FPT University, Ho Chi Minh Campus, Viet Nam
INTERNATIONAL ECONOMICS
GLOBAL SUPPLY CHAIN
Name Student ID
Student 1 Bui Nhat Hieu SS171178
Student 2 Tran Thi Phuong Thao SS171114
Student 3 Truong Ngoc Ai Vi SS171238
Student 4 Doan Tran Uyen Ha SS171279
Student 5 Nguyen Quang Huy SS171240
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Table of content
I. Global supply chain: 3
1. Definition: 3
2. Global supply chains today situation: 3
3. Countries that have a great impact on this industry 4
4. Development potential: 4
II. The opportunities of global supply chains: 5
1. Access to new markets: 5
2. Collaboration: 5
3. Technology integration: 5
4. Sustainability: 5
5. Risk diversification: 6
6. Talent acquisition: 6
7. Digital transformation: 6
8. Access to the best partners: 6
9. Offers international customers: 6
10. Creates the opportunity to handle more inventory: 7
III. Challenges that the supply chain has to face: 7
1. Material scarcity: 7
2. Difficult demand forecasting: 7
3. Increasing freight costs - Port congestion: 9
Conclusion 11
Reference: 11
Introduction
The global supply chain is a complex network of entities that work together to produce and deliver goods
and services around the world. The COVID-19 pandemic has highlighted the vulnerabilities of global
supply chains, leading to disruptions and shortages in various industries. As we move towards a
post-pandemic world, it is crucial for companies to make their supply chains more resilient and
sustainable. Overall, it is important to consider the challenges and opportunities facing global supply
chains in today's interconnected world.
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I. Global supply chain:
1. Definition:
Before discussing the concept of a global supply chain, let's take a brief look at the concept of a supply
chain. There are many different concepts of a supply chain, such as "a supply chain is a system of
activities that provide, produce, and deliver a product or service from the primary supplier to the final
consumer". Or it can also be understood as "The supply chain of an item is the process starting from raw
materials until a finished product is formed and that product is delivered to the final consumer".
From the above definitions, we can define a global supply chain as a complex business model, including
all steps from production, transportation, and storage to distribution of goods and services to customers on
a global scale. This model is built on linking suppliers, manufacturers, carriers, warehouses, and other
partners in a complex network.
Global supply chains allow companies to produce in countries with lower production costs and then ship
products to consumer markets around the world. This helps increase competitiveness and reduce
production costs for businesses, and it benefits consumers through competitive prices and product variety.
However, the global supply chain also faces many risks, such as natural disasters, wars, epidemics,
economic crises, political and legal issues, etc. These risks can cause supply shortages, increase prices,
and affect businesses in the supply chain.
2. Global supply chains today situation:
Currently, the global supply chain has improved in many respects, but the whole system is still fragile.
Cargo capacity with ocean and land carriers continues to be stable, and rates have normalized to near
pre-pandemic levels. Diesel prices also fell in the last quarter, contributing to lower freight rates. The
biggest risk in the transportation sector is still the risk of job loss due to ongoing contract negotiations.
Delivery times are improving across each of our market segments, and we are seeing continued
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improvement in customer occupancy rates in several market segments. Commodity prices remain volatile,
but most are well below the pandemic highs of the past three years.
While we continue to see noticeable improvement in many areas, some challenges continue.
Unemployment and labor force participation rates remain at or near record lows, and job growth
continues even as the economy falters. Currently, there are not enough people to fill the job, even in the
manufacturing and distribution sectors. Strong demand growth in some segments, such as electric utilities
and natural gas, continues to strain supply chains and product availability in many categories. Several
shortages of raw materials and spare parts remain a major global risk, including semiconductor chips,
semiconductor neon lights, power steel used in transformers and electric vehicle products, and carbon
black used in the sheath shielding the cable.
In addition, the catastrophic earthquakes that struck Turkey and Syria earlier this month caused significant
damage to people and infrastructure in both countries. Although it is not possible to know the full extent
of the impact on the supply chain, the overall impact in thousands is very small. There has been damage at
several major ports in Turkey, which will cause short-term disruption. Turkey lies between the Black Sea
and the Mediterranean Sea and is an important waterway for sea container shipping in Eastern Europe.
Turkey's largest exports include iron and steel (the sixth largest exporter by volume), motor vehicles and
machinery parts, electrical equipment, and refined petroleum. Some cable manufacturers have the
capacity in Turkey, so the disruption is minimal.
In summary, the situation of the current global supply chain is complex and requires initiative and
innovation from businesses to meet the needs of the market and overcome the challenges that it is facing.
