Introduction

Abstract

Supply Chain Management (SCM) plays a significant role in value creation on a global scale. Figure 1.1 illustrates the growth of global manufacturing and global trade as one of the principal drivers of worldwide wealth creation. Based on sustained foreign direct investment (FDI), as shown in Figure 1.2, it would be safe to conclude that this growth is bound to continue, as companies rush to take advantage of not only lower labor costs (Figure 1.3), but also emerging centers of excellence such as China and India. In supporting such sustained economic activity, supply chain costs in developed economies are estimated to be around 10% of the GDP, surpassing, for example, $1 trillion in the United States in 2001. In developing countries, on the other hand, supply chain costs may represent up to 30% of GDP. This is due to both the lower-value products and services produced by these economies and the higher transaction costs engendered by poorer infrastructure in communication and transportation. Supply chain costs typically consist of

• 58% for transportation

• 30% for inventory carrying

• 8% for warehousing

• 4% for logistics administration