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Challenges in Global Supply Chain

Challenges in Global Supply Chain
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  • 0:00 The Global Supply Chain
  • 0:51 Increased Paperwork
  • 2:10 Varying Regulations and Fees
  • 3:45 Language and Cultural Barriers
  • 4:54 Lesson Summary
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Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Once a business goes global in its supply chain, a whole new set of challenges and concerns arise. A business will encounter not only increased paperwork but also other challenges, including language barriers.

The Global Supply Chain

A global supply chain is a network that moves supplies from distributors in one country to businesses in another country. In today's world, many companies purchase supplies from one country and make or sell the product in another. For example, you might see a product at a store with a label that says the material came from Thailand, while the product is assembled in the USA. In this lesson, we will talk about some of the challenges that come from moving supplies from one country to another.

Let's meet Susan. She is the general manager for a company that makes all-wood furniture. One aspect of Susan's job is that of finding beautiful pieces of real wood to make the furniture for the company. Susan talks to wood suppliers worldwide to find the best pieces of wood for the best price. Let's see what kinds of challenges she faces.

Increased Paperwork

One challenge that a business with a global supply chain faces is that of increased paperwork. Each country has its own paperwork that must be filled out correctly for the supplies to make it through the country to its destination. The more countries the supplies pass through, the more paperwork there will be. This paperwork includes invoices, letters of credit, bills of lading for shipping supplies via boat, and air waybills for shipping supplies via airplane.

Different countries may also have different inspection points as well. To get through these inspection points, the proper paperwork must be filled out for that particular country. If paperwork is filled out wrong, it could mean the supplies will be delayed. Instead of taking the usual week to deliver, the supplies may take a whole month. In a company that relies on its suppliers to make its products, this could mean a loss in the company's profits.

For Susan, this means she has to stay on top of all the paperwork that she needs to fill out when she finds that beautiful piece of solid wood. Today, for instance, Susan needs to fill out South African paperwork to make sure that a wood piece found in South Africa makes its way to the U.S. without a hitch. If she fills out the paperwork correctly, the wood will be here within the month. But if not, then there could be lots of back and forth and possibly even a denial of shipment. So Susan is very careful to provide the correct pieces of information.

Varying Regulations and Fees

Another challenge comes from the varying shipping regulations in each country. Some countries require a business to carry cargo insurance for its supplies. Each country may also have its own import and export fees that a business has to pay when shipping supplies through the country. Businesses may also have to meet various governmental codes and reporting procedures in order to successfully move their materials through a foreign country. Especially since 9/11, some countries have even greater security regulations that must be met.

The more countries that a business has to ship supplies through, the more potential costs there could be. The cost of shipping globally is something the business needs to consider. For most businesses with a global supply chain, the low cost of foreign supplies makes it worthwhile for the business to purchase supplies overseas, even with shipping costs factored in. If you're considering a global supply chain for your business, you need to make your own calculations to make sure that it will be worthwhile for you.

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