Introduction
GE is a conglomerate company with a presence in various industries, including manufacturing, finance, and healthcare. The wide nature of GE business comes with greatest challenges especially when collaboration is needed. From the core aspect of GE business it is clear that it has wide range of professions and people from diverse backgrounds. It also has many suppliers who have different production and supply chain strategies. Above all, GE operates in 130 countries across the world (ge.com). Global supply chain management best practices are very important for GE. Collaboration is among the best practices in supply chain and companies that have mastered the art of collaboration both in internal and external aspects, can cut down operation costs and enjoy competitive advantage (Supply Chain Collaboration, 2017). This paper will address the role of collaboration in the global supply chain of GE. Specifically, the paper will address regional trade agreements that influence GE, consequences of characterizing a product wrongly, NAFTA tribunal, global collaboration, global supply chain strategy, and global risk factor.
Regional trade agreements
The fact that GE operates in 130 countries located across all continents means that most trade agreements affect its operation. Some of the notable trade agreements that have a great impact on GE operation include NAFTA, European Union, and AFTA. Free trade agreements are usually subjected to changes occasionally, and it should not be a surprise to see free trade blocks joining or free trade block entering an agreement with another country. For example, European Union and USA are in talks to reach an agreement for Transatlantic Trade and Investment Partnership (TTIP). Such agreement presents opportunities and challenges, and it is something a company like GE should always be aware of (Ansley, 2017). Having knowledge about changes in economic blocks is very important for large company to make short term and long terms decision that influences their future growth and profit-making. The company must also be aware of changes in trade agreements. For example, NAFTA is being ratified and replaced with USMCA (Kirby, 2019). The changes come with new labour provisions, country of origin rule, intellectual property modification and increased competition in dairy products (Kirby, 2019). Such changes have impact on how the company operates, and thus it should be a matter of importance to the GE management. Besides, politics in free trade block should not go unnoticed by GE. For instance, case of BREXIT should be a matter of great importance to GE. It means that after BREXIT deal, GE will likely deal with Britain as individual country rather than a member of European union. GE CEO said “Although GE supported the UK remaining in the EU, we respect the decision of the British people and remain firmly committed to the UK and Europe.” (Dusen, 2016). Meaning that they had done their analysis and UK as a member of European union served GE interest well compared to when they are trading as individual country. One of the areas of consideration is tariff, UK as part of European subjected GE to trade block tariff. Now, GE has to pay tariff to UK as well as the European Union for goods that would otherwise billed once. Such changes may come with additional tariffs or a better tariff deal.
In business, any risk is important. A major risk that GE faces is its size. In other words, operation risks. Managing GE is very difficult since it has a subsidiary in many parts of the world. The fact that GE is involved with many people, profession and companies, managing its operational risk effectively is very important. Above all, identifying all risks that have the potential of crippling, it is the key to succeed in global supply chain. When all the risks are identified, they can be grouped easily by their order of importance and thus managed effectively. Any risk is important for GE, but GE size, tariffs, Chinese economy, and USA economy are the most important risk to GE. China and USA are major GE markets, and they contribute immensely to GE's revenue. Therefore, any failure in either market is likely to hit GE hard (Reliableplant.com).
Consequences of choosing the wrong characteristics
One of the products that GE sells internationally is bakery Oven (Geappliances.com). If the Ge bakery is manufactured in other countries and supplied to the USA, different tariffs will be applied based on the trade agreement between USA and the source country or region. For example if the product is sourced from Australia, Bahrain, Canada, Chile, Colombia, AGOA region, CBI region, Israel, Jordan, Korea, Mexico, Oman, Morocco, Panama, Peru and Singapore, they will enjoy 0% tariff rate due to special consideration provided (USITC, n.d.). Some of the special consideration includes being a member of trade blocks with USA or direct association between the USA and a trade block where the product is sourced from. If the bakery is obtained from a country with normal trade relations with USA, it will be subjected to 3.9% tariff rate. On the other hand, if the product originates from Cuba or North Korea, it will be subjected to 45% tariff rate. If bakery oven is manufactured in USA, the company will save 3.9% of its earnings, provided everything else is constant. If bakery oven business generates $50 million every year, a 3.9% tariff will reduce that amount to $48 million. Therefore, the higher the sales, the higher the impact of tariffs.
