Introduction
Economic globalization concentrates on cross-border corporate activity involving firms, institutions, people, or state entities. Moreover, international trade deals with exchanging anything significant between individuals, including merchandise and offerings, innovation, investment, labor, and proprietary information (Sharma et al., 2020a). Although the global marketplace is becoming increasingly integrated and approachable, the dangers associated with conducting operations overseas should not be underestimated. Since each jurisdiction has its administration, regulations, ordinances, currency, traditions, time zones, dialects, and inflation rate, navigating the global corporate environment can be challenging. Therefore, this paper examines the issue of supply chain complexity in international business. In doing so, the essay identifies some of the causes of the challenge, promotes recommendations for the problem, and assesses the appropriateness of the suggestions that have been applied to solve the concern.
Supply Chain Complexity
Several factors can contribute to the complexity of a production process, and some of the most prevalent ones are described below. Supply chain complexity does not imply that a distribution network is sophisticated; instead, it refers to the degree of interconnectivity across a structure in which a modification in one component might affect other sections. Therefore, production chain sophistication is a framework with different functionalities (Ahmed et al., 2022). A classic example would be a multinational firm with many production sites that are all in communication with multiple delivery locations around the globe and service thousands of destinations.
Networking Complexity
The greater the number of nodes and links in a system, the more sophisticated it becomes. As a consequence of contracting non-core tasks, many businesses today are far more dependent on external providers of merchandise and offerings (Azadegan et al., 2020). These external vendors are also reliant on a network of second-tier providers and so on. The company at the program’s core will probably be unaware of most of the second- and third-tier businesses that supply their primary distribution network (Azadegan et al., 2020). These extensive connections exacerbate the risk of unanticipated production process disruptions.
Process Complexity
Numerous processes, including those administered by upstream and downstream counterparties, form the foundation of every supply chain. Frequently, these procedures have been established haphazardly, with additions and modifications made to match current needs, resulting in their Complexity (Brammer et al., 2021). Moreover, Brammer et al. (2021) insinuate that this Complexity manifests itself in procedures with several steps, frequently executed sequentially rather than in parallel. Therefore, companies would encounter problems in their distribution networks when operating globally due to process sophistication.
Product Complexity
The assortment of goods and services most businesses offer to the international market tends to expand rather than contract. Brammer et al. (2021) enumerated that this proliferation of products or services extends the long tail of the Pareto distribution. The launch rate of new merchandise or solutions, fresh pack dimensions or versions, and brand extensions exceed the elimination rate of existing goods or services (Brammer et al., 2021). Generally, as more versions are introduced to a range, consumption per variant will decrease, resulting in a reduction in prediction precision.
Information Complexity
The interchange of information across all organizations and divisions that constitute the whole end-to-end system underpins modern production processes. The quantity of data flowing in all dimensions is enormous, not always precise, and susceptible to distortion (Sharma et al., 2022b). How material is screened and manipulated as it travels from one institution or level to the next might obfuscate the perception of actual demand and supply circumstances. The Bullwhip effect illustrates how market indicators can get significantly skewed due to several chain processes (Sharma et al., 2022b). As a result of this misinterpretation, the data utilized as input for scheduling and forecasting operations is inaccurate, resulting in less accurate forecasts and higher expenses.
Organizational Complexity
Historically, most firms have been structured around functions and divisions, and their sequence diagrams have varying facets and a hierarchical structure. Such vertical institutional structures are unquestionably managerially advantageous since they permit a division of tasks between functions and efficient financial management (Cardoni et al., 2020). However, they tend to restrict agility since, by obligation, they are intrinsically motivated by productivity rather than outwardly focused on performance (Cardoni et al., 2020). The roles have the propensity to become silos with their objectives over time. They might remain unaware of the company’s primary mission, acquiring and retaining lucrative customers.
