global production networks refer to networks whereby goods and services are produced in a specified nation or nations and then they are distributed to the rest of the nations. This article will focus on the above mentioned frameworks and discuss their strengths and weaknesses in the global market.
Strengths of supply chain management
As mentioned earlier, supply chain management deals with the management of the movement of goods and services in the supply chain. In the global scene, supply chain management has become one of the most significant activities in the management of businesses.
It has a number of strengths and weaknesses, which are significant to a business organisation (Fleisher & Bensoussan 2008). The strengths include cost reduction and provision of better customer services, among others. These are major factors that lead to the general success of a business organisation.
Costs are reduced and the profitability of the organisation increases as a result of efficient global supply chains. It is easier for the production or the operations manager to coordinate production schedules if the supply chain is managed effectively, such that the goods and services are able to arrive at their destination in time.
The production functions also run smoothly (Turega 2000). The management is also in a position to manage stock levels better. It should be noted that the stock levels represent a very significant part of the organisational costs (Christopher 2011).
The stock level should be maintained at a low level, which is possible with effective supply chain management.
Good supply chain management is also important because it helps in increasing the level of customer service, which gives the organisation a competitive advantage in return. Supply chain fulfils the customers’ time and place utilities because it ensures that goods are at the right place, at the right time (Pernu, Mainela & Puhakka 2014).
On the other hand, supply chain management ensures that goods are produced at the highest level of quality possible and transported safely. This further increases customer satisfaction. The end result is that the competitive advantage of the organisation is increased, which results in better organisational performance in the future.
Weaknesses of supply chain management
Despite the strengths of supply chain management, there are also a number of weaknesses that may affect its contribution in the organisation (Lambert 2008). For instance, if one part of the supply chain breaks down, then it has the ability to cripple the entire system and cause loss of sales and reduced profitability.
More specifically, if, for example, a machine breaks down or the manager is not able to locate some items in the warehouse, then there will be nothing to supply and the organisation will have nothing to sell. Therefore, the interdependence of the supply chain is a weakness that can work to the organisation’s disadvantage.
The various parts of the supply chain management are under different departments in business organisations. The fact that each of these departments work independently in relation to the supply chain related activities means that coordination is not easy, which could serve as a weakness in the entire chain (Christopher 2011).
The lack of effective communication may be a challenge that can affect the supply chain negatively. It is a weakness that the organisation can only serve to make better, but it cannot avoid entirely.
Strengths of global commodity chains
Global commodity chains have emerged as some of the most important frameworks in the global supply chain. GCCs facilitate the manufacture and distribution of goods in the global market. One of the strengths of the GCCs is that they help in observing quality production.
They involve the gathering of raw materials and converting them into finished products, followed by distributing the products to various destinations (Swinnen 2007). During this conversion, the production department is able to observe quality because it does not execute other activities.
It encourages specialisation in production and distribution, which increases its efficiency. This is very important as the organisation is able to produce high quality goods in a timely manner. In this regard, global commodity chains help in improving the competitive advantage of organisations.
The other strength of global commodity chains is that they enable the management to examine the forward and the backward linkages between the various production processes, both in a comparative and a historical manner (Gereffi & Korzeniewicz 1994).
Therefore, GCCs allow the organisation to use its own activities as benchmarks for its production. The production manager is able to track the relationship between the various production segments.
In doing so, it is possible to maintain a high level of production quality and improve the current quality of production. It further gives the organisation a competitive advantage.
Weaknesses of global commodity chains
One of the major weaknesses of global commodity chains is the fact that they require a lot of data to achieve the required results (Bair 2009). Collecting data is one of the most difficult tasks, which is also expensive in terms of financing.
Collecting the correct data is also a challenging issue, as this is essential in ensuring that the research has minimal or no bias at all. It is not easy to avoid bias in the framework due to the large volume of data required and the difficulty involved in collecting the correct data.
Data collection could also be expensive and time consuming. It should be noted that the framework requires this data to enable the management decide on the production routes. The production manager, through the help of such data, is able to determine the volume of production required to satisfy the demand in various regions.
The other weakness of the framework is that it can only be used by large organisations. Small organisations cannot benefit from the GCC framework because they, probably, cannot afford it, or they do not have sufficient production to merit the framework.
This is a weakness because the framework is not open for all organisations (Gereffi & Korzeniewicz 1994). In other words, the GCCs lock the small organisations out. Global commodity chains are infrastructures for international trade.