On the other hand, if the product is sourced from Cuba or North Korea, the revenue will be cut down by almost a half. Hence, for later case, it would greatly affect the profitability. The wrong classification of the product is likely to result in fines. The reason being that custom border protection will take it as a fraud. Besides being fined, there is likely high chance that you will be subjected to harsh custom clearance procedures in future. Therefore, it is really important to figure out the source and type of the product to ensure that you pay right amount of tariffs since misclassification is usually taken as fraud, and it has dire consequences to the importer (Frohsinbarger.com). It is also worth to check the sources to avoid paying excess tariffs. For instance, sourcing from Cuba or North Korea should never be an option since they attract high taxation. On the other hand, sourcing from countries with special considerations such as Australia and Singapore should be encouraged since they attract 0% tariffs.
NAFTA tribunal process
GE has facilities in several locations across Mexico. Saltillo is one of the towns that host GE production facilities. At Saltillo plant, accessories and control systems for aeroplanes are produced (Mexico-now.com). Arbitration is one of the most preferred conflict resolution techniques by NAFTA. Although there is no conflict already in play, it is foreseeable. Therefore, the best thing is to renegotiate with Saltillo to give the company time to implement green effluence management practices. Green implementation is good, but for the sake of the employees and the company sustainability, it is proper for the company to continue producing while implementing green discharge program progressively. The company can also argue that changes were abrupt and not communicated within reasonable time. Therefore, it is prudent enough to allow the company enough time for it to be sustainable. In this situation, the best recourse the company has is its headquarter and expert knowledge. The headquarters can chip in and provide the subsidiary funding to implement sustainable green effluence management that will require low maintenance. Expert knowledge is required to assist the company in planning effectively such that they can easily meet the new regulation requirement at the lowest cost possible. Experts are also required to renegotiate with town environment agencies to allow the company reasonable time to implement sustainable waste management. The strategy is to increase the company margin and the fact that it is a requirement to have a green effluent system; it means that the cost of operation is unlikely to go up. Therefore, it is not certain that the company will meet its revenue targets with new requirements in place. It is also very uncertain that environment agency of the town will allow the company reasonable time to implement the changes while maintaining profit-making operations.
Global collaboration
GE has a wide range of network which spans to over 300,000 people both internally and externally. Well-connected collaboration is the main reason why GE is among the highest buyers of Chinese products. the largeness nature of GE operation is one of the major risks identified. GE is large, and creating an integrated supply chain system is one of the processes that may not work for GE (Immelt, 2017). Besides, GE is now producing its aviation product rather than outsourcing as it has always done before. However, with an increase in demand in aviation products especially aircraft engines, it is highly likely that it will not have enough qualified engineers to meet its production needs (GE Report, 2017). GE outsourcing strategy has always been to outsource IT section as much as possible. Before hiring the new manager Jim Fowler, the company had outsourced about 80% of its IT unit to India (Murphy, 2014). “We've outsourced some of our expertise, and we've given up some of the knowledge of how we run the business, how the place is wired, that we need to get back in-house,” he said (Murphy, 2014). Currently, with new CEO, GE is looking forward to balancing outsourcing and in-sourcing on 50-50 basis. Sustainable outsourcing should help the company manage its triple bottom line, i.e. profit, people and planet (Ponsaran, 2017). Therefore, the choice of outsourcing strategy should not focus only on control; rather it should be three-edged such that shareholders are satisfied, working conditions improved, CSR implemented and wastes managed efficiently.
