Strains in global production networks, which began to emerge in late 2020, are a result of imbalances in the supply and demand for specific goods, and they are posing challenges to the ongoing global economic recovery. Global production network strains, also known as supply bottlenecks, are a multifaceted phenomenon. The drop-in economic activity and subsequent recovery during the COVID-19 pandemic were unprecedented, reflecting massive shifts in demand and supply caused by the closing and reopening of economies, as well as significant monetary and fiscal stimulus and high levels of accumulated savings, particularly in advanced economies. Furthermore, as pandemic-related containment measures severely limited consumption opportunities in the services sector (particularly travel, tourism, and recreational activities), there was a rotation in demand towards merchandise goods, which exacerbated the goods sector’s already strong cyclical recovery. Faced with such a significant increase in demand, global suppliers of goods have been struggling to keep up.
The most important factors are: (i) Logistics and Transportation issues (ii) Semiconductor shortages. (iii) Economic activity restrictions caused by the pandemic (iv) Labour scarcity Global shipping of merchandise goods has been severely disrupted due to container misplacement and congestion as a result of not only the global economy’s rapid recovery, the rotation of consumption demand from services to goods, and the resulting high import volumes, but also port closures due to localized and asynchronous outbreaks of COVID-19.
Supply chain management is widely recognized as an essential component of most businesses and is critical to company success and customer satisfaction.
Customers anticipate receiving the correct product assortment and quantity. Customers anticipate that products will be available at the appropriate location. Customers expect products to be delivered on time Customers also expect products to be serviced quickly after purchase.
Reduces Purchasing Costs – Retailers rely on supply chains to deliver expensive products quickly in order to avoid keeping costly inventories in stores for longer than necessary. Reduces Production Costs – Manufacturers rely on supply chains to reliably deliver materials to assembly plants in order to avoid material shortages that would cause production to shut down. Reduces Total Supply Chain Cost – Manufacturers and retailers rely on supply chain managers to design networks that meet customer service goals while spending the least amount of money. Supply chains that are efficient allow a company to be more competitive in the market.
Increases Profit Leverage – Companies value supply chain managers because they help control and reduce supply chain costs. This can lead to significant increases in firm profits. Reduces Fixed Assets – Firms value supply chain managers because they reduce the use of large fixed assets in the supply chain, such as plants, warehouses, and transportation vehicles. If supply chain experts can redesign the network so that it can serve US customers from six warehouses rather than ten, the company can avoid the construction of four very expensive buildings. Improves Cash Flow – Companies value supply chain managers because they expedite product delivery to customers. For example, if a company can manufacture and deliver a product to a customer in 10 days rather than 70 days, the company can invoice the customer 60 days sooner.
SCM Aids in the Sustainment of Human Life – Humans rely on supply chains to get basic necessities like food and water. Any disruption in these delivery pipelines endangers human life. SCM Enhances Human Health – Humans rely on supply chains to get medications and healthcare. During a medical emergency, the performance of the supply chain can mean the difference between life and death. SCM Protects Humans from Extreme Weather – Humans rely on an energy supply chain to deliver electrical energy to homes and businesses for lighting, heating, cooling, and heating. A logistical failure (such as a power outage) can quickly lead to a threat to human life.
How supply chain management help the economy of a country? The expansion of global supply chains has altered the income distribution across countries. Participation in these supply chains, which began with the successful completion of low-value-added manufacturing tasks, aided in the industrialization and rapid economic growth of several Asian developing economies. What are the major benefits of effective supply chain management?