Chapter 6: Global Supply Chain and Logistics

“The supply chain is the bloodstream of business.”

– John Gattorna, Author and Supply Chain Expert

In the modern globalised economy, supply chains are the backbone of almost every business operation. From raw materials to final products, companies rely on complex networks that span continents, industries, and regulatory environments. However, these global supply chains face increasing challenges due to geopolitical instability, supply chain disruptions, technological advancements, and the growing demand for sustainability. This chapter explores the evolution of global supply chains, the current challenges businesses face, and how companies are adapting to ensure resilience, sustainability, and efficiency in the modern global marketplace.

The Evolution and Complexity of Global Supply Chains

Global supply chains have undergone profound changes over the past several decades. Originally, businesses focused on local and regional supply chains, sourcing raw materials and goods from neighbouring regions or countries. However, with the rise of globalisation, companies began to expand their supply chains to tap into low-cost labour markets, access specialised components, and serve new consumer markets. The establishment of the WTO in 1995 and the development of free trade agreements (FTAs) paved the way for companies to enter new markets without facing stringent tariffs and trade barriers.

The expansion of supply chains was facilitated by several factors, including advances in logistics, transportation technologies, and communication systems. Containerisation, the use of standardised shipping containers, revolutionised the transportation of goods globally, reducing shipping costs and allowing for the efficient movement of products across the world. Information technology also played a critical role in supply chain management, enabling companies to track shipments in real-time, monitor inventory levels, and communicate instantly with suppliers and manufacturers.

However, as companies expanded their global operations, supply chains became more complex, involving multiple suppliers, manufacturers, and distributors across various countries. The increased interdependence and complexity of these global networks introduced new risks, which businesses were often ill-prepared to handle. Over time, supply chains have become not only a logistical function but also a strategic imperative that can make or break a company’s competitive advantage.

Contemporary Challenges in Global Supply Chain Management

One of the primary contemporary challenges facing global supply chains is geopolitical risk. With the rise of protectionism, trade wars, and economic nationalism, businesses have been forced to rethink their reliance on global supply chains. The U.S.-China trade war serves as a prime example of how geopolitical tensions can disrupt global supply chains. In 2018, the U.S. imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods, which affected manufacturers, exporters, and importers around the world. In response, companies had to diversify their supply chains, look for new markets, and find alternative suppliers to avoid the rising costs associated with the tariffs.

The Brexit negotiations between the UK and EU provide another example of geopolitical challenges impacting global supply chains. In 2020, the UK officially left the EU, and businesses had to adapt to new customs regulations, border checks, and potential disruptions in trade. Many companies that relied on EU-based supply chains had to reorganise their operations, set up new facilities in non-EU countries, and adjust their logistics models to cope with the changes.

The COVID-19 pandemic exposed the vulnerabilities of global supply chains more dramatically than any other recent event. The pandemic caused widespread factory shutdowns, delays in transportation, and disruptions to labour forces. For instance, automobile manufacturers in countries like Germany and Japan were forced to halt production due to shortages in critical parts sourced from China, where the pandemic first started. This disruption also affected the pharmaceutical and medical supply industries, with shortages in PPE (personal protective equipment) and ventilators creating massive challenges for healthcare systems worldwide.

The Need for Supply Chain Resilience

As the pandemic demonstrated, resilience has become a key focus for supply chain management. The concept of resilience refers to the ability of a supply chain to adapt to disruptions, recover quickly, and continue functioning effectively despite unforeseen challenges. In response to global disruptions, businesses are rethinking their reliance on lean supply chain models, which prioritise efficiency and cost reduction at the expense of redundancy. While lean supply chains are effective in normal circumstances, they leave businesses vulnerable to supply chain shocks.

This video explores how the pandemic has led to a shift from a “just in time” mindset to a “just in case” approach. What domestic and international changes are needed to strengthen the resilience of global supply chains and restore support for trade as a key driver of development and prosperity?

“Restoring Trust in Global Trade and Supply Chains” by World Economic Forum in YouTube is licensed under CC.

For example, Apple, a company that has relied heavily on manufacturing in China, has begun diversifying its production facilities to other countries like India, Vietnam, and Mexico. This strategy not only reduces the risk of supply chain disruptions but also enables Apple to tap into new consumer markets. Toyota, another company known for its JIT production system, has taken steps to increase its supply chain resilience by incorporating buffer stocks of key components and establishing contingency plans in case of emergencies.

Moreover, companies are also focusing on sustainability and ethical sourcing as part of their resilience strategy. As consumers become more conscious of the environmental and social impacts of business operations, companies are under increasing pressure to ensure that their supply chains are sustainable. Businesses like Unilever and Patagonia have been leaders in sustainable supply chain practices, using renewable materials, ensuring fair labour practices, and working with suppliers that meet environmental standards. By prioritising sustainability, companies can mitigate reputational risks and create long-term value for both shareholders and communities.

Technology in Supply Chain Optimisation

Technology plays a critical role in enhancing the efficiency, transparency, and resilience of global supply chains. Big data analytics, AI, and IoT (Internet of Things) are reshaping how businesses manage their supply chains. For example, AI-driven predictive analytics allow businesses to forecast demand, identify potential disruptions, and optimise inventory management. These tools can also help businesses make more informed decisions about sourcing, production, and distribution.

“2025 International Automotive & Supply Chain Expo (Hong Kong)” by LN9267 is licensed under CC BY-SA 4.0.

Blockchain technology, often associated with cryptocurrencies like Bitcoin, is gaining traction in supply chain management as well. Blockchain provides a transparent and secure method for tracking products as they move through the supply chain, from raw materials to finished goods. It can reduce fraud, improve traceability, and streamline processes such as customs clearance and payment settlements. For example, IBM’s Food Trust blockchain has helped companies like Walmart and Nestlé track the origins of food products, ensuring safety and transparency for consumers.

In addition, automation and robotics are transforming warehouse and distribution centre operations. Companies like Amazon have introduced robots to help with sorting and packing, improving speed and accuracy while reducing costs. Automation also extends to transportation, with autonomous trucks and drones emerging as potential solutions to reduce labour costs and improve efficiency in last-mile delivery.

Global supply chains are increasingly under pressure to adapt to rapidly changing conditions, from geopolitical risks to environmental sustainability. Businesses that prioritise supply chain resilience, leverage technology for optimisation, and invest in sustainable practices will be better positioned to navigate these challenges. The future of global supply chains will require flexibility, innovation, and collaboration across industries and borders to ensure that they remain robust in the face of future disruptions.

References:

• Christopher, M. (2016). Logistics & Supply Chain Management: Creating Value-Adding Networks. Pearson Education.
• Gattorna, J. (2015). Dynamic Supply Chain Alignment: A New Business Model for Peak Performance in Enterprise Supply Chains Across All Geographies. Gower Publishing.
• World Economic Forum. (2020). “Global Supply Chains and COVID-19: Lessons for the Future.” WEF Report.