3. Countries that have a great impact on this industry
The countries that have a major impact on the global supply chain are those with large economies and
developed industries, as well as those that play an important role in the production and supply of goods
and services important products in the global supply chain.
The first country is China. China is one of the largest economies in the world and a country that has a
major influence on the global supply chain. China is one of the main suppliers of many industries,
including home appliances, electronics, medical equipment, and consumer goods.
Next, it is impossible not to mention the US, which is one of the largest consumer countries in the world
and has many multinational companies operating there. The US's establishment of trade policies, tariffs,
and other trade regulations can affect the operation of the global supply chain.
Japan is one of the countries that produces high-end industrial products such as cars, electronics, and
robots. Japan is also one of the most advanced countries in the use of new technologies such as artificial
intelligence and robotics.
Besides, Germany is one of the countries with a high-end goods manufacturing industry and many
multinational companies. Germany is also one of the leading countries in the research and development of
new technologies.
Finally, there is Korea, one of the countries that produce consumer electronic products such as
smartphones, tablets, TVs, and cameras. Korea is also one of the countries with a developed automotive
and high-tech industry.
4. Development potential:
The global supply chain is currently facing many challenges, but it still has the potential to grow in the
future. Global supply chains can use 4.0 technology to enhance management, speed up shipping, and
reduce costs. Besides, to reduce the risk when a country or a region is affected by factors such as natural
disasters, wars, or pandemics, the global supply chain can enhance the diversification of supply. Not only
that, the global supply chain can develop a green supply chain, thereby minimizing negative impacts on
the environment, ensuring sustainability, and creating value for customers. In addition, cooperation
between countries can help solve problems in the global supply chain, facilitate enterprises' participation
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in the global supply chain, and improve the competitiveness of the entire system. Finally, supply chain
development Humanitarian supply chains are a new form of the supply chain that protect workers' rights
and ensure ethical standards in the production and transportation of goods.
II. The opportunities of global supply chains:
1. Access to new markets:
A global supply chain enables businesses to access new markets and expand their customer base. By
sourcing products and raw materials from different parts of the world, businesses can diversify their
offerings and cater to a wider audience.
Ex: A small business based in the United States may decide to source products from a manufacturer in
China in order to expand its sufferings and target the Chinese market.
2. Collaboration:
The global supply chain offers opportunities for collaboration between businesses, allowing them to pool
their resources, share knowledge and expertise, and create innovative solutions.
Ex: A group of companies in the automotive industry may form a consortium to jointly develop new
technologies for electric vehicles, sharing their expertise and resources.
3. Technology integration:
The global supply chain offers opportunities for businesses to integrate advanced technologies such as
artificial intelligence, blockchain, and the Internet of Things (IoT) into their operations, improving
efficiency and productivity.
Ex: A group of companies in the automotive industry may form a consortium to jointly develop new
technologies for electric vehicles, sharing their expertise and resources.
4. Sustainability:
The global supply chain presents opportunities for businesses to adopt sustainable practices such as using
renewable energy, reducing waste, and sourcing products from ethical suppliers. This can help businesses
to meet consumer demand for eco-friendly and socially responsible products.
Ex: A clothing company may source organic cotton from farmers in India who use sustainable farming
practices, enabling them to produce eco-friendly clothing and meet consumer demand for sustainable
products.
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5. Risk diversification:
A global supply chain allows businesses to diversify their sources of supply and reduce their reliance on a
single supplier or country, reducing the risk of disruption to their operations.
Ex: A global supply chain allows businesses to diversify their sources of supply and reduce their reliance
on a single supplier or country, reducing the risk of disruption to their operations.
6. Talent acquisition:
The global supply chain offers opportunities for businesses to attract and retain talent from diverse
backgrounds and cultures, fostering creativity and innovation within the organization.
Ex: An IT company based in the United States may recruit software developers from India to diversify its
talent pool and bring expertise from a different cultural perspective.
7. Digital transformation:
The global supply chain presents opportunities to leverage technology to improve management and
optimize product transportation and storage processes.
Ex: The global supply chain offers opportunities to discover new partners and expand business networks
to seek out new opportunities.
8. Access to the best partners:
While there may be some great potential supply chain partners locally, it is only by diversifying globally
that you can benefit from access to the full market of suppliers and supply chain partners. As well as
having access to the best potential partners, other suppliers will also be more likely to improve their
offerings to compete for your business if they know you have plenty of options. Even existing partners
may be willing to renegotiate your deal if they know you are willing to diversify your supply chain
because they will want to retain your business.
A global supply chain is a worldwide network that organizations use when producing goods or services.
