After companies decide to start collaborating with international suppliers, they should be aware of the potential difficulties that arise due to cultural and work style differences. If not managed carefully, the latter can become a source of problems and misunderstanding between business partners and, thus, increase the operational costs. Contrary, the high cultural competence of the counteragents and knowledge of international trade procedures can lead to increased productivity. Therefore, it is necessary to identify labor and social issues that domestic manufacturers face with their international partners to improve such collaboration outcomes.
There are several procedural and operational problems that organizations may encounter when they start working with foreign companies:
- Due to distance and language barriers, it may be more difficult to evaluate the counteragent’s credibility before the actual interaction, which exposes organizations to higher risks of fraud and irresponsible behavior;
- Manufacturers have to deal with international trade regulations, which are more sophisticated than domestic laws. Also, the longer distance with the supplier may be associated with increased complications on the route;
- Organizations are exposed to political risks that may create additional barriers to building trade relationships.
Furthermore, companies may face social issues that are highly related to cultural differences. The latter includes diversities in behavioral and language traditions and business etiquette. As a result, potential misinterpretation may arise, which deters the building of trusting and effective communications. For that reason, it is crucial to ensure that supply chain managers are culturally competent and can interact with foreign partners effectively.
To be increasingly beneficial for all the stakeholders, an organization’s supply chain should be integrated and sustainable. The former implies that all the parties involved in the production and exchange of goods and/or services can communicate effectively with a high level of trust (Thomas et al., 2018). Following such a paradigm leads to manufacturing-related waste reduction, sharing risks and costs among counteragents, and increased flexibility in addressing ever-changing consumer demands. Therefore, the organizations enjoy decreased costs, whereas customers can have their needs satisfied in a shorter time.
Additionally, due to reduced waste of raw materials and lesser fuel consumption, integration is positively associated with increased sustainability. The latter means that the organization operates in a manner that ensures the fulfillment of the current generations’ needs without endangering the future generations’ ability to satisfy their demands. As a result, such a strategy creates additional value not only to benefit the present stakeholders but also the future ones.
According to the National Academies of Sciences, Engineering, and Medicine (2013), there are four potential future freight flow scenarios, namely Global Marketplace, One World Order, Millions of Markets, and Naftastique!. The first scenario implies a high level of trade between all the world’s nations and high availability of resources. One World Order similarly presumes that there will be an active international trade between various states but forecasts the shortage of the resources, which will lead to increased control over the latter by the governments. The Millions of Markets scenario predicts that due to technological advancements, many nations will possess resources sufficient to satisfy local needs and, thus, the international trade levels will be low. Finally, Naftastique! presumes that the world will be divided into several economic blocs, and countries will exchange the scarce resources mainly within such trade unions.
Based on the aforementioned potential freight flow forecasts, organizations should seek to develop strategies that would adequately address the issues that may arise in the future. In this regard, the companies may want to prepare themselves either for all the predicted outcomes, some of them or solely for one scenario. To decide which strategy is the best, the organizations should, firstly, develop a set of possible investment plans that would help their company to survive and thrive. Next, it is necessary to evaluate which future freight flows are more probable in company’s sphere of operations. Finally, the investment plans that best address the maximum of the potential outcomes – especially the most possible ones – should be chosen.
National Academies of Sciences, Engineering, and Medicine. (2013). Strategic issues facing transportation: Scenario planning for freight transportation infrastructure investment (Vol. 1). The National Academies Press.
Thomas, S., Eastman, J., Shepherd, C. D., & Denton, L. T. (2018). A comparative assessment of win-win and win-lose negotiation strategy use on supply chain relational outcomes. The International Journal of Logistics Management, 29(1), 191-215.