Move production overseas boils down to cost

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Reference no: EM132185164

Criticize this discussion in few paragraph 

Uncertainty in any circumstance can be the cause of downfall for any business. As our readings for this week focus on supply chain, the events in one environment could affect a business profit at a global scale. Companies should consider having a plan in which can foresee any threats that may damage the survival of the organization. For example, Mark Humphlett writes about Lagasse Inc. implementing an established plan when Hurricane Katrina hit Louisiana in 2005. The plan included actions that rerouted supply form other distribution centers and transferred to other types of transport. In addition to this, the company manipulated data in which reflected anticipated spikes in demand for some product lines in which were able to change sources at a faster rate (Humphlett, 2011). The outcome of the rapid response costed less than three percent of network capacity and recorded high sales during the time following the disaster. In short, they had no system downtime. This natural uncertainty is one of many that can happen, and companies should be aware that it can with minimal or no warning.

There are other uncertainties that affect the globalization of the supply chain. Financial uncertainty is considered as the market fluctuates, much like the Great Recession of 2008. For example, most global suppliers and buyers depend heavily on banks, more so, the working capital to finance production inventories and receivables. Due to the liquidity problems in 2008, many of the lenders denied credit. It did not matter if companies have good credit and strong balance sheets. Consequently, businesses made cuts anywhere they could. As a domino effect the demand and production fell (Mefford, 2009).

Supply chain is highly dependent on logistics as well. Without the logistics to procure demand, problems could arise in planning, scheduling, and control. Some uncertainties can be the result of seasonality or demand amplification, this affects supply quantity, quality, and supplier lead time. Much like the Lagassee, Inc. scenario mentioned above, the logistical strategy implemented of anticipating spikes in demand, caused more production of items that were high in demand. The company wholesales a wide variety of janitorial and cleaning products, from brooms to cleaning chemicals (Bloomberg, 2018). By manipulating data that reflected by Hurricane Katrina, the company was able to mobilize and have steady logistic management control. Had the company not been prepared for such disaster, supply would not have been able to meet demand making the company logistics unreliable.

The economic and social costs of deciding to move production overseas boils down to cost. Companies can pay less money for labor then they would need to domestically. Although this takes jobs away, it does give way for rising living standards in other countries. Therefore, contributing to the development. For example, the amount of IT outsourcing to India and Philippines, to name a few, have created a growth spurt for the local and global economy (Joseph, n.d.). Some political uncertainties can be faced as well, such as a sudden change in regime or president. For example, when President Trump took office, he opted the US out of the Trans-Pacific Partnership. This affected the nations free trade expectations with eleven other countries.

Reference no: EM132185164

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