An example of the effect of global events on international trade is the earthquake and tsunami that struck Japan in 2011. This disaster had a significant impact on global trade due to the destruction of manufacturing plants that supplied products to many companies all over the world. The devastation of Japan’s infrastructure, e.g. roads and ports, also played a role. Exports from Japan decreased, but imports increased due to the re-building efforts. Many organisations with Japanese suppliers had to make alternative arrangements, which resulted in the alteration of many supply chain strategies and risk management practices.
Companies engaging in international trade should cater for these international trade risks in their supply chain strategies, because competing for a slice of the global marketplace pie is much harder than before.
Martin Christopher, emeritus professor of marketing and logistics at the Cranfield School of Management in England says: “We don’t compete as individual businesses anymore; we compete as supply chains.” The winners, he says, aren’t necessarily the companies that have the best products and services, but the ones that have the most efficient supply chains.
This sentiment is echoed by Jim Owens, the former chairman and CEO of Caterpillar in saying that: “In our industry, the competitor that’s best at managing the supply chain is probably going to be the most successful competitor over time. It’s a condition of success.”
Stanford University’s Professor Hau Lee takes supply chain partnerships and the principle of competing supply chains one step further by saying: “With today’s prevalent business model of brand owners embracing trading networks of outsourced manufacturing and distribution, one could argue that it’s now trading network versus trading network. The secret to success here is how well brand owners and their trading partners can collaborate — moving beyond the archaic one-to-one manual sharing of spreadsheets to achieve one-to-many and many-to-many visibility based on real-time information across a network that provides a single source of truth.”
Partners in a global trading network must realise that their own individual strengths and weaknesses become the strengths and weaknesses of the competing global trading network that they form part of. It is therefore imperative that employees of companies who are part of these global trading networks understand their specific roles and responsibilities in the mechanics of international trade. They should also understand the risks and benefits of trading on an international scale so that their companies are not exposed to international trade risks without receiving the required benefits.