Academic journal article Journal of Supply Chain Management

Why the World Suddenly Cares about Global Supply Chains

Academic journal article Journal of Supply Chain Management

Why the World Suddenly Cares about Global Supply Chains

Article excerpt

INTRODUCTION

Global supply chains have been a familiar part of the international business landscape for decades. From a management perspective, there are always issues connected with the efficient and timely distribution of goods that flow across supply chains. From an industry perspective, there are questions about how the industry is organized in terms of the size and ownership of major manufacturers and their suppliers, and where these companies are located. From a national competitiveness perspective, countries are concerned about whether they can gain and maintain the production, sales and research capabilities needed to develop and make low-cost, high-quality or high-tech products (Pisano and Shih 2009). Finally, global supply chains matter for international development too, as the ability of countries to prosper depends on their participation in the global economy, which is largely a story about their role in global supply chains.

Despite its relevance on many levels, the literature on global supply chains tends to appear in a specialized set of publications oriented to a business audience. However, since the early 2000s, the global value chain (GVC) concept has gained popularity as a way to analyze the international expansion and geographical fragmentation of contemporary supply chains. The GVC analysis originated in a framework called global commodity chains, which emerged in the 1990s to link the concept of the value-added chain directly to the global organization of industries (Gereffi and Korzeniewicz 1994). As more research focuses on value creation and capture across the full range of possible chain activities, the GVC concept has become widely accepted as an overarching label for this body of literature (Gereffi et al. 2001; Gereffi 2005).

GVC studies are pervasive in academic publications that examine a wide range of global industries, (1) and the framework has been adopted by many of the most important international organizations concerned with economic development, such as the World Bank (Cattaneo, Gereffi and Staritz 2010), the World Trade Organization (WTO and IDE-JETRO 2011), the Organization for Economic Cooperation and Development (OECD 2011), the International Labor Organization (Gereffi 2006), the U.S. Agency for International Development (USAID 2011) and the U.S. International Trade Commission (USITC 2011).

In this research note, we highlight some of the main features of GVC analysis that contribute to its popularity, discuss the relationship between the core concepts of governance and upgrading and illustrate a few of the implications of a GVC approach to global production and trade.

THE GOVERNANCE OF GLOBAL VALUE CHAINS

Globalization has given rise to a new era of international competition that is reshaping global production and trade and thereby altering the organization of industries (Gereffi 2011). Since the mid-1960s, U.S. companies have been slicing up their supply chains in search of low-cost and capable suppliers offshore. This process of "global outsourcing" initially focused on the simple assembly of parts supplied by U.S. manufacturers, typified by the U.S. production-sharing or "twin plant" program with Mexico, but the pace of offshore production soon accelerated dramatically (Dicken 2011). In the 1970s and 1980s, U.S. retailers and brand-name companies joined manufacturers in the search for offshore suppliers of most categories of consumer goods, which led to a fundamental shift from what had been "producer-driven" supply chains to "buyer-driven" chains. The geography of these chains expanded from regional production-sharing arrangements to full-fledged global supply chains, with a growing emphasis on East Asia (Gereffi 1996). In the 1990s and 2000s, the industries and activities encompassed by global supply chains grew exponentially, covering not only finished goods but also components and subassemblies, and affecting not just manufacturing industries, but also energy, food production and all kinds of services, from call centers and accounting, to medical procedures and core research and development (R&D) activities of the world's leading multinational corporations (Engardio et al. …

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