In today’s globalized world, products are made from components all over the world. The interdependence among countries is more important than ever and international trade serves as the backbone of economic growth prospects. With this interconnectedness comes great risk; however, great opportunity also results.
A simple jar of Nutella requires natural resources from four continents and is assembled in manufacturing facilities scattered throughout the globe. Nutella’s distribution chain also spans across the entire world. By implementing a globalized supply chain, a successful product was created in Nutella with low costs and significant market reach. This example shows that globalization has dramatically changed how companies operate, offering many opportunities to reach new customers in new markets. However, alongside these opportunities is increased competition and complexity.
There are many complexities and risks when operating a supply chain on a global scale. First of all, natural disasters can cause massive disruptions in global supply chains even though the disaster may have occurred on the other side of the globe. Secondly, when a company’s suppliers are located in several different countries, that company is then exposed to risks associated with exchange rate fluctuations. Lastly, competition also greatly increases with the global supply chain. When a company competes on a global scale for supplier partners, the sky becomes the limit. Competitors will emerge and new challenges will undoubtedly follow.
Despite these challenges and risks, great opportunities can be leveraged with a global supply chain. Managing risk in this dynamic business environment becomes a key aspect of international business. International buyers and suppliers must therefore increase visibility among business partners. Perhaps not surprisingly, cooperation and transparency can actually go a long way in today’s globalized economy.