These networks may span across several countries and continents to supply and source goods. Many
global supply chains involve the flow of information, resources, and processes worldwide. Organizations
sometimes refer to them as global value chains or global production networks.
For example, if an organization sources raw materials in Germany, manufactures the product in China,
and sells it to customers in this country, its supply chain is global. Key activities in a global supply chain
may include material purchasing, production planning, sales forecasting, and customer servicing.
Companies often manage this chain to ensure that the international network of suppliers, vendors,
distributors, transportation companies, warehouses, and retailers operates smoothly.
9. Offers international customers:
Global supply chains typically enable companies to enter new markets and gain international customers.
For example, if a company has outposts in its supply chain across Asia, Africa, and Europe, it may find it
easier to sell to those parts of the world. Businesses often experiment by shipping to new locations to
discover untapped markets. This may allow them to attract new customers and improve sales.
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10. Creates the opportunity to handle more inventory:
A higher volume of goods in an inventory typically enables organizations to sell more products. The
global supply chain often benefits companies by allowing them to handle and store a higher volume of
inventory. By producing items at a lower cost, they can buy more stock and have several warehouses
across different regions to store them. Companies with sufficient stock may also reduce lead times,
especially during global shortages. A lead time is the amount of time between when a business places an
order to replenish inventory and when the supplier receives the order.
III. Challenges that the supply chain has to face:
1. Material scarcity:
Insufficient inputs have been a source of concern since the pandemic started, owing to an unprecedented
increase in consumer demand. Even now, retailers and suppliers are struggling to satisfy this demand due
to the limited availability of many parts and materials.
Today, many businesses use outsourcing techniques, particularly in the manufacturing of machineries like
cars, phones, and laptops. Machine components frequently cause dependence between nations. Take the
automaker Toyota, which has more than 200 suppliers in total. They include TAC Manufacturing
(Malaysia) for the damper button, KEIPER (Germany) for the back seat assembly latch, Tenneco (USA)
for the exhaust components, etc. A global supply chain bottleneck developed at that time as a result of
country blockades that exceeded the supply chain expectations of businesses with manufacturing facilities
spread across several nations, like Toyota.
For instance, Vietnam still exhibits its shortcomings in terms of technology, management capability, and
connectivity despite getting numerous supportive policies from the Government and ministries, branches,
and supporting industries. When the COVID-19 epidemic lasts for more than a year and causes shortages
and disruptions to the global supply network, these flaws become even more obvious. The epidemic in
Vietnam is spreading to industrial parks, leaving many businesses in a precarious position where they lack
the necessary supplies for production.
This scenario demonstrates the need for more immediate and coordinated solutions for the growth of
ancillary industries, assisting businesses in becoming self-sufficient in production, and reducing risk
dependence on the global market.
Production stalled: In Vietnam, Hyundai Thanh Cong is a sizable automaker. The lack of chip supply in
the market has previously had a major impact on this company's production.
According to a business representative, factories are anticipated to reduce their capacity by 20%, with the
possibility of further reductions if there is a shortage of chips.
"Businesses can create when there are chips; otherwise, they must pause. The majority of car types are
impacted. Because other imported components cannot be used in production, the business consequently
has both a shortage of products to sell to the market and a large inventory”, according to Le Ngoc Duc,
the executive director of Hyundai Thanh Cong.
Not just in Vietnam there are a thousand enterprises around the world that have to temporarily suspend or
close completely because of a shortage of components when the global supply chain is due to the
shutdown order in countries with outbreaks of covid19.
2. Difficult demand forecasting:
In the midst of a worldwide pandemic, demand forecasting has raised the standards for supply chain
management at many businesses. For a large number of retailers and providers of consumer
goods/services, the start of COVID-19 effectively shattered the forecasts, leaving them without a guide as
to how much inventory to stock or make at any given moment.
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Since January 2021, as the worst of the pandemic has passed, companies in the United States have added
540,000 employees per month. Many consumers are making big purchases with savings accumulated
during the pandemic, causing new home sales to reach a 14-year high and auto sales to reach a 15-year
high. While a quick shift to growth is beneficial for businesses and workers, it also brings with it new
challenges.
For example: Another helpful case study is the lack of toilet paper during the early stages of the epidemic.
Demand for retail toilet paper, the fluffier variety used by households, increased abruptly by 40% as a
result of stay-at-home purchases. However, the quantity cannot suddenly increase to meet demand.
Because toilet paper is bulky to store and the demand for it is typically very stable, manufacturers run
their factories at 92 percent capacity and retailers only maintain two to three weeks' worth of inventory on
hand. Americans emptied shop shelves out of concern that they would be without toilet paper.
