The Global Supply Chain Landscape - A Macro Perspective
With each passing day, surviving in the competitive business world looks challenging. Today, more and more businesses are struggling with consumer demands and cost-savings. This is why a massive shift towards an interconnected supply chain network can be seen.
But what does this network refer to? Which benefits does it offer, and what factors influence this system? Let us dive deep to understand all this and a lot more:
Global Supply Chain
It is a worldwide system used to manufacture and deliver products and services. For instance, a business sources raw material in China, manufactures it in Pakistan and sells it in the USA. This business is using an international supply chain.
The process looks lucrative. This company manufactures goods in a developing country but generates revenue from a highly developed country.
Cross-Border Connectivity and Cost – Efficiency
Labor and material costs are cheaper in underdeveloped and developing countries. In the same way, the cost of production is relatively lower, which helps achieve cost-efficiency. The decline in the overall cost also results in earning more revenue. On the other hand, it allows prices to decline and gain a competitive edge.
However, the process is not as simple as it sounds. It requires a deeper analysis of multiple international factors. Various complexities can also arise for which expertise in supply chain management is needed.
Let us shed light on these factors:
Factors Affecting the Global Supply Chain
Some factors that greatly influence this interconnected system include:
Political Instability
Political instability may result in closing borders and the announcement of new trade policies. Such restrictions cause delays in deliveries. Besides this, the policy change gives birth to compliance issues, creating complexities for businesses.
Climatic Conditions and Natural Disasters
Extreme climatic conditions cause the closure of some routes. It results in delivery delays as well as increasing transportation costs. Similarly, natural disasters can cause great disruptions. They affect the overall economy and may disrupt transportation routes.
Financial Crises
Poor economic conditions result in price fluctuations. In such circumstances where economic instability is present, businesses need to consider multiple suppliers. Delays in supplier response or unexpected hikes in prices increase the overall cost.
Not only is this, but businesses need to deal with trade barriers and credit issues.
Technological Advancements
Businesses need to embrace technological innovations. Well-known global firms are already making the most of innovative technology. Their supply chain strategy includes blockchain technology, the Internet of Things (IoT), big data analytics, and more. This technology helps with tracking and contingency planning. Likewise, it assists in production planning and keeping consumers updated.
Trends in Worldwide Supply Chain Industry
At the macro level, the economic and political factors greatly influence the international supply chain. We have studied some recent examples which are likely to set new trends in the future. Here they are:
The Strengthening Partnership Between China and Russia
Relations between China and Russia have been growing over the years. The Ukraine conflict has further strengthened this bond. The two countries have now announced a No-Limit Partnership. This collaboration will make these two nations a strong economic partner of one another.
Russia has a big name in oil and gas. Likewise, China is remarkably known for its technological and manufacturing expertise. By partnering, China can secure the energy sources, and Russia can benefit from manufacturing opportunities.
The two countries are looking for more economic collaboration opportunities and joint ventures. Most importantly, this strong relationship will reduce their reliance on the US dollar for international trade.
Growing Use of Chinese Yuan
When it comes to global trade, the use of the Chinese Yuan is increasing. Also, in the future, its use will continue as China stands at number two in the world’s largest economies. China is continuously pushing the Yuan in global trade. It has also made several currency swap agreements.
The growing use of the Yuan will reduce the dominance of the US dollar. It will help those countries who no longer want to rely only on the US dollar for worldwide trade.
Russia’s Initiatives Emphasizing Ruble
Like China, Russia has also taken several initiatives for the use of Ruble in international trade. One such initiative is the pricing of its oil in its own currency. Russia also wants to reduce its reliance on the US dollar. Other countries who do not wish to see US dominance in the global trade system can benefit from it. However, the future will tell whether Ruble will gain a dominant position in the international market.
These are only a few trends. Many other initiatives of de-dollarization are in practice by various countries. Such trends will change the global supply change landscape in the near future.
Wrapping It Up
All in all, the international supply chain is a cross-border network presenting endless growth opportunities for businesses. However, understanding the complexities and challenges of this system is essential. Businesses need to stay updated with the current trends and find ways to address the complications.
Efficiently managing this interconnected supply chain can help gain a competitive advantage in no time. But on the flip side, it can result in negatively affecting the production process and losing loyal clientele.
Join Hands with a Supply Chain Firm
Make a wise decision and seek assistance from an international supply chain company. Dynamic World Wide Logistics Group is a reputable name in supply chain management. Our services are fulfilling the logistics and supply chain needs of various businesses. You can be the next one!
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