Business is simply exchanging goods or services for money. Good business is doing that in a way that generates a profit. Though it may feel like the cost of pretty much everything in the world is going up, we actually have access to more efficient and cost-effective ways of doing business thanks, in large part, to the global marketplace. Moving goods around the world in a profitable way requires global supply chain management, but before we get into that, we need a global supply chain definition.
What Is a Global Supply Chain?
Basically, global supply chain management means ensuring that goods get to customers efficiently and at a price that satisfies those customers while yielding a profit for your business. It involves countless aspects of global trade, including (but not limited to) manufacturing choices, shipping decisions, currency value fluctuation and quality concerns.
Options can seem limitless and stakes can be high, making effective global supply chain management seem daunting.
You may be wondering, is it even worth it?
I say the answer is yes! Expanding both your purchasing and your sales globally can have positive effects on your bottom line.
...A global marketplace can help you bring high-quality, unique goods to market—things your competition may not be able to source.
Benefits of a Global Supply Chain
While there are many benefits to having a global supply chain, I’m going to focus on how beneficial it can be for three areas of your business: your operations, shipping and product offerings.
Efficient operations
Let's say you sell pencils as part of your retail offerings. How do you get those pencils? You could source graphite, wood and rubber; build a manufacturing facility; and purchase trucks to deliver those pencils to your customers' homes. (And each pencil would probably have to cost $100 for your troubles.)
Or you could flex your global supply chain management muscles and find a producer of pencils based in Mexico or China so you could import those pencils for a fraction of the cost.
When products are made in large quantities, there are enormous economies of scale. Opening your pool of possible vendors up to worldwide manufacturing means you may be able to boost your margins.
And in terms of your business at home, if you can employ people to sell pencils rather than to manufacture them, you're going to be able to move far more product with the same number of employees. Global supply chains can be far more efficient than relying solely on locally produced goods.
Diversified shipping options
No doubt about it, you're going to incur shipping costs if you're doing business worldwide. But just like the economies of scale in manufacturing, shipping can become more cost effective if you review your options.
When you're shipping lots of product around the world, you'll want to ensure you're doing it as efficiently as possible, given cost factors. Freight or cargo consolidation, customs management, standardized packaging, ensuring client addresses…there are a host of shipping factors that can affect your total cost and client satisfaction. Part of effective global supply chain management is reviewing your options and making sure you're making sound decisions about shipping.
Unique offerings
So much of what's for sale around the globe is mass produced and not terribly interesting. And for some industries and categories, that's perfectly fine. After all, a builder doesn't need carpet tacks in a variety of colors made by an artisan. They need functional, reliable, inexpensive tacks, nothing more or less.
But there are industries and categories in which good global supply chain management can help you differentiate yourself from your competitors. While some may think of goods produced overseas as cheap and low quality, think about the value that can be conveyed by the term “imported." When you're talking about Italian leather or textiles made by the women in a small Guatemalan village, a global marketplace can help you bring high-quality, unique goods to market—things your competition may not be able to source.
Global Supply Chain Management: Is It Right for Your Business?
Global supply chain management can be a big job. When you think about having to place orders months in advance or negotiating to make sure you're getting the best shipping rates, you may feel intimidated. But the advantages can be worth it.
There's a world full of factories and producers of goods. There's also a world of potential consumers. Broadening your horizons to include new vendors and suppliers lets you expand the products you offer, choose items you can make higher margins on and even have goods manufactured specifically to meet your needs.
Being willing to sell your goods overseas gives you a much bigger pool of customers, some of whom may pay handsomely to obtain your products.
Read more articles on strategy.
Photo: Getty Images