Within the globalized economy, a
global supplier refers to either:
- a company which has production facilities in several countries;
- a firm which supplies multinational companies (MNCs); or
- a country whose economy is strongly linked to the global economy by the many supplier-buyer partnerships its national firms have established with foreign firms.
The multiplication of
global suppliers is linked to the globalization of supply chains.
The most dramatic change in the relationship between MNCs and local firms in developing countries has taken the form of an increased utilization of first tier
global suppliers.
Assemblers now ask these
global suppliers not only to provide complete modules and sub-systems, but to cooperate in the design process as well. Assemblers also force these suppliers to co-locate whenever a new assembly plant is established. This increased partnership gives the MNCs distinct advantages. Assuming that the
global suppliers co-locate with them, the MNCs can increase the quality of production at offshore sites.
A primary criterion for becoming a
global supplier is to have a design centre close to the design facilities of the assembler. It is also easier to rapidly develop new models: the supplier becomes involved at the earliest stages of the design process, and this highly cooperative relationship can both speed up the design process and facilitate the possible adjustments necessary to please an overseas market.
Unlike in the past, when offshore manufacturing sites often struggled to meet the standards of the home company, MNCs are currently able to develop their most advanced plants in different countries, often in the developing world. Without the restrictions of unionized labour, old-line management, and aging plant and equipment, these operations provide opportunities to experiment with new and innovative production techniques. Yet, to the extent that qualification as a first-tier supplier in some industries now appears to depend upon being able to produce and supply in multiple locations, the entry barrier for firms in developing countries has risen.
Global suppliers will not arise in all industries, and the form they take will vary from sector to sector.
(adapted from Thun, E.,
Growing Up and Moving Out: Globalization of 'Traditional' Industries in Taiwan, MIT ICP Globalization Working Papers, June 2001, visited 2007-01-15)
The development of global sourcing strategies and
global supplier networks has clear consequences with regard to access and upgrading for enterprises in the developing world, and has led to the creation of new global companies. In the case of the automotive industry, these new global firms are first-tier manufacturers which have considerable design and technology capabilities. In the case of the garments industry, the core competencies of the new global firms appear to be more located in logistics skills and the translation of design ideas into detailed product specification. The increasing role of global intermediaries in logistics and design has been welcomed by retailers and brand-name companies whose core competencies lie in branding and marketing.
(adapted from Humphrey, J.,
Upgrading in Global Value Chains, International Labour Organization (ILO), visited 2011-04-01)