Global supply chain
GE has many products, and discussing supply chain for entire business operation is very difficult. In this case, the study will focus on GE transportation. GE transportation has 4 facilities in North America. They also have three facilities in South Africa and one in Kazakhstan, Brazil, and Turkey. They are also planning to build a locomotive plant in India (GE Transportation a Wabtec company, 2016). All these facilities sources raw material from nearby factories. One of the key material required for manufacturing is steel. Due to heaviness of steel, these companies are mostly located near a steel supplier and other support industries. It is true that locomotives are not like cars, and they are less likely that thousands can be sold per year. However, spare parts of these locomotives can be sold in hundreds of thousands per year. Therefore, continuous flow model is the most likely supply chain model in play in GE transportation (Kanbanize, n.d.). This model is preferable for parts productions. Based on 4R model, GE transportation is following best practices. That is why they are always creating relationships, establishing roles, assigning responsibilities and focusing on the results (Work Effects, n.d.). GE Transportation is partnering with different stakeholders such as governments agencies and suppliers to ensure; they have all the resources it takes to produce effectively (Wabteccorp, 2018). GE transportation has also established key roles in its supply chain including coaches and trainers whose role is to impact GE employees with key knowledge that is industrial competitive. Every employee at GE has a responsibility whose outcome is tailored in ensuring GE transportation is the leading producer and supplier of locomotives and parts in the world. The company culture is also designed such that it focuses on positive result that gives the company competitive advantages (THOMPSON, 2017). Result-oriented culture has enabled GE to establish role and responsibilities that match result required. It has also enabled the company to use target-system to ensure that each employee has a goal to achieve and thus give their best always. One of the most consistent happenings at GE is continuous improvement. GE is always ahead in ensuring that they improve their production efficiency and thus create more value in production. The common inconsistency noticeable in GE global supply chain is ever-changing strategy. The company has been subjected to strategy change at least two times per 10 years. For instance, in last 10 years, the company has had three CEO. All of them had different strategy pertaining supply chain. There are those that favoured extensive outsourcing while there are those that considered excessive outsourcing risky (Murphy, 2014).
Global risk factor
GE approach to GSCM is framed in wide combinations of networks. For example, GE has established plants in different parts of the world to enjoy affordable labour costs as well as to reduce transportation costs. Besides, Ge has also maintained quality human resource management strategy that ensures they get the best workers, maintained them and improve their ability to keep offering the best services. Despite mastering the art of global supply chain, largeness is the main risk that impacts GE effectiveness. GE is large such that it incorporates different culture, different management strategies and different suppliers. Managing thousands of network that keep GE operating is the most challenging task and it something that if it is done wrongly, GE may struggle to meet its targets. Government regulation is another risk that can influence the effectiveness of GE. For instance, increase in tariffs is likely to cut down GE margins. Also, trade conflict as it is the case between USA and China now, further makes it hard for GE to do business. To reduce risk of largess, it is important to make sure that each subsidiary are autonomous such that it can be easier to identify and control risks as they occur (Heskett, 2012). For the case of government regulation, it is important for GE to have good relationship with foreign government such that in case of working conditions, they can have bargaining power (Zopf, 2015). Above all, they should ensure they operate in countries that promote easiness of doing business for FDIs. To be in same side, it is highly recommended that large companies such as GE to have a risk management department that can continuously manage risks as they are identified or as they occur.
Conclusion
GE is a multinational company operating in 130 countries across the world. GE is influenced by most of the trade agreements in the world. Listing a product for important accurately at HTS is very important since it will help a company like GE or individual avoid fine and bad reputation. Outsourcing is part of GE strategy; however, a better outsourcing strategy should be based on triple bottom line, i.e. profit, people and planet. GE suffers from many risks, but the most important risk is operational risks and government regulations. The study has mostly focused in supply chain as a general, but there are key specific questions that future research must address including what technology are likely to influence GE supply chain in future and if technology is implemented, how is GE preparing its thousands of staffs to tackle technology changes.
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