How did American toilet paper producers react to the shortages? To increase capacity, none appear to
have added manufacturing lines or new facilities. This is due to the fact that producing toilet paper today
is a highly capital-intensive and mechanized process that requires four-story-tall machinery that cost
billions of dollars to build and take months to complete. Contrary to the quick retoolings that enabled
American manufacturers to increase production of cleaning wipes and hand sanitizer, few factories appear
to have switched from scratchier commercial toilet paper to retail varieties. Many also didn't offer
domestic customers commercial toilet paper.
Instead, producers made a little bit more use of their current procedures. They restarted idled equipment
and operated plants at close to full capacity. Some companies streamlined their product lines to cut down
on machine downtime and, in particular, switched to large-roll products to increase domestic paper
consumption without investing in expensive machinery upgrades. Others made investments in their
distribution networks so they could foresee and react to local shortages more swiftly.
3. Increasing freight costs - Port congestion:
• Increasing freight costs:
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Contrary to early predictions, container shipping has become significantly more necessary throughout the
pandemic. Global lockdown measures have led to a spike in online sales, which has increased demand for
imported raw materials and manufactured consumer products. ( a large percentage of which are moved in
shipping containers).
And because this demand was so much higher than expected, there was a record-breaking shortage of
empty or available containers as well as inadequate transportation capacity to meet it. This shortage has
resulted in a sharp increase in price, as it frequently does.
Simple case: Intermodal transportation experienced massive growth in 2021, and spot rates also doubled;
for example, the price changes for reefer (+25%), van (+18%), and flatbed (+27%) vehicles. Additionally,
the cost of shipping goods by air and water has increased dramatically, making it difficult for businesses
to operate at full capacity. As a result, companies have made investments in cutting-edge supply chain and
logistics technology in an effort to find the most economical options. In just 2021, freight rates from
China to the West Coast have jumped by a whopping 240%.
• Port congestion:
Port congestion created by the pandemic remains one of the world's top challenges for supply chains, with
port owners, carriers, and shippers all scrambling for a feasible answer. Congestion happens when a ship
comes to a port but is unable to load (or unload) its cargo because the station is already at capacity.
Although the loading/unloading process usually proceeds as planned, labor shortages and societal
distancing caused by the pandemic have significantly thrown things off track. (creating major bottlenecks
at a number of busy global docks).
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Example: Long lines have formed for ships entering ports all over the globe in the last two years. Danish
supply chain research company Sea-Intelligence has predicted that an increase in March and April in the
number of vessels scheduled to deliver cargo from Asia to North America will add to port congestion for
two reasons.
In March and April, the number of vessels scheduled to depart Asia – and subsequently arrive on the
North American West Coast – will increase sharply and surpass a 40% increase compared to the
pre-pandemic normality, according to Alan Murphy, CEO of Sea-Intelligence.
Numerous businesses are unable to ship their products on time as a result of this congestion and the
backlog it creates, which makes it difficult for transporters to meet their promised delivery dates.
For the purpose of unloading goods from China in October 2021, more than 50 container ships gathered
just outside of Los Angeles and Long Beach. Gridlocks like these delay ships as they search for cargo,
especially in foreign harbors. Such bottlenecks cause both import and export activities to take longer,
which disrupts the domestic supply chains.
Although port congestion is not a new problem, the National Customers Brokers & Forwarders
Association of America (NCBFAA) forecasts that supply chain disruptions and lengthy wait times may
occur in 2022. And as a result, supply chain management will increasingly use technology.
Add headings (Format > Paragraph styles) and they will appear in your table of contents.
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Conclusion
In conclusion, the international shipping and transportation industry, governmental interactions, and
information systems all demand knowledge in many fields due to the complexity and dynamic nature of
the global supply chain. Employing the proper employees is crucial for businesses to run this process
successfully. Supply chain management aims to add value by controlling the procedures used to deliver
goods or services to clients. The global supply chain has certain benefits, like improved productivity and
lower costs, but it also has some drawbacks, such disruptions brought on by political and economic
events. While evaluating the advantages of a global supply chain, it is critical to balance its advantages
and drawbacks. In today's interconnected world, the global supply chain plays a crucial role and
necessitates careful management and research.
Reference:
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16, 2023).
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Guides at International Labor Organization.
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Available at:
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-cong-ngh.html (Accessed: March 16, 2023).
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Available at: https://www.marinetraffic.com/en/maritime-news/article/40811 (Accessed: March 16, 2023).
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Available at: https://www.forbes.com/sites/forbestechcouncil/ (Accessed: March 16, 2023).
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implications for International Trade? Brookings. Brookings.
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rnational-trade/ (Accessed: March 16, 2023).
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16, 2023).
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