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Globalization's Impact on Operations & Supply Chain Management

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  • 00:00 Globalization
  • 00:42 Procurement & Sourcing Methods
  • 1:54 Inventory Management
  • 2:27 Distribution Facility Location
  • 2:56 Transportation
  • 4:00 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Globalization's impact on operations and supply chain management is multifaceted. In this lesson, we will discuss four impacted areas: procurement and sourcing methods, inventory management, distribution facility locations, and transportation.

Globalization

Hot Beans is a growing international coffee company that has expanded into many international markets. In this lesson, we will examine how their tremendous business growth has impacted Hot Beans' operations and supply chain management systems. In order for Hot Beans to remain competitive in the coffee marketplace, the company has had to go global with their business.

Globalization is the relinquishing of any trade barriers or tariffs that results in uninhibited economic development across all countries. Globalization has impacted the operations and supply chain of Hot Beans in four areas: procurement and sourcing methods, inventory management, distribution facility locations, and transportations.

Procurement & Sourcing Methods

Globalization has been embraced by businesses for many years due to the need for continued corporate growth and the ability to save money. Procurement and sourcing methods have been impacted by the globalization of business. These methods allow companies, such as Hot Beans, to acquire supplies, materials, and labor more efficiently overseas. Countries such as China and India offer Hot Beans low-cost, well-educated workers that can offer tremendous savings along with cheaper production costs.

Not all forms of sourcing come without disadvantages. Hot Beans has to worry if utilizing overseas procurement and outsourcing will cause potential product issues. It is not in the company's best interest to save money at the expense of quality and reliability. One of their international suppliers had to be dropped when it was discovered that the quality of the beans had plummeted. Hot Beans also has to worry about infringement on their secret recipes in markets such as China, where intellectual property is not deemed important.

Inventory Management

Inventory management methods or the management of the percentage of stocked goods has also been impacted from the changes ushered in through the globalization of business. Hot Beans has noticed that their inventory levels have risen since dependency on outsourced materials. This is due to the uncertainty in the transportation of the products due to weather or port issues from overseas markets. The company has to adopt safety stock, or extra stock to mitigate shortfalls, in order to protect their supply levels.

Distribution Facility Location

Hot Beans' distribution facility locations, which are locations where product is received, stored, organized, and redistributed, are now much more difficult to manage due to the complexity of the globalized network. Hot Beans now utilizes network modeling tools to help choose the best locations of their facilities to incorporate international shipments near ports. With easy access to oversea ports, Hot Beans can cut costs in their movement of product.

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