Supply chain management is an elaborate system of collaborative transportation, logistics and distribution. This process is complex enough on the domestic level. When you add the challenges of global logistics and varying foreign regulations, the risks of a breakdown increase.
Broader Trust Requirements
A key element of SCM is close relationships with a modest number of trusted suppliers. When you globalize, you not only have a broader direct supplier network, you sometimes are at the mercy of your supplier's suppliers and their reliability. Unreliable subcontractors could impede your business significantly if you don't vet them. Going global also exposes you to great risks of intellectual property theft. Whereas the United States has patent laws and regulations to protect intellectual property rights, you don't always get the same protections overseas.
Long Lead Times
Even when production flows optimally, you normally experience longer lead times in a global supply chain than in a domestic one. The distance required for a manufacturer to source raw materials from its suppliers, ship finished goods to a wholesaler, and then have those goods shipped to retailers in a global supply chain is significant. In contrast, when producers, wholesalers and retailers all operate in the same country, the distance from one stop to the next decreases. Such long lead times make it difficult to meet sudden demand spikes or to fill special orders.
Comparing the costs and process times when evaluating global suppliers is more complicated than comparing these factors domestically, according to procurement specialist Epiq. Simply looking over the quotes by dollar amount doesn't tell the whole story. You have to compare the transportation, logistics, overhead, shipping and time allocation costs with each potential partnership when managing your supplier network. It also takes more time to review the product and service quality of each provider, which has an effect on value as well.
Environmental or uncontrollable business factors impact most companies to some extent. However, global SCM faces much greater environmental risk than domestic SCM. If your supply chain consists of companies in 10 countries, each country could face different climate and weather factors on a given day that affect production or distribution. Political and economic instability are also harder to predict on a global level, which can have adverse impacts on some industries.