A global supply chain is a worldwide network created to source and supply goods and services. It typically spans multiple countries or continents and requires different activities, people, entities, information, and resources to function correctly.
Using a global supply chain is a profitable move for your manufacturing business, as it has many benefits. The exposure you give your business alone by entering into a global supply chain is more than enough reward. Fortunately, brand exposure is not the only benefit, as you also enjoy cost savings, a broader market, and profitable sales, to mention just a few.
This article discusses all you need to know about global supply chains, how your business can benefit from them, and how a leading global marketplace like Alibaba.com can help you on your journey.
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What do Alibaba, Nike, and HP all have in common? If you thought of “global supply chains,” then you’re on the right track. A global supply chain allows huge multinationals to carry out business all over the world.
Fortunately, with the right knowledge and tools, you can also use a global supply chain — just as those giant companies do.
A supply chain consists of two key parts: sourcing and fulfillment.
The sourcing part of a global supply chain relates to manufacturing activities, such as purchasing the raw materials that make up a product. You can source the raw materials for your products either locally or internationally. It is the international sourcing of raw materials or components that takes your business from local to global.
The second part, fulfillment, deals with supplying goods to customers all over the world. Just as you can sell your company’s products locally, you can also expand your reach into international markets.
A typical supply chain involves producers, vendors, warehouses, managers, transportation companies, distribution centers, and retailers. These entities all play their part to ensure that a product goes from its raw form to its finished form, and finally arrives at the end-user.
A supply chain typically requires the following steps: [i]
What makes a supply chain global is that the steps involved occur across multiple countries. So, a manufacturing company can be part of a global supply chain by sourcing raw materials globally and selling its products locally, or sourcing raw materials locally and selling its products globally, or both.
A great example of a company operating both parts of a global supply chain is Apple. Apple sources the components that make up its products from all over the world. The company has over 200 suppliers[ii] and over 800 production facilities[iii] in countries including China, Taiwan, Brazil, and Vietnam, to mention a few.
By doing this, the company effectively reduces its production costs with the cheaper raw materials and labor in these regions compared with regions like North America and Europe.
The company does not stop there. It also markets its products in regions all over the world, which allows it to enter new and lucrative markets, even when local sales slow down.
There is no one-size-fits-all model for global supply chains. The model a company adopts depends on its structure and specific needs. Fortunately, there are several supply chain models to choose from. Some of them are:
As a result, the company relies on supply and demand stability. In light of this, the process is designed to ensure a steady rhythm. Using this model, a company can streamline its production times, ensure there are no inventory shortfalls, and prevent supply chain bottlenecks.
They rely on high forecast accuracy to reduce market mediation costs. They also invest in end-to-end efficiency, so their products are affordable for the consumer. If your company is trend-based, consider applying this supply chain model. Otherwise, by the time your product arrives, it might be out of style.
Taking your business beyond the borders of your country is a highly beneficial move. Businesses with global supply chains enjoy a broader market and can access cheaper or better-quality raw materials. You also stand to gain a competitive advantage over local rivals and increase the value of your brand.
Remember, for your company's global supply chain to deliver the results you desire, you should practice good supply chain management (SCM). Your supply chain should be designed to prevent or reduce shortages, risks, and supply chain bottlenecks that might threaten your business.
Now, let’s take a closer look at the benefits presented by global supply chains:
Now that you know just how beneficial global supply chains can be, let’s turn to how your business can get into one.
Before launching into how your business might exploit global supply chains, you should understand that transacting internationally is not without risks. Due to disruptions caused by the COVID-19 pandemic, international markets are wobbling a bit currently. A combination of factors such as high energy prices, port congestion, increased shipping costs, and labor shortages (such as a lack of truck drivers) have produced global supply chain woes.
But the good news is that countries worldwide are working hard to solve these supply chain issues. With the global economic recovery, and as countries exit lockdowns, global trade should recover. For instance, in the United States, the Biden Administration is working to remove port blockages and delays restricting the flow of goods. The government is also making plans to help its key West Coast ports stay open, such as in Los Angeles.[vi]
That said, here’s how to bring your business into the international scene and exploit the benefits of global supply chains:
On the fulfillment side, demand in global markets may fall because of local events, or unfriendly government policies may affect sales. However, many of these risks are foreseeable, and you should prepare against them when you can.
Alibaba.com is a leading global online marketplace with over 26 million active buyers globally, and over 400,000 product requests daily. Over 200 countries are represented on our platform, and their success stories testify to the value we bring to the table. So do your business a favor and scale it up by selling on Alibaba.com today.