The Globalization of Supply Chains and its Implications for Trade and Commerce

Globalization of Supply Chains and its Implications

We have discussed how the globalization of the world economy has made the globe more integrated and interconnected. While this has both positive and negative effects on the way global trade and commerce takes place, there is one critical aspect that needs our attention. That is to do with the globalization of the supply chains that link world trade and commerce. Before launching into a full-fledged discussion, it is useful to consider what supply chains are and what globalization has done to them.

Supply chains are the networks of buyers, sellers, intermediaries, and vendors involved in the production and distribution of goods and services. The interlinking transport and communication that facilitates the trade and commerce is also part of the supply chain.

The globalization of the supply chains means that goods produced in one part of the globe can be transported to another part of the globe and indeed, each component of the goods thus produced can be made in different countries. For instance, if we take the Apple iPhones, different parts are made in different countries including China and the finished product is shipped to the United States and Europe where it is sold.

Some Examples of Disruption of Supply Chains

The implications of the globalization of supply chains is that in case of a breakdown in one part of the globe of the supply chain, the whole network is impacted leading to delays and disruptions in the transport and movement of goods. This means that any disturbance in one country in the supply chain impacts the entire supply chain leading to chaos and confusion. This is definitely one of the negative impacts that the globalization of the supply chains has for manufacturers in the global economy.

For instance, because of the Fukushima Earthquake in Japan, the delivery of components in the electronics industry was impacted leading to all round disruptions and delays in the supply chain.

Similarly, in recent years, disturbances in India have meant that the supply chains for services have been disrupted which has impacted the BPO and the IT sector to a great extent.

The remedial measures for such a negative impact would be to have backup suppliers and have backup sites for the suppliers themselves so that they do not let the buyers down because of any disruptions.

Closing Thoughts

Globalization has many advantages and disadvantages. In a similar manner to globalization creating prosperity, the fact remains that globalization of the supply chains creates problems as well. Hence, the implications for this are that each of the party in the supply chain takes precautions and ensures that the network is not disrupted in case of any disruptions to the place of operations or in the transport and communication links.

We cannot rule out globalization completely and hence, we must take appropriate measures to safeguard against the perils of the process. This is where contingency planning and business continuity planning come into the picture and this is where the capabilities of the stakeholders determine the success or otherwise of the supply chain.