For thousands of years man has struggled to provide material goods for its wellbeing as well as to exchange information with his fellows, to get to know the surrounding world from both inside and outside. This has its roots not only in nowadays supply chain management, but also in the rapidly changing world, steered by the globalization.
In the past (Gandhi, 1998) has said: “I don’t want my house to be surrounded by high walls and my windows shut. I want the cultures of different countries to spread freely in it. But I don’t want to be conquered by any country.” Cultural flow today is from rich to poor countries. The biggest American industry is not plane nor car but entertainment. Hollywood movies bring billions of dollars profit all over the world. Satellite communication technologies are a powerful means in the world. American films can be watched in the most remote places. Even 8 years later (Dumont, M, 2006) continues the idea of his predecessor with the following statement: “Today in the era of globalization there is no such issue as borders between states of the same nation.”
According to Krugman (2008, p26) showed that two new factors in the world economy have made supply chain management as well as international trade more relevant in income distribution: the rise of China as a major exporting country and the rapid development of production fragmentation internationally (or offshoring). A good example for this is the Apple Inc. product development process (Figure 1, Apple Supply chain).
2. Rapidly changing world.
Figure 1. Apple Supply chain
While the world is evolving, the global business scene is changing with it. Starting not to implement all the new trends and innovations will lead your business to that point that you will be behind all your competitors . Accoring to Christopher. Martin (2011, p134.) the globe has turned into a dynamic situation and organizations must have the capacity to adjust to the new and ever display changes that are occurring at an expanding rate on a business level, as well as at social, monetary and political levels. Organizations must have a promise to globalization with their foundation, techniques, and forms, or else they won’t be capable contend in the global market.
Globalization is the deployment of facilities and operations by the companies in manufacturing and service around the world. Companies are exploting not only in their country of origin but in many continents and countries.
Starting point of global activities are in most cases exports or imports. Next steps in globalization of companies are often the foundation of firms in foreign countries they exported products in form of a joint venture with a local company. According to (Dumont, M, p.50) The merger of larger companies or the fusion or take over of companies by foreign companies are the logical consequence of an ongoing globalization and also concentration in many branches like the automotive or technology industry.
2.1 Connection between Globalization and Supply chain management.
As organizations developed, they regularly procured their providers and appropriation channels, bringing control over the esteem chain inside the organization’s limit.
Over the past generation, data and informational technologies and ease shipping have empowered firms to outsource to suppliers around the globe in light of cost and capacity.
Supply chain complexity, represented as the number of suppliers, differentiation among those suppliers, and the level of interrelationship between them, influences the level of exertion important to picture a central (or purchaser) company’s supply base (Choi and Krause, 2006).
Taking the following example, shows the main idea behind the Supply Chain Complexity. If one considers a car manufactured in the United Kingdom coils for the body are coming from Korea, plastic parts are made in China, electronics are produced in Ireland and the tachometer is constructed in Germany but manufactured in Spain. The complex task to coordinate the purchasing processes, construction and material flows is a challenge for operation managers.
2.2 Positive and negative effects
Increment in learning: with the stimulating and strengthening streams of data and correspondence, people can now get to more data from everywhere throughout the world, all from the solace of home.
Low-cost items: the accelerating of streams of transportation and correspondence along permits companies to look the world over for the minimum costly work and producing costs.
More competitive market: exchange happens between all nations, prompting to comparative items originating from every single diverse part of the world, so organizations need to persistently stay aware of worldwide patterns and changes keeping in mind the end goal to remain aggressive in their market and tob e better than the competitors.
Technological inovations: The improvement of information and communication technologies like e-mail, video conferencing, global data networks, and accepted standards for information interchange (e.g. EDI = electronic data interchange, or XML = extensible markup language) promote international business irrespective of the distance between the location of the firms.
A standout amongst the most valuable parts of globalization for business is that organizations can now gain skills and knowledge from over the globe and broaden their horizon, which prompts to expanded cooperation and a boost to the economy.
2.2.2 Downsides and challenges
Lower wages: according to Bloomberg J. (september, 2014) organizations can now look all over the globe for the most reduced evaluated work so sometimes you will get bring down wages for a vocation that ought to pay a higher rate.
Higher Disparity between the rich and poor: the ones who can take favorable position of all that globalization has to offer are the general population who have the cash to exploit it, unfortunately for the ones with practically no cash are left in a cycle of neediness since they can not stand to use the advantages of globalization.
Impact on small businesses: now and again organizations exploit shoddy work in specific areas, which devastates local businesses on the grounds that these nearby organizations can not rival compensation bigger multinational organizations offer.
Laws and regulations: Different labor laws, tax laws, and regulatory requirements should be considered in the target countries for a new location. The economic and administrational consequences of decisions should therefore be evaluated in consideration of the differences in comparison to the home country.
Just covering a couple impacts of globalization, it is clear that there are both positive and negative influence of globalization and a number of these impacts are a great deal more complex and multi-dimensional. There is much more that could be wrangled on the advantages and disadvantages of globalization, yet that is not the motivation