Compare and Contrast Advantages and Disadvantages of Supply Chain Management
Integrated Global Supply Chain (SC) can bring significant benefits o the company as well as increase efficiency of such at the same time. It is, however, an increasing knowledge that in a complex international business environment global SC also increases riks. Taking into consideration global economic, political and social diversity, it is reasonable to assume that instability of the situation in one or another location that builds on a global SC of a company will affect the entire structure of this organization.
Modern economic and political scene demonstrates various examples, where large multinational corporations (MC) are subject to the influence of such elements as a political scenario or currency fluctuation. The recent embargo on bilateral trade between Russia and European Union (UN) in view of Ukraine crisis shows the effect of the political crisis on economic relations between different states. As such, this trade barrier is one of the bright examples, where large multinational corporations are affected by political relationships between the states. According to the briefing of European Parliament (2016), Russia is the second most important market for Europen agricultural goods. Trade embargo has negatively affected the supply chain, demanding the urgent search for redirection to of existing European products to new markets and reducing the efficiency of existing supply chains. Similarly, currency instability caused by the same crisis in Russia increased costs not only for the final product, arriving in Russia but also for raw materials, which build on the supply chains of the companies in Russia.
Policial and economic factors are not the only ones that influence companies´ supply chains. Environmental regulations have great influence on the global SC. One of the good examples with regards to the environmental regulations and supply chains is the shipment of dangerous goods across international borders. Some European ports have much stricter regulations on handling and acceptance of hazardous cargos in ports, which often differ from the regulations in such countries, as Angola or Ghana. This complicates the operations within the supply chain and often not only demands more complex strategies within a global operation but also increases the costs.
Ethical trade is becoming an increasing concern for most of the companies,operating in different markets. With that in mind labor laws and stability are some of the key concerns. One of the examples of such impact is the engagement of large companies, such as Apple,Oxfam, Starbucks Coffee Company in Non-Governmental Organizations (NGOs) and Trade Unions (TU). Participation in these local organizations increased awareness and responsibility of these MCs with their respective SCs with regards to local labor issues.
Finally, the discussion about the external influences that companies facing in their supply chains can not be complete without mentioning the impact of security and transportation on the SC and entire companies´ bottom lines. It is a fact that in many developing countries companies have to overcome significant challenges, related to the security of inland transportation. One of the examples is Angola, home to one of the largest and busiest ports in Africa. The country, however, is also known for the high rate of violent crimes as well as crimes related to the road conditions. High criminality and poor road condition increase the costs associated with fuel, vehicle maintenance, and security measures during transportation (Herausgeber, 2011). As a result, downstream and upstream within SCs increase also reflecting in the bottom line of the companies.
The above discussion outlines some of the major risks which companies working on international business arena face. These risks demonstrate the complexity of the business and the importance of best practices within the international supply chain and operations of MCs.
References
European Parliament. (2016). The Russian Embargo? Impact on Economic and Employment Situation in the EU. Retrieved from http://www.europarl.europa.eu/RegData/etudes/BRIE/2014/536291/IPOL_BRI(2014)536291_EN.pdf
Herausgeber W.K. (2011). International Supply Chain Management and Collaboration Practices. Koln: Josef Eul Verlag Gmbh.
