The Supply Chain Risks of Global Sourcing: A Focus on the Environment and Infrastructure - Term Paper Example

The Supply Chain Risks of Global Sourcing – A Focus on the Environment and Infrastructure Without a doubt, the world economy has grown in recent decades. So much so, that the pundits have said something good about it. International trade is something that is attributed to this upheaval. It has formed the motivating factor behind the very same. Developing countries have also stepped on to the bandwagon and are thus bringing in more and more opportunities for the developed nations to invest their money in their territories. One such example is that of outsourcing where developed nations are taking the plunge and entering into the developing nations’ zones and thus reaping huge benefits. It should be kept in mind here that this is a symbiotic relationship, benefiting both the parties on a consistent basis. It has also been seen that the developed nations are more than happy to outsource their work and set up offshore avenues in order to earn revenues and make the most out of their business. However the litigations that are in place with regards to setting up these industries is something that needs to be delved into by them in detail and we, as students of the same, will try our best at understanding the whole ball game. Global sourcing is a phenomenon which is on the rise with the passage of time. It is also known as ‘outsourcing’ as it looks to cover the weak areas of a business, enterprise or a country for that matter in another’s area of strength, manpower abundance and availability of proper resources. However all this requires sound planning and immediate provision of funds which will not only benefit the two parties, but also the major (and minor) stakeholders, the employees working at the sites and above all the whole society who is about to go on a radical shift in their fortunes. To start with, outsourcing is defined as the amalgamation of the required skill set from a number of different areas with the eventual aim of benefiting the people in a number of ways by providing them what they really need as well as provide back to the organization and at times the country as well. Outsourcing of late has come out as something that is becoming a trend and thus is an important issue to surface in the recent times. It has also hit the presidential elections in the United States. With outsourcing comes a responsibility as well. The companies need to understand their duties towards all the relevant stakeholders as well as the employees. More than that, it needs to dispel all forms of negative notions which are related with the issue of outsourcing. In fact all these qualms need to be given a rest for good. The question to this day remains as to whether a country needs to outsource individuals or not? The same is answered in the light of the prosperous financial and banking sectors that have come to light in the wake of the American economy which is on the rise due to the outsourcing issue. An important question which has come to the notice of all and sundry here is that offshore business processes can be best used for meeting demands of the customers when we discuss the subject of demand and supply. However the problems that remain within this issue are something to talk about as well. One needs to understand that a significant notion that is making rounds within business circles relies on the fact that whether or not outsourcing of jobs can tie in easily with the aspects of innovation and creativity. Recent research and studies have shown that within the US, nearly 1 million jobs have factually been reserved over a period of time. The same is mentioned as something being in duration of economic recovery for the huge multinationals as well as the corporations. A number of different issues thus surface which relate with the tax cuts and whether or not the scenario has thus hurt the job creating situations. The offshore movement as concerns to jobs has become a subject of debate within the tourism industry just like any other sector as well. A couple of countries which stand out in this whole scenario are the Philippines and India. These two countries are the best possible areas (of strength) for setting up the call centers as there is an abundance of related talent and required skill set as well. The people within these countries take less amount of money and do the job which their foreign counterparts would do at an exorbitant rate. Also countries like Pakistan, Sri Lanka and United Arab Emirates are giving positive signals to the developed countries of the world to come and invest in the form of outsourcing with minimum possible risks as far as supply chain issues are concerned. Outsourcing can pose quite a few problems for the stakeholders and just about anyone who is attached with this business. To list three of the more significant ones, we can quote the case of the organizational, environmental and infrastructural aspects. We will briefly explain each one of these in the proper contexts. Environmental concerns rise when there is a trend of congestion within a particular area or where there is an alarming situation of having pollution as well as toxic emissions. This can be pretty evident if a country asks for production of plastic at a place which is not so close to its boundaries but has cheaper plastic production rates as well as trained manpower in the respective area of expertise. Hence when the deal is struck between the two players, it is only after that they come to the knowledge that this can eventually result in a situation where environmental concerns can become the talk of the town. In such cases, proper litigations need to be enacted in order to put environmental concerns before anything else and then only grant the respective players or the companies their right to go ahead with the production processes. Global sourcing can also result in a problematic situation for the people who live in that area and just cannot do anything about it since their both ends are met by the salaries thus given out by the industry as a whole. No matter, how much the situation could be alarming, one has to see that the same can result in pretty drastic consequences and thus lead the people residing in the area to suffer at the hands of the risks posed by global sourcing. There is a quagmire in this whole situation since the hand feeding the residents is the hand which