CHAPTER 5

GLOBAL SUPPLY CHAIN

MANAGEMENT ISSUES
 Issues in Global trade and Supply Chain

When considering the global trade there are a number of

potential issues looming that could disrupt global supply

chains, sourcing strategies and the flow of working
capital.
If not properly addressed, importers and exporters may face
significant unexpected costs and increased disruptions to their
supply chain. Some of the issues are: -
 1) Going green concept

The world focuses on environmental safety and public

health and much focus has been given to global warming

phenomenon consequently businesses are driven
towards production /supply of goods that are
environmentally friendly and pursue recycling products
laws and trade regulations have also been established.
Fuel companies for example have had to produce

unleaded fuel that is more environmentally friendly.

 Ctd….
Similarly electrical companies have had to conform to

production of electrical products not harmful to the

environment e.g. production of refrigerators that are
CFC free, component harmful to the ozone layer.
The concept of green supply chain has moves from

public relations strategy to a necessary means of

deriving real economic value and compliance.
 Green Supply Chain Management

Management of Materials and Resources from Suppliers to



Manufacturer/Service Provider to Customer and Back, with the

Natural Environment Explicitly Considered.

GSCM is an integrating environment thinking into supply chain



management, including product design, material sourcing and

selection, manufacturing processes, delivery of the final product to

the consumers, and end-of-life management of the product after its

useful life.
Ctd…

The supply chain has been traditionally defined as a one

way, integrated manufacturing process wherein raw

materials are converted into final products, then
delivered to customers.
Nowadays due to recent changing environmental
requirements affecting manufacturing operations,
increasing attention is given to developing environmental
management (EM) strategies for the supply chain.
 Factors Driving A Company To Adopt GSCM

Government

Environmentally aware customers

Market and competitor

Company
Designing The Green Supply Chain

Distribution

Consumer

Supplier Manufacturer Retailer

 Why Do it? (Benefits)

Economic benefits from increased efficiency. By reducing

wastes, companies decrease handling expenses, fines, and

even costly inputs. Supplier's savings may be passed along
to buyer companies.
Competitive advantage through innovation. Efficient

production is enhanced through the use of cleaner

technologies, process innovation, and waste reduction.
Reduction in wastes equals dollars earned.
Ctd…
Improved product quality. Supply chain partnerships help
maintain relationships between buyers and suppliers leading
to increased control over product quality.
Consistent corporate environmental goals. In an era of
multi-faceted, non-vertical manufacturing, companies
include supplier outreach to address corporate environmental
goals.
Improved public image. Consumers, investors, and
employees respond positively to companies with a
reputation for good environmental performance.
 Managerial Benefits
1.Reduced purchasing cost through volume
purchasing. By identifying purchased materials
serving the same function, GT enables the buyer to
purchase fewer different items at higher volumes.
Subsequently, the buyer can take advantage of
substantial volume or shipping discounts.
2.Faster lead time. By computerizing the coding
system, the buyer can quickly identify the materials
or the parts needed. Thus, the buyer can speed up
the ordering process, thereby reducing order cycle
time.
Ctd…
Better negotiation leverage. On many occasions, the
buyer repeatedly purchases similar items. Since the GT
classification and coding system can be a basis for value
analysis, the buyer can not only discover substantially less
expensive items from other suppliers, but also estimate the
supplier’s actual profit margins. This information can be
used as a valuable bargaining tool for negotiating with the
suppliers when the purchase of similar items recurs.
Some ways of greening supply chains
 Product Packaging
 Design for Upgradeability
 Design for Recyclability
 Materials Innovation
 Energy Efficiency /Green/Alternative sources of
energy
 Environmental cleaning and greening e.g tree
planting
2) Lack in manufacturers compliance
A number of regulations are usually passed from
time to time e.g. environmental regulation .
Majority of manufacturers take time to comply
this regulations that leads to lost revenue,
stalled supply chains, fines and ruined
cooperate reputations.
An organizations has to confirm that supply
chain partners are shipping products compliant to
the regulations and carry out audits to ensure
compliance measures are observed.
3) Sourcing shifts by manufacturers
Shift sourcing strategies depending on where they
see the next bubble is. Factors including increased
energy costs ,falling price of dollar ,limited
trade agreements and rising costs of production
forces the organization to rethink their sourcing
strategies.
E.g. China which has of late been adversely
mentioned in terms of production of toxic products
and use of child labour. This bad press has made
organizations to rethink sourcing from elsewhere
 4) Safety initiatives
Over the years there has been product recall for defective

goods. This has lead governments to enact safety laws and

measures that protect the consumer and increase safety of
increasing volumes of imports.
This measures may include third party certifications, raising

consumer safety penalties and strengthening reinforcement

actions to ensure accountability. Firms therefore constantly
ask themselves whether their imports are safe.
Opportunities cropping from Global trade and Supply
Chain issues
a) Environmentally Aware Consumers
As the public becomes more aware of environmental
issues and global warming, consumers will be asking
more questions about the products they are
purchasing.
Companies will have to expect questions about how
green their manufacturing processes and supply
chain are, their carbon footprint and how they
recycle.
b) Profiting from going green
Some companies have seen that this not a bad

thing and indeed have been able to convert the

public’s interest in all things green into
increased profits.
A number of companies have shown that there

is a proof of the link between improved

environmental performance and financial
Ctd…
Companies have looked to their supply chain
and seen areas where improvements in the way
they operate can produce profits.

E.g. General Motors reduced disposal costs by

$12 million by establishing a reusable
container program with their suppliers.
Maybe General Motors may have been less
interested in green issues if they were making
record profits, but in an attempt to reduce costs
in their supply chain.
c) Unaware of Potential Benefits
By re-evaluating the company's supply chain, from

purchasing, planning, and managing the use of materials

to shipping and distributing final products, savings are
often identified as a benefit of implementing green
policies.
Despite the public’s focus on the environment, benefits

attributed to reducing a company’s environmental impact

are not in the forefront of supply chain executive’s minds.
Ctd…
It appears that many executives are still
unaware that improved environmental
performance means lower waste-disposal and
training costs, fewer environmental-
permitting fees, and, often, reduced materials
costs.

Hopefully the interest in green issues and

environmental concern by the public will not
wane as economic issues become more
important due to the faltering economy.
Thank you ! !