Supply chain management is continually evolving due to the advancements in technology and fierce competition from global companies. More companies are introducing products with shorter life cycles, coupled with heightened consumer expectations have also made companies to focus and invest in their supply chains. Supply chain management entails all the facilities that affect cost as well as playing crucial roles in making sure that products, information and services conform to consumer requirements right from the producers and suppliers’ facilities to warehouses and distribution centers to retailers and eventually to the final consumers (Branch, 2009). It is thus important for managers to focus on their domestic and international supply chains to ensure that consumer expectations are met on time.
Most companies choosing to go are either using the strategy of outsourcing to other foreign companies or selling and manufacturing overseas. Managing these strategies as well as domestic supply chains requires certain elements regardless of whether the supply chain is domestic or global. Such elements include, visibility, technology as well as flexibility so that the supply chain can function efficiently regardless of the length of the chain. Technology plays the role of speeding up the supply chain and gives way to visibility, by allowing different logistic systems to communicate and share information (Christopher, 2012). Conversely, visibility assists the management to know where the goods are to manage their supply chain strategically to reduce delays.
Moreover, the supply chain should be flexible enough to accommodate any changes domestically and globally. The supply chain managers switch the global port and flex the domestic one to meet the goods at another location until they get to their ultimate destination. However, firms using domestic supply chain strategies fall into a slight niche of markets which ensures that they maintain on-shoring operations in their local markets to gain local control, specialized skills as well as tight cycles. Domestic supply chains ensure that manufacturers capitalize on close proximity to the local consumers. Moreover, firms pay lower logistics costs in domestic supply chains as compared to international which helps the firms to balance out higher costs of operations (Danese, Romano & Formentini, 2013).
Unlike domestic supply chains, international supply chains have to deal with brokers, custom concerns, freight forwarders, as well as ocean and air carriers. Domestic supply chains on the other hand, rely on long-standing relationships with the local transportation logistics, which involve a combination of customer-provided transportation, fleet and parcel to transport products from the distribution centers to the players in the logistics chain (Branch, 2009). Domestic supply chains have however evolved to incorporate direct-ship services on behalf of retail consumers.
Managing a global supply chain is complex and costs as much as twice the domestic supply chains. Moreover, international supply chain involves closing the loop between planning and execution, control tower approach and synchronization of end-to-end activities from supply of raw material up to the time the finished product reaches the final consumer. Domestic supply chain on the other hand may use the postponement strategy whereby product components are made in other countries then transported to the local markets where the final manufacturing process is done. This strategy is enables the local company to maintain a high degree of customization and control.
Since in international supply chain products are transported a far greater geographical distance, they require totally different transportation modes as well as multiple hand-offs that must be managed. However, visibility is very difficult to achieve in an international supply chain. Consequently, the skills and expertise needed to manage a global supply chain differ from the domestic requirements. Technology is advanced in most developed countries which translates into smooth flow of products and information between them. However, this technological advancement is not well developed in the developing countries thereby adversely affecting logistics which means that missing the information as well as unreliable information could add risk and decreases flexibility in the international supply chain.
Christopher (2012) asserts that achieving visibility in domestic supply chain is far easier than in international supply chain since a company can contract a single domestic carrier and there are visibility gaps when it comes to international supply chains. However, to ensure visibility, firms can outsource their supply chains to other companies that possess the ability to handle the complexities of global supply chain management. Such partnerships ensure that the company going global can benefit from logistics partners with developed operations and partnerships in foreign countries. Further, global logistics entail moving products and information from origin to port in-country, shipping from port to port over the ocean, and then shipping from port to destination in the local markets.
International logistics lengthen the chain thereby exposing the companies to greater variables, such as border crossings, multiple modes of transportation and multiple hand-offs, different government systems, technology issues and security concerns. This makes international logistics more uncertain and risky than domestic logistics, where incidents are less likely to occur and the consequences are far less severe. This therefore begs for global companies to constantly conduct a cost-benefit analyses (Branch, 2009).
In both domestic and international supply chains, the most important element is to comprehend how they links to organizational strategy. Companies should focus on low cost to ensure total efficiency in their supply chains. However, depending on the operational structure and size of a firm, the domestic supply chain may be managed as part of an international whole. Conversely, the global supply chain of many firms is made up of many smaller pieces that operate independently and uniquely (Danese et al., 2013). This is not the case for the domestic supply chain which is made up of one piece, and the skills and expertise required to manage it are different from those required to manage the global supply chain.
The considerations for international supply chains are security, port issues, tax and tariff issues, partnerships with local experts, cultural differences, technology, and risk management. When a company’s supply extends beyond the domestic borders, a whole new level of security comes into play. Moreover, capacity issues are considered if products are to be shipped by ocean so that the company can route its goods accordingly. Firms should also consider the tariffs and taxation issues to ensure that manufacturing as well as sourcing overseas is as low in cost as possible since tax and tariff regulations differ from country to country (Christopher, 2012). Additionally, product packaging can change the entire tariff structure completely, therefore it is important for the firms to do their research regarding tariff regulations before engaging in international supply chains.
Engaging in international supply chains requires in-depth knowledge of how that country operates, therefore firms should seek partnerships with local experts in the foreign countries to mitigate risks and costs involved in logistics which may be caused by entry into a foreign market (Branch, 2009). These partnerships are made directly or through third-party logistics. Moreover, the most crucial consideration that companies should consider is cultural differences to save logistics planning. Many companies have failed in foreign markets for failing to understand their cultures and instead replicating their cultures in those markets.
Technological abilities and capabilities, on the other hand ensures visibility and smooth flow of information, products and services. Further, companies seeking to venture in global logistics should consider the issues of risk management since the possibility of things going wrong is greater and often more costly to fix. Supply chain managers should thus find out the risks and plan for them in advance to ensure success in the global markets (Christopher, 2012).
System variations over time is an important consideration in both domestic and international supply chain. Managers should ensure that the planning process accounts for cost and demand parameters even when demand is known precisely. This works to mitigate the effects of promotions, competition pricing strategies, seasonal fluctuations, as well as trends (Danese et al., 2013). The demand and cost parameter variation with time makes it hard for the management to determine the most effective supply chain strategy that reduces system-wide costs and conforms to customer requirements.
Moreover, the supply chain management team should consider issues pertinent to finance, purchasing, supply chain, and sales and marketing. Even as they try to manage the physical and information flows of the supply chain, partnerships with key suppliers and outside service providers is very crucial (Christopher, 2012). They should also acquaint themselves with Knowledge of the true total costs of supply chains. Partnerships are important in identifying the areas and reasons true costs are occurring and design ways to jointly manage and reduce them. It is thus important for the firms to realize that improved supply chain financing is supported by better knowledge and control of accurate supply information on events, times and costs.