Alongside the many opportunities globalization presents for the supply chain industry are potential pitfalls, as such, preparing for them is crucial to the industry’s health.
Globalization has had many positive effects on supply chains. From greater market growth due to an increase in demand, to greater connectivity due the rise of the internet. With that said, the many positives have come with corresponding risks.
Milosz Majta, outlines this in his Forbes article,
Just as there are benefits and costs of globalization, there are similar pros and cons of a global supply chain. In particular, companies need to manage the related risks.
This means that those managing supply chains need to be able to mitigate for these risks if they want to see the upsides of globalization. After all, globalization is like any other major develop in market demand and pressure, resulting in both opportunities and threats. Crucially, the ability for companies to sufficiently overcome these threats is greater than ever. This in no small part being due to advances in machine learning, artificial intelligence (AI), and automation.
This week’s article by Morai Logistics highlights the obstacles that supply chains face as a consequence of globalization and what they can do to solve them.
Harmful External Factors
When managing a supply chain on a global scale, damaging external factors are more likely to come into play. These factors can look like political instability in countries, natural disasters, wars, etc. Ultimately what any of these factors amount to is a potential breakdown in supply chains. If a country’s government is in turmoil, its ports could be affected. If war breaks out, certain supply chain routes may no longer be safe. The same applies to a dangerous weather event. All these factors become more likely due to the scale and variability globalization brings with it.
This a risk that can’t always be mitigated for by its very nature—it’s external. The best a company can do is to have contingency strategies in place for each potential event. Even then, its strategy will ultimately be reactive. In turn, this threat does present an argument for regionalization. As regionalization reduces the problems of scale and instability.
Uncertainty
Market demands and trends become harder to prepare for the more actors that can influence a supply chain that are at play. With globalization comes the largest number of actors possible. In turn comes a staggering influx of data which gets increasingly hard to process, analyze, and make predictions off. Thus, supply chain companies have the potential to be floundering in the dark.
Here is where technological advancements become crucial in combatting globalization threats. By being able to automize data entry and collection, as well as process that data via AIs, this threat is greatly minimized. Once data collection becomes an automated procedure, keeping track of data becomes simple. And, with that data, an AI can make predictions and forecasts that make better sense of the market.
Complexity
More links in a supply chain mean more points of possible weakness within it. With globalization, supply chains are longer, involve more stops, take more time, and include multiple lines of communication. Consequently, this greater complexity requires greater oversight, as even one weak link can vitiate the whole chain.
This byproduct of globalization can be addressed in large part through the technologies mentioned previously. The increasing complexity in supply chains can be simplified by automating processes along it. Moreover, the reliability of a supply chain can be increased by the forecasting of AIs. Finally, the oversight needed along each link in the chain can be better achieved through blockchain technology.
