Challenges involved in global production networks

There are various challenges in development of global production networks. It is difficult for multinational corporations to choose whether to produce multiple products in multiple locations or specialize in production of specific products in given locations. Both perspectives pose challenges in development of global production networks. These challenges are human and logistical, including cultural diversities across nations and choice of distribution channels for the multinational corporations in foreign markets.

Production of specific goods in a given location involves centralized global production network whereby production takes place in one location. This involves production of goods which require activities that are difficult to relocate. It includes production goods that are produced using resources found in a specific place e.g. production of oil in Middle East. One of the logistical challenges involved in this type of global production network is that it is costly to distribute the products produced in one location to other locations around the world. Another logistical challenge is that it is difficult to learn the needs and requirements of customers in other countries if production is carried out in one country. Therefore, it is difficult to produce products that meet such needs. In terms of human challenges, centralized global production network will utilize only knowledge and skills of people from one country. Therefore, it may not benefit from the knowledge and skills of people from other countries because it will be expensive to import human capital from other countries.

Production of goods and services in several countries involves regional production whereby production takes place in various regions in which goods are manufactured. One of the logistical challenges of this global production network is that the production and distribution logistics are difficult to reconcile effectively.

Regional production also faces the challenge of lack of interdependency in productivity. Therefore, each component in the supply chain results in a different impact on the quality and cost of the final product. In this case, cost and prices of products in various locations differ. As a result, production and distribution logistics become more complicated and difficult.

One of the cultural challenges associated with production in various locations is that cultural diversities may cause conflicts at the workplace. It also leads to different interests, perceptions and understanding of key issues at the workplace. Therefore, it is difficult to manage human capital in foreign locations. Another human challenge is that human capital may be insufficient in locations with enough physical resources for production. For example, oil resources are found in large quantities in UAE but qualified local human resources are not enough. Therefore, human capital is imported from other countries. This is costly and may result in cultural differences at the workplace.

In conclusion, a firm can maximize both efficiency and effectiveness of its operations across the global network by developing effective research and development and training and development of employees. Research and development program solves the logistic problems of distribution and production while training and development program solves the human challenges. Through research and development, a company can be able to design innovative products that can meet the needs of customers in global markets. Research and development also enables a company to develop innovative distribution and production logistics using appropriate technologies in foreign locations.

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