The firm, a European manufacturer of ready-made garments, is marketing the products in American markets. It has a Hong Kong-based local coordination office to look into the movements of the inventory. The initial conceptualization and design of the garments is done in Hong Kong. The cotton yarn is brought from Korea and dyed and woven in Taiwan. Japanese zippers are sourced from a factory located in China. Finally, all these components are shipped to Thailand where a consignment of 50,000 garments is split into five batches of 10,000 each for further processing in five separates factories. The ready-made garment may bear a “made in Thailand label,” which does not reflect the reality. The entire consignment will then reach Hong Kong where the final inspection and packing will be done. The final product will reach the destination in five weeks’ time. Similar networks are also in operation for products like Barbie dolls and entertainment electronics.
In the above global model, the shift is from value chain to value network. The product passes through several countries and many factories employing thousands of workers with diverse cultural and linguistic backgrounds. Each stage in the logistics supply chain is identified to be the most efficient and cost-effective. For example, Japanese zippers are good in design and performance, but to source them from a factory located in China is a cost-effective option. The low-cost option of the Chinese manufacturer is a motivating factor for incorporating them in the value network. Due to the prevailing quota system, Thailand is the best location option for final manufacturing. The country option in the value network may change due to changes in the local regulations and business environment. For a long-term competitive advantage, the logistics manager has to look into the best options available for inventory movement across the global supply chain network. The logistics cost may go up but it will be more than compensated by the benefits (value additions at different locations) without compromising on quality.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.
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