July 08

The Rapid Global Trade

“It has been said that arguing against globalization is like arguing against the laws of gravity,” Kofi Annan once said. Manage globalization or let it manage you out of business, I’m sure any manager would choose the former. Globalization has forced companies to do things in new ways; otherwise it might be the end for them. And so the world started to become flatter.

As companies expand their activities globally, their supply chains are growing and expanding as well to meet the production needs and maintain competitive advantage. And some simply wanted to take advantage of opportunities to lower cost (of production, for instance) and outsourced or expanded their production base abroad. Knowing these, indeed globalization is at its peak – or maybe not, there’s more perhaps. If you take a look at one product on your desk, say your Asus EEE, Asus’ corporate base is in the US, but most of its computers are assembled in China – where the cheapest labor is – and if you look closer to each component of your EEE, you’ll find that the battery cells are manufactured in Japan and some unlabeled components might actually be manufactured here in the Philippines. With this in mind, one can imagine the need for urgent bulk deliveries of the components/products overseas to meet production needs – the emergence of a worldwide fast-paced logistics. But all these urgencies are not limited to the physical leg of the already complex supply chain (SC); these also affect the financial and data facets of the supply chain. For the global SC to be sustainable, the financial SC has evolved so as not to hinder the physical movement. From the old reliable letter of credit to open account transactions, technology has played a large role in this rapid global trade and in tying the three legs of supply chain together. Or perhaps it is more accurate to say, technology weaved this global trade to what it is now — bigger cargo planes and more high-tech ports for the physical supply chain and advanced intercontinental networking tools to make international data transfer and financial services possible. So what do these mean to supply chain managers or future SC managers, to include us?

First, we have to be aware of developments in the global trade as well as limitations of the current supply chain – capitalize on opportunities that may arise from either the developments or even the limitations of the trade. This is connected to the second notion that managers have to view the supply chain holistically. The global trade as a whole is like a huge platform where one thread’s limitation creates an opportunity for another and so on. The three facets are interdependent instead of independent of each other, to quote the article. Third, having said that technology has been playing a major role in this grand scheme, we have to learn to take advantage of the advancements in this field. We have to be open and accept to new ways of doing things if it’s for the better. Conservatism may not be a good stand in this era where efficiency and effectiveness are tied to technological innovations. And lastly, we have to be adaptive. We have to remember that what is optimal today may not be the most efficient way of doing business tomorrow – just consider the evolution from local manufacturing to overseas production and from letter of credit to open account transactions. Now, I wonder what will the next decade be for supply chain management.