8.

0 IMPORTANT FINDING

Globalization has changed the business of around the world and introduced the
concept of a global supply management. Everyone knows that globalization refers to a cross
exchange between the international boundaries such as movement of goods and the
emergence of offshore competitors and opportunities due to competing supply chains within
an industry.

Figure (Annual Report Ministry of International Trade and Industry 2018)

According to Annual Report by Ministry International Trade and Industry (2018), we

have find that Malaysia have five top international supply chain which is accounted for 50.6
% or RM949.45 billion of total trade between those countries. In addition relating to global
supply management, we have found potential problems areas in global supply management.
The problem or issues that we want to expose is on areas faced in global sourcing even
though in Malaysia or around the world. As an astute buyer will recognized that he or she
must consider the total cost of ownership, not just the initial purchase price but when
evaluating an offshore source globally.

8.1 POTENTIAL PROBLEM AREAS

8.1.1 Political, Labor and Security Problems
This is related to planning and management where it is based of the country in which
supplier located. Besides that, it is depending more to government’s policy and instability
of political. For the example, waste from electrical and electronic equipment is one of
government’s policy that it can be recyclable to maintain environment’s sustainability and
prevent pollution. So, the business that sells electric and electronic equipment like old
computer have to collect it back and return it back to their perspective manufacture.

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8.1.2 Legal issues
Legal issue is an issue of law which is a question that is become basic for formation
of a cases that requires decision made by the court. Besides that, legal issue also can be
classified as evidence of the case and the outcome must be decided by the court that
interpreted by the law. Legal issue or legal risk that occur in global supply including risk in
control and sanction of export. Then in global supply chain management, labour force is one
of common features. For the example, in Bangladesh here is a report about labour’s slave in
fishing industry at Thailand which is like labour’s practice in supply chain by British’s
public. This one of situation abuse the human’s rights that happen in range of industries
where the production is outsourced to each supplier that mostly happen in developing
country.

8.1.3 Hidden cost

Hidden cost are unforeseen expenses that added on to the purchases. This is happened
when ignoring the relevant cost either indirectly or directly related to purchase equipment or
machine, maintenance, upgrade and support and so-on. We look at, hidden charges of
shipping can be categorized into storage charges, inspection charges, detention charges,
waiting time, rural tailgate. So, this will make an additional charge and will increase
expenses.

Figure (Website International Cargo Express, 2019)

8.1.4 Warranties and claims
Warranties and claims are about customer’s claim towards goods or service that they
get or purchased that in not well performance or not well condition like broke, damage or
something else that make the customer unsatisfied with the things that they got. Next,
warranties and claims either the customer ask for replacement or return for goods

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manufactured by the business or supplier under warranties or credit of price. However, return
or replacement especially when customers demanded for replacements of the goods
manufactured it is more time consuming due to distance.
8.1.5 Cultural and social customs
Cultural and custom it is give a quite similar definition because it is showing a regular,
pattern behaviour in social systems. For instance, shaking hand is commonly used in the
society as great’s method. So, for manufacturing operation that located around the world
have to ensure the efficient for movements of the goods and it is become they
responsibilities to face with different cultural challenges for each region or state the
good move. According to CEO’s Price water house copper stated that, “to ensure supply
chain’s progress smoothly, it is require to entertaining conversation but it is also need to
practice in daily’s effort to make a relationship in business” (Cultural effects on the global
supply chain, 2005). For example, in Central America, certain worker did not want to return
to work until dismissal, but it is different in Japan. This is due to personal relationships are
more important, so a deal will happen if a foreigner turns down an invitation to go
“hasigo” which is pub crawl in Japanese’s version. So, it can be concluded that to develop
strong working relationships, it is important to accept the differences in cultural.

8.1.6 Language
Each nation has different language that they use to communicate with each other in
daily life. Then, for operation of manufacturing that relocate around the world must ensure
the efficiency of goods from their manufactured movement or progress. So, it is become they
duty to understand other language. This is because some of the buyer might not know or use
other language beside their own “mother-tongue” to carry on the deal or purchasing
agreement. This situation makes some of the companies give the priority when hire a worker
with multilingual’s skill.

