لطفا منتظر باشید ...
Chapter 4: The Impact of Globalization on Supply Chain Management
The globalization of business is the best thing to happen to supply chain management (SCM) in the last 30 years. This seemingly bold statement is made not because globalization has made SCM any easier — quite the contrary. Driven by overwhelming market forces, globalization has forced countries and companies to become more efficient, creating the infrastructure and competitive advantage necessary to survive the early rounds of a brawl that will undoubtedly go beyond the last bell. Unfortunately, whether one is in favor of or against globalization is irrelevant for purposes of this discussion.
Although both sides of the globalization debate have valid points, the fact is that it will continue. Reality dictates that if companies intend to not just survive but prosper in a hyper-competitive environment, they would be well advised to acknowledge the complex nature of the terrain in which they find themselves deployed. What is relevant to this discussion, however, is a basic understanding of what globalization is and its significance to the field of SCM
Globalization, the World Trade Organization and Trade Agreements
Globalization assumes many faces, but in the realm of economic development it revolves around the nurturing of commerce through the removal of both tariff and non-tariff barriers to trade. Driven mainly by the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT), [1] countries that embrace globalization allow access to their markets through lower tariffs while seeking reciprocal business opportunities in member countries around the world.
On one side, reduction or removal of high tariffs allows for broader access to target markets, a scenario that purportedly promotes a more even distribution of quality products across demographic strata. Of equal importance, removal of non-tariff barriers to trade (import licenses, inspections, quotas, etc.) facilitates and accelerates the movement of goods around the world, an element of globalization that is not lost on enterprises interested in optimizing their lead times.
FREE TRADE AND THE U.S. CONSTITUTION
The perceived and real benefits of globalization have not come without acrimonious debate. On the one hand, big business boasts of a better world through ubiquitous access to market-priced goods and services. Opponents of globalization point out salient negatives, including environmental abuses, human rights issues and child labor exploitation. The high-profile protests of the World Trade Organization in Genoa and Seattle are but the vanguard of a movement that is as relentless as the very pace of international trade.
The United States has had no shortage of exchanges between these opposing groups, both of which have valid points to make. It is instructive to note, however, that regardless of one's opinion, the stage was set for free trade in the United States when the Constitution was written in Philadelphia in 1787. While recognizing administration-specific trade agendas over the years (Abraham Lincoln was a staunch protectionist, for example), the genesis of free trade can still be traced to the tenets of Article 1, Sections 8 and 9 of the Constitution.
The commercial success of the United States over the last 200 years can be attributed to many factors. The good fortune of being born on the cusp of the Industrial Revolution created an environment of invention and innovation unprecedented in the history of mankind. Also, investment in infrastructure for the development of roads, rail, ports and then airports has accelerated the pace of growth considerably. It is no coincidence, however, that just as the aforementioned articles of the Constitution set the stage for international growth, it is feasible to argue that they also established a structure that was highly conducive to domestic trade.
From a national perspective, Section 8 of Article 1 establishes a common currency for the entire country. A seemingly innocuous occurrence, one need only look to Europe prior to the introduction of the euro to understand the ramifications of a multi-currency structure and how it complicates business.
Another important cornerstone for the growth of domestic trade in the United States can be found in Article 1, Section 9, a point that clearly prohibits internal tariffs. This means that no customs duties can be affixed to goods traded between the states, nor can any customs formalities be executed at each state's border. Needless to say, this point had a clear effect on landed costs and transit times from the earliest days of interstate commerce, making quick and cost-effective access to products commonplace for the American consumer.
In a more contemporary sense, the Constitution has also had a profound effect on international trade. Article 8 made three important contributions to the growth of commerce via its establishment of foreign exchange policy, a common external tariff and trademark/patent protection. With regard to the first point, the ability of a merchant to know exactly the value of both domestic and foreign currency at any given moment is vital to running a profitable business. Second, the common external tariff meant that the same customs duties would be applied to all products in a uniform fashion on a national level, regardless of the port/state of entry. Once again, consistency and predictability of landed costs are essential to even the most nescient of business models. Finally, patent and trademark protection encouraged investment in R&D, activities that accelerated and perpetuated the innovation of the Industrial Revolution well into the present day.
Article 9 also made a tangible contribution to the proliferation of international business in that it prohibits export taxes. Any tax makes a product more expensive, and although prosaic in a modern context, the elimination of export duties in the late 1700s was considered ultra-modern economic policy.
So, as the debate rages between those in favor of or against globalization, one point is certain. As it relates to U.S. citizens exercising their right to free speech under Article 1 of the Bill of Rights, those citizens should realize that the same Constitution is what paved the way for international trade. In that context, all involved in the debate on globalization would be well advised to read a bit further in the Constitution to understand exactly with what they are dealing.
Organizations like the WTO have also promoted globalization through the development of policies in the areas of trademark, patent and copyright protection. Member countries are pledged to adhere to WTO rules regarding these points, particularly as they relate to the enforcement of infringement of said rights. These are important issues to companies that have historically invested quite aggressively in the pursuit of patents, only to have them pirated by rogue entities that have never been prosecuted by their own governments. The knowledge that trademarks, copyrights and patents of WTO members are protected is critically important to companies in industries like pharmaceuticals, music and wearing apparel, encouraging them not only to export products but to establish a presence in international markets.
Without question, today's supply chain executive must be armed with the knowledge of what globalization is and how entities like the WTO and its various trade initiatives impact SCM. Once this knowledge is acquired, a more tactical, micro-level understanding of how these policies and decisions trickle down to an operational level is required for companies to respond intelligently. In the case of the WTO, the reduction of tariff and non-tariff barriers to trade has encouraged investment by foreign companies in both existing and emerging markets, changing the business model from arm's-length business agreements to much more integrated, ownership-oriented arrangements.
Whereas companies once exported and imported through agents or commercial representatives, now many have set up shop in foreign markets, creating buying and/or selling entities of their own. As these changes occur, the differences in supply chain dynamics become much more pronounced, creating the need to contract local expertise, language skills, knowledge of logistics infrastructures and financial savvy. It is the ability to quickly adapt to these and other changes wrought by globalization that will determine who the most successful supply chain players will be. Without an understanding of the cause-and-effect relationship between macro-economic policy and the corresponding requirements of tactical supply chain execution, companies will be left to speculate as to their hopes for success.
[1]An in-depth understanding of the WTO and its structure and methodology for administering international trade is available at www.wto.org.
