9.2 Globalisation and SCM issues
The idea of globalisation is not a novel concept any more. It is in the 21st century a well oiled roller coaster in motion which is reshaping the business landscape. As business barriers began to tumble across the world in the 1980s with free market forces gaining ground, many firms went through a process of fundamental reorientation in their business processes. The most obvious directions in which this reorientation took place can be summarised as:
- New sources of raw material . With tumbling economic barriers firms could look for raw material from cheaper sources which hitherto were inaccessible.
- New sources of cheap labour . The new economic order and the generally less rigid legislation in many countries allowed firms to migrate to overseas territories to set up new manufacturing or assembly facilities.
- New markets . A new open trade regime worldwide allowed many manufacturers to export to new overseas markets.
These are the three basic directions in which businesses reorientated themselves and you can surely find many variations in the way firms adapted to globalisation. The resulting business configuration, with respect to supply chain thinking, has introduced great complexity into the world of business, as the techniques or practices which firms have developed in order to harness the power from their supply chain members cannot be applied with any level of confidence.
But let us look at the level of globalisation before proceeding to address the contentious issues in international supply chain management.
The most obvious impacts of globalisation can be seen in the context of two developments - the rise in the percentage of world trade (cross border trade) and the proliferation of multinational companies in the last 30 years. In the period immediately after the WWII, the ratio of world trade to total trade was less than 10%; but by 1980 this percentage had doubled to 20% and by 2000, it rose to 35%. Approximately 50% of this volume was intra-company transfer, highlighting the emergence of global multinational companies. (Fletcher & Brown 2002). These statistics demonstrate the increasing internationalisation of supply chains and you must not forget the broad remit of supply chain management which attempts to optimise the system from the source or origin up to the point of delivery.