is making their lives terrible both in the short term as well as the long run. The infrastructural concerns are an unlimited proposition since the problems posed with setting up an industry of a particular product is virtually next to impossible at times. This could be accredited to the shoulders of bureaucracy and red tape, not to forget the several amendments made in the government’s litigations with regards to the very same. The infrastructure for setting up selective industries is difficult to come by. It is all the more hard to acquire trained manpower and select skill sets. If only all these measures are taken in the right direction, the single most issue of funds poses as the biggest hurdle in the way of setting up the infrastructure in that place. Only when all these combine in unison, then the same is possible with the backing of major players, the outsourcing representative which in these cases is generally the government itself as well as the people who are taking the gamble of investing their money, i.e., the stakeholders. The reason for global sourcing of products and industry is that there are no infrastructures in place which can help and thus this leads to a situation of chaos and more than that a price hike in the neglected area of concern. The last concern related with outsourcing is that of the organization. It might be possible that an organization does not manufacture a particular product within its industry due to the shortage or lack thereof a raw material, which could only be made available with the permission of the government or the situation is such that the same is made ready at an expensive price which the manufacturer does not allow to come cheap at all. This poses problems at all levels, but acts as an agent of hope and business for the concern which has the raw material with it, in the first place. The organizational concern also details the aspects of supply and demand issues where a product does not reach the channels within a set time frame and this is able to trigger a downfall in the market indicators as well as facilitate in increasing inflation and price hikes. This is an unethical situation, one that is lying on the shoulders of the major players who fleece their customers every now and then. Also the issue of shortage of a product can increase the chances of making it available at a later time at a higher price and thus making people adept at buying it again and satisfying their necessities. These are the loopholes within the marketing framework of running a business or an organization for that matter. Delving further into the environmental concerns raised in the light of the global sourcing issue, we find that the transportation modes which are up and running in the times of today are harming the whole atmosphere more than anything else. These include the cars, buses, trains, airplanes and just about everything that is moving and is a source of locomotion for people as well as goods. These vehicles and moving objects produce carbon dioxide in the atmosphere with which there is an alarming situation in the whole world. Already the issue of the hole in ozone layer has taken much debate all over the world and now since the population is increasing at a swift pace, different organizations and NGOs the world over need to step up and do their bit at reducing the carbon dioxide emissions in the open air. It has been brought to the notice of all and sundry with tremendous amounts of research owing to it that nearly 22% of all global emissions of carbon dioxide are courtesy the transport sector. This is an alarming rate, one which needs to be tackled with proper insight and planning. We need to get our act right in the wake of ozone literally breaking up in the atmosphere and thus posing a problem for the mankind as well as the plants and animals. The aviation sector has resulted in 12% of all the carbon dioxide emissions (in 1990) which comes duly under the transport sector. There are some regional variations to this equation but on the whole this has been the general trend all over the globe and it is not something to be proud of in the literal sense of the word. Also the fossil fuels have resulted in 2% of the global emissions of carbon dioxide courtesy the aviation industry. Rails and vehicles that are run of the roads within the metropolis have been taken as the substitute for air travel all over the world. The electrical power generation which gives out its resources to the energy consumption and carbon dioxide emissions is very much dependent on the electrically powered vehicles which have included the fast speed trains, tubes and rails. An interesting point top note here is the fact that carbon dioxide emissions are nearly twice in terms of the aviation industry than the other forms of the transport used all over the world. This is true for both the passenger aircrafts as well as the freight transportation which occurs in the sea as well as in the air. However the amount with which it happens in the sea is much more than a freight aircraft can handle per trip but owing to the carbon dioxide emissions in the air, that single aircraft trip is twice the emissions of the sea freight, which goes on to suggest the negative aspects related with aviation in terms of the global atmosphere and hence the global sourcing discussion is taken into proper perspective here as well. The government of Japan has taken proper and adequate steps in the right direction to cut down on the emissions of Green House Gas (GHQ) courtesy the ocean going ships and vessels. The United Nations Framework Convention on Climate Change (UNFCCC) discussed the issue of emissions with the International Maritime Organization (IMO) in a quantitative estimation so as to study the possible options for the reduction of GHQ. Moreover, within Japan, the Ship & Ocean Foundation (SOF) has been pretty instrumental at solving this problem once and for all. The results of the GHQ emissions by ships and vessels in the oceans has been estimated to be about 20-44% up rise in the year 2010 as well as 38-74% increase in 2020 as compared to the original emissions as taken in the year 1997. This however depends on the vessel types and the distances that they voyage over a period of time on a global scale. This also examines the aspect of indicating the exact significance of taking and thus recoding these emission values and noting the reduction courtesy the measures employed when we