Customer Complexity
Due to an excessive number of non-standard product offerings or bespoke alternatives, purchaser complexity occurs. The costs of providing different consumers can vary considerably (Rosado-Pinto and Loureiro, 2020). Each client will exhibit distinct shopping attributes, such as regularity of requests, order size, and contractual arrangements, among others. Due to multiple service choices or customization and package alternatives, these discrepancies will grow in global business. While there may be sales and promotional benefits to offering a variety of options to clients, these selections must be moderated by a thorough understanding of their price and flexibility consequences (Rosado-Pinto and Loureiro, 2020). Eventually, the only intricacy that can be rationalized is the complexity buyers are willing to pay for, providing actual value.
Vendor Complexity
The vendor base’s expansion can cause the logistics system’s complexity by raising the number of interactions that must be regulated and the overall transaction expenses. Since a high degree of partnership practice with suitable suppliers is one of the requirements for responsiveness, this necessitates a significant amount of proactive provider administration and supplier participation in system integration (Eden and Nielsen, 2020). This proximity is unlikely to be realized across a broad supply base, hence the necessity for standardization.
Solutions to Supply Chain Complexity
Strengthening Domestic Capacities via On-shoring and Near-shoring
In the past, many businesses used a just-in-time supply strategy in which they stockpiled what they required immediately and relied on logistics to deliver other commodities swiftly. Companies saved money since they did not need to construct larger storage centers or maintain a complete inventory. Concerns sparked by the pandemic and reliance on foreign producers have increased hazards and heightened circumstances surrounding just-in-time procedures.
The interruptions produced by these adjustments have prompted calls for an increase in on-shoring and near-shoring capabilities. On-shoring is the return of manufacturing to a company’s home nation, where it is protected from overseas competitors and subjected to local health and safety regulations (Hofmann et al., 2020). Near-shoring is relocating production to allied nations close to the state to avoid long shipping times and security and safety issues (Fernández-Miguel et al., 2022). For the USA, such a strategy would rely more heavily on countries like Canada and Mexico, where distribution routes are shorter and governments are typically more stable.
Some administrations incentivize companies to begin or relocate operations to their home countries. Singapore, for instance, has introduced the Together Enhancing Enterprise Resilience Initiative, which provides funding to improve the operations and capacities of businesses (Fransen et al., 2022). Italy undertook projects to revive the manufacture of jewelry, couture, and textile luxury products (Giuseppina and Michele, 2018). In many instances, these subsidies are firm-specific and offer funding to individual businesses that agree to relocate their production processes to their home countries. Occasionally, the schemes are industry-wide and give tax breaks and infrastructure improvements to enable a range of businesses to restore their activities.
Reducing Transportation Jams
In recent years, logistic bottlenecks have adversely impacted supply operations. There have been several complaints of port delays, carrier box scarcity, and price hikes in essential regions. Shipping interruptions complicate product agreements and make it challenging for businesses to get the basic requirements to build products. According to the United Nations Trade and Development (UNCTAD), several variables contribute to shipping problems (Canton, 2021).
A huge blockage occurred in the Suez Channel when a massive ship became jammed in the canal and halted travel for numerous weeks. In addition, there has been a deficit of cargo boxes, which are used to carry a variety of commodities through sea hubs (Canton, 2021). COVID-19 delays related to the workers’ health and difficulty in controlling manufacturing capability when customer consumption for durable goods increases also caused significant disruptions in international business.
The consequence of the Suez Canal blockage and COVID-19 is a substantial increase in container freight charges which drives up the price of foreign-made goods. Instead of being a cost-effective method of providing products and services, offshoring increased expenses, making it more difficult for firms to meet customer demands (Koberg and Longoni, 2019). Among the concerns addressed by the expanding discipline of maritime computing are the surveillance of port calls and liner timetables, improved tracing, and harbor call management. Enhanced monitoring and mapping would aid in identifying bottlenecks and enable businesses to take steps to alleviate delivery concerns.
