Global supply chain management

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Cambridge O Level Commerce 7100

Global Supply Chain Management

The big idea: A global supply chain stretches across countries: raw materials from one, components from another, assembly in a third, customers everywhere. Managing it well brings lower costs; managing it badly leaves a business exposed to floods, wars, price swings, cyber attacks and scandals in factories it does not own. Risk assessment is how a business decides which of those dangers to plan for.

Summary — What This Chapter Covers

A simple supply chain: supplier → manufacturer → consumer. A complex supply chain: supplier → agent → wholesaler → retailer → consumer.
Global supply chain management has three parts: upstream (suppliers), the enterprise (the business’s own operations) and downstream (distribution to customers).
Suppliers matter because the quality, price and reliability of the final product depend on them.
Benefits: lower cost of production, lower labour costs, lower cost of purchasing, and advances in logistics and communication.
Risks: environmental (pollution, deforestation), natural disasters, financial, ethical, technological and political.
Risk assessment identifies each risk, judges how likely and how serious it is, and plans how to reduce it.

1. Types and Features of Global Supply Chains

Syllabus 3.2.1 · Papers 1 & 2

Simple and complex chains; upstream, enterprise, downstream

Definition · Global supply chain The network of businesses in different countries involved in producing a good and delivering it to the consumer, from raw materials to the final sale.

Type	Route	Example
Simple supply chain	Supplier → manufacturer → consumer	A furniture maker buys timber from a foreign supplier and sells tables directly to customers through its own website
Complex supply chain	Supplier → agent → wholesaler → retailer → consumer	Coffee beans are bought from growers through an agent, roasted, sold to a wholesaler, then to supermarkets, then to shoppers

Feature	What it covers	Example: a phone maker
Upstream	Everything before the business: choosing suppliers, buying raw materials and components, getting them delivered	Buying screens, chips and batteries from suppliers in several countries
The enterprise	The business’s own operations: production, quality control, storing inventory	Assembling and testing the phones in its own factory
Downstream	Everything after the business: warehousing, transport, wholesalers and retailers, delivery to the consumer, after-sales service	Shipping phones to distribution centres, retailers and online customers

The importance of suppliers

Quality: a faulty component from a supplier makes the final product faulty and damages the business’s reputation.
Cost: suppliers’ prices are a large part of the cost of production, so they decide how competitive the final price can be.
Reliability: late deliveries stop production lines and leave shelves empty.
Ethics and sustainability: customers judge a business by how its suppliers treat workers and the environment.
Innovation: good suppliers develop new materials and components that improve the product.

Benefits of global supply chain management

Benefit	How it arises
Lower cost of production	Each stage is carried out where it is cheapest or most efficient
Lower labour costs	Labour-intensive stages are placed in countries where wages are lower

Memorise

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What can go wrong, and planning for it
Weighing benefits against risks

What's inside

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Global supply chain management