8.2 The Importance of Global Supply Management

In modern era globalization today, global supply management has become an integral part of
business and is essential to any organization success and satisfaction among the costumers.
They are creating truly global supply chains because it helps facilitate entry into new offshore
markets, enables business growth and provides them with access to variety type of items
through partnership with offshore markets. To be successful on global supply management,
we must consider any important key to support on outsourcing from other countries. So,
based on our finding we have reasons on how we must choose for global purchasing.

8.2.1 Unavailability of Items Domestically.

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 Many countries have their own resources to be supply around the world. Sometimes,
many organizations are hard to find their good supplier to fulfil the requirement. So, it can
lead to make outsource from other countries and vary with the organization specific
requirement.
This is because, offshore company can give more benefit and value or can give a
source that we can get at our country. For example, we can look on food industry such as
durian. We know that rather than Thailand, our country Malaysia is the largest producers of
durian fruit globally. The bulk tonnage of durian fruit is approximately imported about 900
000 MT per year so, China manage to outsource by sign a contract between Malaysia and
China in durian fruit as preferred source (Allison Lai, 2019).

Figure (Percentage of Planted Areas of 9 fruits in Malaysia MARDI, 2017)

8.2.2 Price and Total Costs

Lower cost is an important factor when organization selecting an offshore supplier as
their preferred supplier. Other than that, might be domestic supplier are to expensive than
offshore supplier can lead the organization to buy globally. All manufacturers have chased to
be a low labour costs. So according to Mozahidul Islam from SFM Consulting Firm Sdn Bhd
(2019), we find an example between United States and Malaysia. These two countries also
play a contribution in global supply management. As we know, United States have higher
exchange rates for their Dollar currency between Malaysia Ringgit. So, many Multinational
Company are eager to set up a business in Malaysia as their base. This is because, the
operational costs for services also might be substantially lower in countries outside of North
America, Europe, China and Japan. Based on our finding, there are many Multinational
Company at Malaysia have been here to expand their businesses.

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 Figures ( Multinational Companies in Malaysia by Mozahidul Islam, 2019)

8.2.3 Government Pressures and Trade Regulations.

Every country around the world have their own trade barriers and restriction. Trade
regulation have setting up by the government even though on international trade or domestic
trade. So, it makes sense to consider buying from offshore suppliers. It might be costly
especially in customs duties, import taxes, export taxes, license, and limited quota for import.
Based on our finding, according to Ministry of International Trade and Industry Annual
Report (2018), the Malaysian palm oil industry is faced with the pressures of some economic
or regulations by introducing new measures that discriminate against palm oil. These are on
the adoption of the European Union Renewable Energy Directives by European Parliament
on last November 2018 to take-out first-generation biofuels with high risk of Indirect Use
Change (ILUC). So, palm oil industries in Malaysia or even though in Indonesia are also
raised concerns on the restriction by the European Union (EU).

Figure (Malaysia protesting due tu EU regulation, NST 2018)

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REFERENCES:
https://www.durianharvests.com/production/

https://www.iscc-system.org/eco-business-winners-and-losers-from-the-proposed-ban-
on-palm-oil/

https://www.thestar.com.my/news/nation/2019/07/14/china-ambassador-to-msia-picks-
up-whole-durian-in-beijing-supermarket-after-inaugural-export

https://www.sfconsulting.com.my/multinational-companies-in-malaysia/

https://www.nst.com.my/business/2018/01/325956/boycott-eu-products

https://www.miti.gov.my/miti/resources/MITI%20Report/MITI_Report_2018.pdf
(PDF)

https://www.researchgate.net/publication/287735975_Research_Review_Paper_The_Gl
obal_Supply_Chain_and_e_-_SCM (PDF)

https://link.springer.com/chapter/10.1007/978-1-4615-4949-9_21 (PDF)

https://www.researchgate.net/profile/Theodore_Stank/publication/316349965_Why_Glo
bal_Supply_Chain_Management/links/0deec52a4f79d2beb7000000/Why-Global-
Supply-Chain-Management.pdf?origin=publication_detail (PDF)