Therefore, they are only beneficial to large organisations that are already operating in the global market, but they do not form avenues for small organisations that are trying to establish themselves in the international market.
It is imperative to note that smaller organisations present the hope for future economic prosperity for their home nations, as well as the whole globe.
Therefore, they need to be offered any form of support they need so that they can establish themselves. It is unfortunate that the global commodity chain framework cannot support such organisations.
Strengths of global production networks
This is a framework that is very useful as it helps researchers understand the issue of globalisation in a more detailed manner (Lau 2007). One of GPNs’ strengths is the ability to enable the investigations in the flow of goods and connections of places, both in the developed and the developing world.
Globalisation, in simple terms, refers to connections or other integration of the world economy. There should be connections in the various nations to enable the world economy to integrate successfully.
Global production networks enable economists to understand these connections. They also examine how goods flow within and across the borders.
Global production networks also enable organisations to establish a flexible chain that is more specialised and has low costs incurred (Humphrey 2014).
Flexibility is an essential factor that will help the organisation access many locations with ease. In addition, the organisation can be able to respond to demand in the various regions accordingly. This, coupled with lower costs, gives the organisation a competitive advantage.
Weaknesses of global production networks
These networks are a conceptualisation of production processes that are regarded as being linear or vertical, which is a weakness because it is not easy to predict or anticipate the production networks.
In other words, the networks are not linear as depicted by the framework (Henderson et al. 2002). Instead, the networks are more complex in nature, as they integrate horizontally and diagonally, as well as vertically.
Organisations that have global production networks are said to have a narrow focus on the role of flagship. This is done at the expense of gaining attention of the network of suppliers.
In addition, researchers of this framework tend to overlook the importance of service functions in the success of global production networks. It should be noted that the service sector is very essential, thus overlooking it in this framework is a flaw.
Conclusion
The supply chain has become increasingly important in the past couple of years. The importance of supply chains has become more significant following the establishment of globalisation, as it helps in integrating nations economically by facilitating the movement of goods, services, people, information, and activities, among other factors.
The supply chain has a number of frameworks, such as the GCCs and GPNs, which are used to analyse and understand it. Researchers in the field of supply chain management need to select and apply the best frameworks based on the specific nature of the organisations they are handling and the benefits associated with the frameworks.
Reference List
Bair, J 2009, Frontiers of commodity chain research, Stanford University, Stanford.
Christopher, M 2011, Logistics & supply chain management (4th ed), Pearson, Harlow.
Cox, A1999, ‘Power, value and supply chain management’, Supply Chain Management: An International Journal, vol. 4, no. 4, pp. 167–175.
Fleisher, CS & Bensoussan, BE 2008, Business and competitive analysis: Effective application of new and classic methods, FT Press, Upper Saddle River, NJ.
Gereffi, G & Korzeniewicz, M 1994, Commodity chains and global capitalism, Praeger Publishers, Portsmouth, NH.
Henderson, J, Dicken, P, Hess, M, Coe, N & Yeung HW 2002, ‘Global production networks and the analysis of economic development’, Review of International Political Economy, vol. 9, no. 3, pp. 436-464.
Humphrey, J 2014, ‘Internalisation theory, global value chain theory and sustainability standards’, in R Van Tulder, A Verbeke, & R Strange (eds.) International business and sustainable development, Volume 8, Emerald Publishing Group Limited, London, pp. 91 – 114
Lambert, DM 2008, Supply chain management: Processes, partnerships, performance, Supply Chain Management Institute, Sarasota.
Lau, AKW 2007, ‘Educational supply chain management: a case study’, On the Horizon, vol. 15, no. 1, pp. 15–27.
Pernu, E, Mainela, T & Puhakka, V 2014, ‘Organizing MNC internal networks to manage global customers: strategies of political compromising’, in T Pedersen, M Venzin, TM Devinney, & L Tihanyi (eds.) Orchestration of the global network organization (Advances in International Management, volume 27, Emerald Publishing Group Limited, London, pp. 349–376.
Swinnen, JFM 2007, Global supply chains, standards and the poor: How the globalization of food systems and standards affects rural development and poverty. CABI, Wallingford, UK.
Turega, M 2000, ‘Issues with information dissemination on global networks’, Information Management & Computer Security, vol. 8, no. 5, pp. 244-248.
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