Suffering major financial difficulties
The global economic crisis has impacted every industry to a greater or lesser extent. It is believed that the supply chain industry will ride out the crisis since goods and materials even at reduced volumes still need to arrive at the final consumer. In the context of the above statement research the global supply chain of 2 organizations that have been impacted differently by the global economic crisis. Executive Summary Almost every company today sells or sources globally and even if it does not, it must be competing with a company that is involved in international business.
Global supply chain management therefore is one area that cannot be ignored when the success of a business is being contemplated. It is a source of market competitiveness and an effective global supply chain is bound to increase any company’s market prospects (Mentzer, Theodore and Mathew, 2006: 4). The current global financial crisis has basically affected every industry across the globe. Surviving the tough times is quite a challenge to many firms and many have gone bankrupt mostly because they had no prior preparation for such a crisis.
The supply chain industry however is likely to survive the financial crisis. DHL portrays this possibility as it has not recorded a lot of losses. This is because goods still have to be delivered even with reduced production. DHL and General Motors (GM) are two companies that are expected to defy the odds despite the ongoing global financial crisis. DHL has been forced to lay off some of its workers and close up some of its hubs with all hubs in the U. S being completely shut down. This is in response to the financial crisis pressures that have put the company at a risk of insolvency.
GM faces the same plight and it has been forced to lay off a significant number of workers in the recent past to try and reduce the impact of the crisis. GM and DHL portray the importance of adopting an effective supply chain as it is likely to have positive effects on a company’s operations. In the occurrence of similar challenges, firms must learn from the current economic crisis to adopt better global supply chains to maintain business in future. Introduction The effects of the global economic crisis can be felt in each and every industry with far reaching consequences.
Not only has the power of industries to produce goods reduced but the consumer’s purchasing power has also been affected leaving the world economy in a poor state. Possession of an efficient global supply chain is one thing that will help majority of firms to overcome the situation. The global supply chain industry is one sector that has been greatly impacted on by the crisis. It is however believed that the supply chain industry will eventually ride out of the current crisis given that supply will have to be maintained.
The fact that the goods and materials are in reduced volumes does not matter because even then, they still need to be delivered to the final customer. This paper seeks to justify this statement while incorporating real organizations. The global supply chains of two organizations: DHL and General Motors will be used as research support cases for this analysis. From the two case studies, the paper will analyze the importance of implications and consequences of having an effective supply chain. Findings DHL As the financial crisis deepens DHL has found itself a victim of fate with the company suffering major financial difficulties.
According to Yasmin (2009: 2), DHL is already trying to shield itself off from the effects of the crisis by laying off some of its workers and closing some branches for a limited period of time until they can be able to sustain them. DHL is one of the largest companies in the supply chain industry undertaking transport of goods and packages to different destinations in the world (DHL, 2009). Although the company expects to survive given that companies are still using its services to transport their merchandise, DHL has been forced to lay off some of its workers due to reduced business (Yasmin, 2009: 3).
The total number of workers bound to lose their jobs is estimated to be over 16,000. The Deutsch global shipping giant also intends to close its operations in the United States. In a statement issued by the executive director of March Joint Powers Authority, Lori Stone in November 2008, the March Air Reserve Base hub would be closed by January 2009 (Press Enterprise, 2008: 11). About 300 employees undertaking the sorting and loading of trucks, planes and other jobs will lose their jobs in this hub. In total, DHL’s 18 hubs in the U. S will close as confirmed by the CEO, John Mullen.
This means that the company will reduce the 13,000 workforce to only 3,000. With the exit from the U. S, DHL plans to outsource its business to UPS (United Parcel Services) in a $1 billion ten year contract (Press Enterprise, 2008: 16). As indicated by Mullen, decline had been witnessed in the U. S but otherwise it was doing well globally. DHL has established an effective global supply chain. Being a freight company, theirs is a service industry and therefore supply refers to delivery of the goods on behalf of the customers (DHL, 2009).
To facilitate this, DHL has established agents all over the world. These agents are responsible for providing DHL services in their countries and they include freight agents including air freight agents and sea freight agents, logistics agents and cargo and storage agents. As the company would have it, the agents are well distributed around the world making a total of 1,025 suppliers (Barrington, 2007: 23). China rates among the countries with the highest number of suppliers with 127 agents. This is more so because of the numerous products and raw materials exported from China.
The company needs supplies which include packaging materials, delivery trucks, airplanes, ships and trains for which they have identified global suppliers. DHL has also arranged its supply chain such that it appoints agents who are financially endowed and who can purchase their own trucks for transport. This way, the company only pays the agent fees and the burden of obtaining supplies is eliminated. Some materials such as packaging materials must however be supplied from specific suppliers identified by the company due to identity.