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According to Skjott and Schary (2007 p. 15), the rise of globalization has largely contributed to the growth of Global Supply Chains. The Global Supply Chain comprises of interrelated processes, resources, and organizations that create and ensure delivery of services and products to end consumers. Global Supply Chains are associated with increased efficiency, supply cost reduction, high-quality services and products as well as the creation of new opportunities. Also, Global Supply Chains are critical in creating opportunities for global corroboration among companies. To take advantage of globalization in supply chain management, there is the need for the organizations to evaluate their position of power within the Global Supply Chains they operate in. Therefore, analytical frameworks like Global Commodity Chain, Global Value Chain, and Global Product Network are used in the evaluation of organization power relations in the Global Supply Chain (Lynn & Morita 2011 p. 21). This essay will discuss how and why different analytical frameworks evaluate the relevance of power relations in Global Supply Chains.
Discussion
Gereffi and Lee (2012) argue that in the recent years, there has emerged a group of retailers and manufacturers with enormous power within the global market. Power within supply chain refers to the ability of an organization to control and own essential assets in the supply chain and markets allowing it to maintain its ability to accumulate and appropriate value through leveraging its suppliers, competitors, and customers for itself. Global Supply Chain is a term used to refer to the network created between different organizations involved in the global production, handling as well as the distribution of specific goods, products or services (Meixell & Gargeya 2015). Meixell and Gargeya (2015) claim an efficient supply chain is critical to any business as it acts as a source of organization competitiveness in the market. A majority of organizations strive to influence their Global Supply Chains with the objective of reducing their cost of production, increasing competitiveness in the global market, retaining and expanding market share. Therefore, determining organization power relations in the global market is crucial in developing organization operating strategies in the global market.
The relevance of power relations in Global Supply Chains can be evaluated using different analytical frameworks like Global Production Networks (GPN), Global Value Chains (GVC), Mainstream SCM and Global Commodity Chains (GCC).
Global Value Chain/ Global Commodity Chain Framework
Global Value Chains also known as Global Commodity Chains and usually are used interchangeably despite their different history. The focus of GCC is on large retailers’ powerful role within the supply chain. GCC concentrates on four dimensions which include input-output structure, territoriality, and governance structure which is either buyer-driven or producer-driven and institutional framework (Baglioni 2017). According to Gereffi and Fernandez-Stark (2016), Global Value Chains are a dominant feature of global trade surrounding emerging, developing as well as developed countries. GVC consists of the wide range of activities required like sourcing of raw materials, design, distribution, marketing and support to ensure product conception and delivery to the final consumer. As such, GVC comprises of all the organizations and people involved in goods or service production.
Accordingly, GVC evaluates power relations in Global Supply Chain by considering the production chain rather than the individual production stages. As such, an organization that has the greatest ability to influence the entire supply chain is considered to have more power over the others. GVC concept explains that power in the Global Supply Chain is not derived from the ability to influence a single stage of production but rather the ability to influence all the stages of production. It may not be possible for the organization to influence all the stages of production and therefore, the organization controlling a majority of the stages of production will have the ultimate power in the supply chain (Gereffi, Humphrey & Sturgeon 2009).
Essentially, GVC is used to evaluate power relations in the Global Supply Chain because not all organizations participate equally in the supply chain. Therefore, to determine the power of these organizations calls for a framework that will consider the extent of influence of the organization in the entire supply chain. Also, GVC can be used to evaluate a country’s power within the Global Supply Chain depending on the extent of its influence in the Global Supply Chain. For example, developing countries have less power in the Global Supply Chain compared to developed countries because they control fewer stages in stages of production. Also, GVC is helpful for organizations focused on the sustainable economic upgrade in determining their competencies about other players within the industry in the chains they participate in both locally and globally (Gereffi, et al. 2009).
