Global trade relies on an effective global supply chain connecting suppliers with customers. Multinational corporations operate in more than one country, requiring a well-working supply chain paramount for sustainability and profitability. Yet, this objective is unachieved because supply chains involve risks. This paper discusses some risks facing the supply chains of multinational corporations in 2021, the different reconfiguration methods, and how they would impact the consumer.
The Risks Facing MNC’s Supply Chains in 2021
Modern organizations rely on software-defined networks, software-defined storage, protocols, and enterprise-grade cloud hosting, data analytics, and Artificial Intelligence machine learning (Etemadi et al. 1-2). Undoubtedly, this technology presents a critical cyber security risk. For instance, using less secured systems could cause severe impacts. Cyber threats come from various sources, including uncertainty of information security practices by suppliers, vendors’ software or hardware with vulnerabilities, and those that result from third-party storage systems.
All these must get addressed for smooth transmission of data from one point to another.
The trade war between China and the United States presents another significant risk to global supply chains for multinational corporations. The separation of the United Kingdom through Brexit, and tariffs imposed by countries on each other, have all contributed to one question, whether the world is moving towards “de-globalization” (Handfield et al. 2-4). Expecting China and U.S. to become close allies again soon and ease risk management in these two countries is almost inconceivable. The escalation of issues such as arrests of businesses persons from either country, and disruption of supplies by the imposition of heavy tariffs have caused massive disruptions on the global supply chain.
Multination corporations rely on the ease of moving goods from one country to another. As goods or resources move between borders towards the end-user or a company, the tariffs and customs charged on such quantity determine whether the company could adopt a different supply chain to save cost or continue ordering through the same route. Usually, tariffs make the process of obtaining products from another country extremely high. Thus, it reduces the potential sales margin and the organization’s sustainability. This problem is prominent in 2021 because many countries have been trying to raise more revenue through monetary policies that might be relatively unfair to foreign companies.
How Organizations Will Reconfigure These Supply Chains
The main focus for multinational corporations is to have a working supply chain. To achieve this, they require more technology and innovative strategies to mitigate cyber risk. Organizations are now including blockchain that adds data from different sources through a consensus mechanism. Many are likely to pay greater attention to the transparency of supply chains, privacy and security, immutability, and reduced overall cost. These practices are crucial because, without them, the supply chain could still get exposed to the same risks in the future and be without a proactive approach. Such would be critical and an impediment to their growth.
Many multinational corporations will likely shift their demand to neighboring countries and markets to reduce potential risks. Others are leveraging domestic resources in times of inadequacy to remain in business and attract a considerable market share. A significant percentage of MNC’s operate in perfectly competitive markets whose conditions necessitate continuous improvement and innovation. Without these, an enterprise can get unsustainable in the long run due to high lead times, prolonged wait times, and poor-quality products. To these enterprises, reconfiguration is, therefore, a necessity rather than an option.
Implications on Customers
There is a high chance the reconfiguration of the global supply chain could result in substantial positive outcomes for consumers. A possible explanation for this trend is that when a supply chain is efficient, customers get their goods in time, minimizing cost and eliminating waste. Consumers will also feel cushioned in case of unprecedented events. As long as there are no adverse effects of these reconfigurations to the product’s end-user, there is a significant probability that consumers would support them.
Etemadi, N., et al. “An ISM modeling of barriers for blockchain/Distributed Ledger technology adoption in supply chains towards cybersecurity.” Sustainability, vol. 13, no. 9, 2021, p. 4672, doi:10.3390/su13094672.
Handfield, R. B., et al. “Corona virus, tariffs, trade wars and supply chain evolutionary design.” International Journal of Operations & Production Management, vol. 40, no. 10, 2020, pp. 1649-1660, doi:10.1108/ijopm-03-2020-0171.