talk about the aspect of global warming. There needs to be a proper framework as well as a model in line with the steps that have to be taken for reduction in the GHQ emission and more than that an understanding that has to be reached by the IMO and the relevant ocean bodies. The substandard vessels and ships need to be taken off the roster and new and efficient ones should be on board so that there is a complete check and balance for the reduction as far as GHQ is concerned in the proper scheme of things. The greenhouse abatement policies in the transport sector are deemed very necessary since the transport sector accounts for about 20-25% of all GHQ emissions. In a period of six years, starting from 1990 towards 1996, the emissions of GHQ increased by 10% which is something to ponder upon as it is a step in the wrong direction and thus needs to be curtailed no matter how tough the circumstances really are. The emissions from the road transport owe to the fact that these include a number of different factors which are the activities, the structure of the whole foundation, the intensity with which the tasks are actually completed as well as the fuel types used to power transport. These can form as the drivers and trends for the greenhouse abatement policies. Now we delve further into them and examine the sub aspects where we see that the activity aspect discusses the total freight volume and the GDP of the country under the microscope. The structure entails the road transport, rail transport; water bound one as well as the air transport. The intensity is of the fuel and is generally measured in units of energy use per passenger km or tonne km of freight. The policy making in the transport sector all over the world has seen some pretty important litigations and rulings set in place which is the emissions of transport coming in from the dispersed sources as there is a general absence or lack thereof the point source emitters. The alternative fuel options are not that abundant and seem to fall short on the chart of the transport sector on the whole as the fuels have not been able to provide enough of its resources on the aspect of GHQ reductions when we compare the same to gasoline. The important points that need to be seen in the wake of the policy draft are the receiving of attention in the road transport passenger sector as well as the chalking up of an effective policy mix, one that takes into consideration all the related aspects and points within it. Also there is the fact that a number of countries are inter-connected with each other, when the discussion is related with the transport systems. In the wake of the rising global sourcing within United Kingdom we see that a number of smaller business concerns are adopting the way of the international organizations, i.e., going global and with the trend. This has certainly brought some problems for the nations that have taken the brunt in this whole scenario since the outsourcing has been in the form of not only the educational and call center industries but in the oil and petroleum industry, outsourcing of cars and heavy vehicles and other related equipment. Thus the technical side has been pretty evasive in this whole situation and this is one thing that the government of UK needs to take a look at. It must find certain ways to solve the issues of unemployment and the like within its own territories and to do the same the UK government needs to draft measures which are in line with the global sourcing strategies adopted by other developed nations of the world. The crux of the whole situation should be to save the environment from degradation in the countries which develop products and offer services that will eventually be used for the UK markets. Efforts have to be shaped up in line with the activities that are planned by the UK government on 5 yearly and 10 yearly basis and the tactical changes have to be modified in order to save the environmental degradation and related problems that are on the rise within the countries taking the brunt of the UK going on a global sourcing route. An important perspective in this whole discussion has been in the form of the risks associated with global sourcing in particular and thus we shift our attention towards the infrastructural problems related with it. The infrastructural aspects are very closely inter-twined with that of the environmental concerns that have previously been stated in detail in this paper. However, for the sake of providing more insight into this aspect, we will once again underline the key issues, the touch points between the two as well as the remedies that can go a long way in bridging the gap between what is prevalent in the present times and how the same can be changed for the better in the times to come. The most basic and significant aspect behind setting up infrastructure at foreign place is due to the fact that cost is a major issue in this whole equation and in order to meet the same, one needs to be proactive rather than being reactive and thus incur losses. The risk in this scenario is also something to write home about but one that is of less significance when there are potential profits for the key players in sight. Thus this gives rise to the notion of setting up industrial concerns at places and suburbs which at far stretched areas or even in other countries due to cheap labor, access of skilled manpower to the industrial concerns, their problems being met by the industrial units in more ways than one as well as abundance of the key raw materials at the place where this unit is installed. The consequences of offshore sourcing are immensely positive since we need to see that these bring prosperity for the area where the industrial unit is set as well as profits for the players who have set them up in the first place and thus invested their huge sums in. the important thing to understand here is that these industries bring a lot of negative changes to the area under question which as discussed before are the competitive climates, the pollution and congestion issues, which come under the environmental concerns and lastly the hidden costs as well as the risks that are involved with these things. Global sourcing has required the companies to take one step further from the traditional thinking mindset. People are now more open to experimentation then they were in yesteryears and are ready to take risks which were unheard of before. With that, people