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 contents
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
III. The challenges of global supply chains: …………………………….6
1. Material scarcity:……………………………………………………..6
2. Difficult demand forecasting:……………………………………......7
3. Increasing freight costs - Port congestion:…………….....................8
IV. References: …………………………………………………………..10
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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 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
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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 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.
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II. The opportunities of global supply chains:
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.
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.
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.
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.
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.
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.
Value creation for customers: The global supply chain offers opportunities to increase value for
customers by providing better, faster, or more affordable products or services. This can help
businesses gain a competitive edge and attract loyal customers.
Ex: An e-commerce company may offer free, fast shipping for customers by optimizing their supply
chain logistics and partnering with efficient shipping carriers.
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.
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.
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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.
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.
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
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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:
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
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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).
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.
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IV. Reference:
1) Global supply chains in a post-pandemic world (2023) Harvard Business Review.
Available at: https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world (Accessed:
March 16, 2023).
2) What is a global supply chain (no date) BDC.ca.
Available at: https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/
glossary/global-supply-chain (Accessed: March 16, 2023).
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3) Ilo Research Guides: Supply Chains: Home (no date) Home - Supply chains – ILO Research
Guides at International Labor Organization.
Available at: https://libguides.ilo.org/global-supply-chains-en (Accessed: March 16, 2023).
4) Moit.gov.vn.
Available at: https://moit.gov.vn/tin-tuc/phat-trien-cong-nghiep/dut-gay-chuoi-cung-ung-con-duong-
de-tu-chu-san-xuat-cong-ngh.html (Accessed: March 16, 2023).
5) Why the pandemic has disrupted supply chains (2021) The White House. The United States
Government.
Available at: https://www.whitehouse.gov/cea/written-materials/2021/06/17/why-the-pandemic-has-
disrupted-supply-chains/ (Accessed: March 16, 2023).
6) Global port congestion shows Little sign of improvement (no date) MarineTraffic.com
Available at: https://www.marinetraffic.com/en/maritime-news/article/40811 (Accessed: March 16,
2023).
7) Forbes Technology Council (no date) Forbes. Forbes Magazine.
Available at: https://www.forbes.com/sites/forbestechcouncil/ (Accessed: March 16, 2023).
8) Dollar, D. (Tuesday, November 17, 2020 ) The future of global supply chains: What are the
implications for International Trade? Brookings. Brookings.
Available at: https://www.brookings.edu/research/the-future-of-global-supply-chains-what-are-the-
implications-for-international-trade/ (Accessed: March 16, 2023).
9) Global supply chains in a post-pandemic world (2023) Harvard Business Review.
Available at: https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world (Accessed:
March 16, 2023).
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