Mainstream and Critical SCM Framework
Mainstream supply chain refers to a network of interdependent and connected organizations co-operatively and mutually working together with the aim of managing, controlling and improving the flow of materials from suppliers to the consumers (Baglioni 2017). Baglioni (2017) argues that Mainstream supply chain focuses on being demand-driven, achievement of a seamless flow of products, selection of good suppliers and creation of an agile supply chain. As such, Mainstream SCM objective is to deliver more value at a less cost to the consumers of all the supply chain members. It is for this reason that Mainstream supply chain concentrates on building a competitive supply chain and creating a strong coordination among the members of the supply chain.
Therefore, mainstream framework evaluates an organization power in the global supply chain by considering its ability to deliver more value to its customers at a much lower cost than other members of the supply chain. As such, an organization has a superior position in the global supply chain than other organization operating in the supply chain if it delivers more value at a lesser cost than other organizations in the same supply chain (Christopher 2015).
Additionally, evaluating an organization’s power relations using the mainstream framework enables an organization to analyze the competitiveness of the supply chain and the level of coordination between the members of the supply chain. Also, helps in developing of strategies that will ensure cooperation between firms and build a competitive supply chain. Thus, Mainstream framework analysis is crucial in building a competitive supply chain and creating strong coordination among organizations operating in the same supply chain (Christopher 2015).
Global Production Network Framework
According to Coe, Dicken, and Hess (2008), Global Production Network (GPN) is connected to the interactions of demand and supply. GPN reconciles the consumers material needs with production capacity and distribution system to ensure right quantity, right product, right location, right price, and delivery at the right time. According to Baglioni (2017) GPN focus is on areas like actor’s agency, domestic actors, territory and institutional framework. GPN acts as a source of corporate, institutional and collective power.
GPN framework is used to evaluate the relevance of power relations in Global Supply Chains by going beyond the linearity of other frameworks and focusing on all the relevant set of relationships and factors. The focus of the GPN is upon sets of inter-related factors like processes and outcomes and space and time processing. In GPN analysis organizations with the weakest position are those in the production of products that are easy produced. As such, organizations producing or in control of scarce assets are considered to have more power in the Global Supply Chain (Gereffi, et al. 2012).
As such, GPN evaluates the relevance of an organization’s power relations in Global Supply Chain because they exist in transformational space. Therefore, it is structured and constituted by ideologies, transnational elites, and institutions (Coe, et al. 2008).
Conclusion
Globalization has significantly influenced the manner in which organizations conduct their business. The growth of globalization has increased organization opportunities and competitiveness in global context. This has lead to a growing demand for understanding the Global Supply Chain. As such, organizations use frameworks like Global Value Chain, Global Commodity Chain, Mainstream SCM and Global Production Network to evaluate their power relations in their Global Supply Chains. The evaluation helps an organization develop appropriate strategies to ensure is long-term survival and competitiveness in the global market. Therefore, Global Supply Chain analytical frameworks play an essential role in developing strategies used by organizations in the global market.
Reference List: Global Supply Chain Essay
Baglioni, E. (2017). Critical Views on GSCs: Power and Supply Chain Management, Global Commodity Chains and Global Production Network. [Handout] BUSM091.
Christopher, M. (2015). Logistics and supply chain management: creating value-adding networks. Pearson education.
Coe, N.M., Dicken, P. & Hess, M. (2008). Global Production Networks: realizing the potential. Journal of economic geography, 8(3), pp.271-295.
FLynn, B. B.,& Morita, M. (2011). Managing Global Supply Chain relationships: operations, strategies and practices. Hershey Pa, Business Science Reference.
Gereffi, G. & Fernandez-Stark, K. (2016). Global Value Chain analysis: a primer.
Gereffi, G. & Lee, J. (2012). Why the world suddenly cares about Global Supply Chains. Journal of supply chain management, 48(3), pp.24-32.
Gereffi, G., Humphrey, J. & Sturgeon, T. (2009). The governance of Global Value Chains. Review of international political economy, 12(1), pp.78-104.
Meixell, M.J. & Gargeya, V.B. (2015). Global Supply Chain design: A literature review and critique. Transportation Research Part E: Logistics and Transportation Review, 41(6), pp.531-550.
Skjott, T., & Schary, P. B. (2007). Managing the Global Supply Chain. Denmark, Copenhagen Business School Press.
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