have realized that their businesses cannot be shelved into a single area or region for that matter and they need to explore new territories and break new grounds in order to reach out to the desired customers and make them into clients. However doing so requires tact, intellect and a sense of direction. Without any of these missing from the whole equation is just like inviting trouble but then again, this entire scenario is full of risks and uncertainties and thus it is better to take this leap forward than grumble about doing nothing at all. As far as the supply chain risks are concerned, we need to see that at times, due to unforeseen circumstances as well as problems that have never been encountered in the past, at times, there can be some situations when the government litigations can change in the region where outsourcing has been done by a certain company or an industry for that matter. This can bring in a pool of worries for the major players who have invested large chunks of money and thus they are left to the discretion of the ones who run the country. The foreign investment thus takes a nosedive in this scenario and people who are associated with the outsourcing that has been done, either in an indirect capacity or directly start asking for their share of profits and demand refunds of claim already made. All these situations require proper understanding that has to be reached before any such circumstance happens. In times of wars and distressing circumstances, the risks seem to outnumber the players’ confidence in the business that has taken the route towards outsourcing. Thus the whole infrastructure becomes pretty much in shambles as there is no one to be held accountable for. This is indeed the problem related with the infrastructure and thus all the above mentioned points need to be considered in the wake of global sourcing. The risks have to be in line with whatever the fall out will be in the troubled times. The channel members and the intermediaries who are at each stage of the supply chain process need to be cautioned over their acts as well as given enough confidence and rewards from time to time which can really bolster the trust and positive feelings with relation to the business and the whole relationship as a matter of fact blossoms for one and all. Global sourcing has its merits and demerits in both the shorter duration as well as the longer scheme of things. What is more important is the fact that how people and more so the businesses understand the potentials of the market that is being exploited, both in a positive as well as a negative manner and thus get the best out of the relationship that has developed over a passage of time. The requirements in terms of proper infrastructure and setting up of environment check points where there are no rules that could be broken by anyone, will obviously force businesses and global concerns to take the initiative and thus explore their business opportunities and indeed benefit the whole business fraternity and the society in particular. Thus it is important to weigh the merits and demerits before any decision is reached upon as to how to go about with the proper scheme of things as well as devise the best manner in which outsourcing can possibly be done. The lack of general infrastructure within the UK markets has forced the business affiliates and entrepreneurs to adopt on the bandwagon of outsourcing big time. This is a plus point for the UK marketers since their work can be done swiftly as well as in a professional manner from the offshore markets. It also reduces the sales force automation concept since channel members are minimal in such a scenario. When the points of contact between the outsourcing agents are minimal, best and most effective results are thus achievable. But on the other hand, it comes with a responsibility to give more and more jobs to UK’s own countrymen and women since it is their first right to have proper jobs within their own country. Thus to sum up the whole discussion, we need to pinpoint the areas of strength for outsourcing certain businesses to far flung areas as well as look at the gray areas (the weaknesses) beforehand. This will provide us with a window of opportunity to sit back and relax and heap benefits from the business that has been set in place. Also it will look at overcoming the gaps which are indeed the threats that a certain business might plunge into from time to time. Of course these threats could be cast off by the areas of strength and the opportunities which are present there all the while. The supply chain requires that all the channel members are on the same wavelength and know each other’s respective tasks at hand as well as their own. In a global sourcing strategy, knowing is earning and earning without proper guidance and framework is tantamount to committing a sin. The supply chain risks are innumerable and cannot necessarily be denied of their presence at any given point in time but the matter which holds significance here is that how the same can be tackled in a manner which comes as somewhat smoothly done and under the aegis of the governments which have agreed to have outsourcing done within their boundaries by another country, company or industry, etc. Environment, organization and infrastructure are some points to consider before outsourcing is deemed to be the ‘in’ thing within a particular business as the role of corporate social responsibility lies heavily on its shoulders. The system of proper check and balance as stated before sets the right tone and sends positive vibes within the related circles and therefore the risks are minimized as far as the supply chain issues of global sourcing are concerned. However the important thing here is to realize one’s responsibility and that too in a quick manner. In the framework of UK, we need to see whether the environmental, organizational and infrastructural outsourcing issues are not playing a negative role in its own economy, environment and human resources fields. If the same is happening within the UK territories, there should be a way to counter it as well as a substitute is devised in order to satisfy all concerned. BIBLIOGRAPHY DIEKSTRA, Rene and Martin, Kroon (1997) Cars and Behavior: Psychological barriers to car restraint and sustainable urban transport, in The Greening of Urban Transport: Planning for Walking and Cycling in Western Cities John Wiley and Sons Word Count: 4,453 Read More