Managing Labor Shortages
In past years, unemployment rates and economic disasters have wreaked havoc on distribution networks, causing delays, cost rises, and various logistical difficulties. As a result, inflation has reappeared as an economic issue, and issues are associated with fundamental labor movements. Overall, labor participation fell during the epidemic and has not rebounded to pre-COVID-19 proportions. Despite a relatively low overall unemployment rate, a significant number of individuals remain unemployed globally, and this is particularly true for women who provide for children and aging parents (Sodhi and Tang, 2021). As the world economy is recovering, workforce inadequacies continue challenging enterprises to fill open positions and meet current customer demand.
The recent unsolved question is how many of these epidemic difficulties will be temporary or continue to be employment concerns in the future. A report by McKinsey proposes that government and private industry executives invest in internet infrastructure to facilitate the ability for personnel to acquire broadband, complete their duties, function remotely, and deal with outbreaks, digitization, and population changes (Sodhi and Tang, 2021). Those in danger of falling behind must undergo retraining to ensure that firms have the people necessary to produce, transport, and market durable products.
Evaluation of the Recommendations
Evaluation is defined by the Development Assistance Committee (DAC) using four factors: appropriateness, usefulness, efficiency, and durability. The three suggestions provided in the above chapter will be evaluated based on the DAC’s criteria to establish their effectiveness. Firstly, appropriateness alludes to the amount to which the aims of a suggestion align with the expectations of recipients, the necessities of the nation, international priorities, and the strategies of collaborators and sponsors. The solution, strengthening domestic capacities via on-shoring and near-shoring, would work to fulfill the country’s needs.
For instance, a country wanting to increase local production would encourage the reshoring of business operations. The recommendation, reducing transportation jams, is effective as it works to meet the distribution demands of worldwide transportation by removing dissemination bottlenecks. On the other hand, managing workforce shortages does not meet the first criteria, as firms cannot find full employment.
Secondly, usefulness refers to the degree to which the intentions of the solution were attained or are anticipated to be attained in light of their degree of importance. Enhancing domestic capabilities through on-shore and near-shore production is important to multinational companies as it would cut costs involved in overseas production. Limiting distribution jams fulfills this condition as it is vital in reducing blockages in key transport routes globally. Lastly, managing personnel shortages would be helpful since it will ensure that logistics tasks are completed on time, reducing delays in the production network.
Thirdly, the efficiency requirement means how the recommendation’s contributions and resources, such as money, knowledge, and time are turned into outcomes. For instance, Japan used the first solution by developing a fund to cover 70% of the moving expenses for small and medium-sized manufacturers of PPE and medicinal raw ingredients (Xu et al., 2020). Reducing supply logjams is ineffective since, in a poll conducted by the Society for Human Resources Executives in 2021, 90% of companies reported difficulty employing specific areas (Ghauri et al., 2021). Minimizing supply bottlenecks is equally inefficient, as regular monitoring of the numerous shipping containers that transit the globe is not always straightforward.
Finally, the sustainability consideration alludes to the growth advantages following the implementation of a solution. Strengthening domestic capacities via on-shoring and near-shoring is durable as it aims to solve the supply chain complexity issue in the long run. Reducing transportation logjams in the global setting would be sustainable since it will lower the amount of times goods are shipped to their final destinations worldwide. On the other hand, managing labor shortages is not sustainable, as it is difficult for a nation to address the issue of unemployment fully. From the three recommendations, enhancing domestic capabilities through on-shoring and near-shoring seems effective as it fulfills all four criteria for evaluating a solution as suggested by DAC.
Conclusion
In conclusion, although the international market is increasingly linked and accessible, the risks involved with running a business abroad should not be minimized. Since each country has its management, legislation, regulations, coinage, conventions, time zones, languages, and inflation rate, navigating the worldwide corporate landscape can be challenging. An issue in international business operations is supply chain complexity. Distribution network sophistication does not mean that a delivery system is complex; instead, it describes the level of interconnectedness and reliance across a framework so that a change to one section may influence other portions.
Therefore, the intricacy of the manufacturing chain is a platform with many operations. Some of the causes of the production process intricacy are information, product, supplier, consumer, and process complexities. However, in reducing the impacts caused by these factors, firms and governments may enhance local capacities via on-shoring and near-shoring, minimize transportation logjams, and manage labor shortages.
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