With this video, we begin an exploration of the very important topic of international supply chains. Supply chains are the mechanism by which global trade and commerce occurs for both goods and services. Supply chains that are at the heart of global business and trade. As we shall see. First, let's define what we mean by a supply chain. Formally, a supply chain is a system of organizations, people, activities, information and resources that transform raw materials and components through a sequence of vendors and processes to create a product or service for an end-use customer. Here is a very simple example of a supply chain for a physical product. Raw materials and supplies are ordered and shift to a factory. Raw materials are used to create a product which is then shipped to a retail outlet or store or the product is purchased by an end-use customer. The linear sequence of interlock and interlinked transformational elements from raw materials to end user has obvious similarities to a physical chain, hence the term supply chain. There are three principle flows in a physical supply chain. The flow of physical goods from raw materials to end user, which is obvious, but less obvious is the flow of information back and forth along the supply chain. Much research and practical experience has shown that the more easily information is exchanged among supply chain players to more efficiently to slot supply chain will operate. Finally, there is a flow of money from the end-user back through the supplier in reverse direction. Without any one of these three flows, a supply chain cannot operate. Here is another supply chain example with a bit of complexity. Suppose you are in business producing a simple cosmetic product that includes your proprietary skin cream, which is put into a tube with a cap to a two labels attached. Finally, it's put in an attractive gift box for retail sale. After your product is manufactured, the product is sent to a distributor or merchandisers warehouse, then to a retail chains warehouse, then onto a retail store. Looking at the functioning of this supply chain in greater detail. From your factory in Canada, you order gift boxes from Thailand, tubes with caps from China, labels from Malaysia, skin cream from the Philippines. All of these materials are shipped to Canada where they are assembled into your final product. From there, your best customer in the UK orders product which is shipped to its Warehouse in England. Smaller quantities are then distributed to regional warehouses such as Belgium, which in turn are supply retail stores in Germany with a shelf inventory for end-use customers to buy. Even a simple products such as skin cream in a tube can have a complex supply chain. Here is an idealized representation of a more complex supply chain for the manufacturer of a laptop computer. The lower orange squares trace part of the supply chain. Crude oil, is used to make plastic granules, which are then used to help form the keyboard, the plastic keyboard that then are part of the laptop. Clearly there are lots of other parts to go into the laptop, this is just one chain. The laptop then is distributed to a computer wholesaler and then to a computer store, and finally to a laptop customer. Clearly this is just one of many, interlocking supply chains that are required to produce and distribute laptop computers. This suggests that their Chain is a misnomer in supply chain. We might think of it more as a supply net. In fact, when real life supply chains are mapped, they represent complex networks instead of nice linear chains. Here is a map of an actual supply chain produced by a company that specializes in mapping in analyzing large supply chains. You can see that it's supply chain is better represented as a complex of interconnected networks or webs. Perhaps we should call supply chains, supply nets instead. But we're probably stuck with chains due to common usage. Supply chains in their management are complex indeed, whether domestic or international. Here is some of the tasks required for the management of domestic supply chains. Aggregate planning, how to plan and prioritize production assets. Demand forecasting, how to produce facilities management or to produce capacity management, when to produce, procurement, where and when to buy needed materials. Transportation management, how to move materials and finished goods. Inventory management, where and how much raw materials work in progress. Finished goods inventory to carry. Production Management, details of scheduling production, quality management to make sure that quality standards are met. Labor management to make certain that workers are properly scheduled and trained. Tax management to reduce taxes as much as possible. Returns management to handle the effective or return product. When operating internationally, all the tasks of domestic supply chain management must be accomplished. Plus global supply chain managers must additionally deal with government regulation, geographic distances, time zone differences, terrorists and non-tariff barriers, corruption in the Foreign Corrupt Practices Act of the nations in which they're operating, currency exchange exposure, accounting differences, tax differences, third party logistics, language differences, and cultural differences to name but a few. I'm just tired of thinking about all this work. It is a little wonder then that global supply chain management has attracted so much attention and research over recent decades. As we have previously seen, this graph shows the exponential growth of world trade over the past 70 years. But this growth is not just magically occurred or peered behind the growth are an enormous number of simple and complex supply chains to facilitate and implement this explosive growth. In a real sense, supply chains are the enablers of global trade. In summary, supply chains are sequences of interlinked production and distribution events, from raw materials through intermediate processes, they result in a finished product. The finished product is then distributed to one or more layers of distribution centers and warehouses. Eventually the finished products find their way into the retail stores and outlets which are made available, for purchase by end-use customers. Finally, supply chains are hardly linear chains, instead they are sophisticated and complex interlocking networks. In the next video, we will examine several informative examples of product can service supply chains. See you there.
