Advantages of supply chain operations

Better quality of life- People can enjoy more goods from a wider range of sources, giving more
choice and variety, often at lower prices

New and innovative job opportunity- Many new jobs are created through supply chain work,
such as jobs in organizing logistics or coordinating the shipment of goods. There is also scope
for entrepreneurial openings such as setting up small, specialist road haulage firms, or selling
goods through telemarketing and new online channels.

Wealth creation- Effective supply chains enable countries to become wealthier, which in turn
means that standards of living can rise. For example, Barbados operates logistics hubs through
its passenger and container ports, creating lots of jobs and enabling all firms in the country to
benefit from the effective transport links it has with the rest of the Caribbean and the world at
large.

Challenges of supply chain operations

Globalization- Global supply chain management is concerned with developing efficient global
supply chains, However, in many countries (including some in the Caribbean) poor infrastructure
and logistics can weaken the effectiveness of global supply chains.

Counterfeiting- The development of global trade has resulted in more counterfeiting. This refers
to the false labeling of products and passing off inferior products as if they are the "real thing".

Product complexity- Many modem products are extremely complex, involving lots of
components provided by many suppliers. This means there is more potential for "glitches" along
the supply chain.

Rapid product obsolescence- some products become dated far more quickly than in the past, as
they are replaced by new products and new manufacturing systems and approaches. This
means the supply chain needs to be regularly rethought and redesigned.

Regulatory complexity- There are many regulations governing the movement of goods and
these vary between countries. Logistics planners need to be aware of these regulations,
particularly when it comes to international trade.

Management blunders- Managers sometimes get the design or handling of the supply chain
wrong. Examples include not obtaining sufficient information about customer requirements and
creating systems that over-handle freight.
Changing market conditions- The demand for a product frequently rises or falls. Failure to keep
up with these changes in demand can lead to an insufficient or excessive supply of the product,
which is not cost-effective for the business.

Natural disasters/ political instability- Natural disasters such as hurricanes and earthquakes can
make it very difficult to manage the supply chain in a smooth way. The more stages in the
supply chain, the greater the scope for these problems. Political instability also affects the
supply chain, as a change of government or a weak government can lead to industrial unrest
and civil disobedience.

The impact of logistics and supply chain operations on the competitiveness of business

There are many positive impacts of logistics and supply chain operations that can give a
company an "edge" compared to its competitors.
Efficient logistics can improve competitiveness. Organizing the supply chain and logistics
efficiently can speed up the manufacture and delivery of goods and reduce costs, thus allowing
a business to compete better with its rivals. Well-managed logistics may help to give a business
a competitive advantage, where it is able to produce and distribute a similar good at a lower
cost than rival goods.

Outsourcing can also make a business more competitive by allowing it to concentrate on

what it does best (making or selling goods). Distribution-related activities such as transport and
storage are often outsourced.

The business that outsources its activities is the first party. Another three parties can be involved
in outsourcing. These are:
● the second party: the end user of a good or service (a customer)
● the third party: a business responsible for managing an aspect of the supply chain (such
as a road haulage company)
● the fourth party: a specialist logistics company that takes over most of the logistics
management, such as organizing paperwork and customs clearance.

Problems encountered in distribution There are a number of problems that may be

encountered when

distributing goods-Relationship between the availability of airport, harbor and docking facilities
and the efficient distribution of goods If a country has large international airports, ports with
deep-water docking facilities, large warehousing facilities and high-quality logistics providers
then goods can be distributed quickly and efficiently. However, countries not blessed with these
advantages will find that logistics are far more complicated and the costs of distribution are
much higher.

Delayed shipment- caused by poor weather conditions, breakdowns, missing paperwork, etc.
Results in late delivery to customers.
Spoilage- Caused by insufficient packaging, bad road conditions, etc. Results in the goods
being damaged. Caused by poor labelling or inadequate Misdirection of goods

Paperwork- Results in the goods being sent to the wrong location. Inadequate warehousing
facilities
Caused by a lack of space and equipment, poor temperature control, etc. Results in the goods
being damaged.

Lack of proper security measures- Caused by a lack of security personnel or cameras, facilities
that are not locked overnight, etc. Results in goods being damaged or stolen.

Industrial unrest- Caused by angry workers going on strike. Results in the movement of goods
being blocked.

Ineffective communication- Caused by lost or inaccurate paperwork, unclear messages, etc.

Results in the supply chain running less smoothly.

Measures to mitigate problems in distribution

Some of the approaches and solutions that can be taken to help solve distribution problems are
given below.

Government intervention- The government of a country can invest in roads, ports, airports and
other elements of the transport network, as well as in the infrastructure for ICT communications

Communication networks including use of the Internet- Logistics providers and supply chain
companies can invest in more complex ICT systems that help to improve communication

Insurance- Taking out insurance helps to provide cover against spoilage and delays in the
supply chain

Selecting the most appropriate channel of distribution- Companies should choose the best
channel for distributing a particular product (for example, a company might decide to cut out the
wholesaler and sell directly to customers to improve efficiency and costs)

Use handling services with a good reputation- If a business uses the services of a distribution
company that has a good reputation, the goods are more likely to get to their destination on time
and undamaged

Careful labeling and documentation- This helps to prevent goods from being misdirected or held
up in the distribution process

stocks- Avoiding holding large Manufacturing and distributing only the parts and goods that are
needed avoids damage and unnecessary storage costs
Increasing security- Employing a security company and using security cameras can help to
reduce vandalism and theft

The impact of information technology on logistics and supply chain operations

Ways that information technology contributes to logistics and supply chain operations

Global Positioning System (GPS)- An accurate way of finding directions, enabling drivers to plan
quicker (and thus cheaper) transport routes. GPS allows people to pinpoint their exact position
using satellites that orbit the earth.

Geographic Information System (GIS)- This is software that can be used for the geographical
planning of logistics. It helps with the routing of vehicles and management of logistics over a
relatively large geographical area. GIS simplifies directions and maps to make vehicle tracking
and planning routes much simpler. It can identify the shortest and least congested routes for
carrying particular consignments of goods.

Portnet- Portnet is an ICT system that supports the shipping community by handling the
booking, scheduling, tracking and documentation of freight that is carried by international
shippers,

Telemarketing and The development of electronic e-commerce- communications has led to new
supply chain patterns, with goods being sold over the telephone (telemarketing), through
television shopping channels and via online websites. These sales are then distributed by
logistics and transport providers who deliver the goods to customers' doors.

Global logistics providers- Global logistics providers are companies that act as third parties,
handling logistics on the behalf of those wanting to send or receive goods internationally.
Examples include FedEx, DHL and Amazon

Logistics hubs- A logistics hub is an area around a port of entry that focuses specifically on
logistics operations, such as handling containers, storing large quantities of goods in
warehouses, organizing documentation and so on. Countries seek to set up these hubs
because they create many jobs. For example, Jamaica is currently seeking to become an
important logistics hub in the Caribbean. An effective logistics hub will require the use of
sophisticated ICT.

How national income relates to growth and development, and impacts standard of living
and quality of life

The development of a country is often measured in terms of how high national income is and
how fast it is growing. Standards of living improve when people have more goods, and they
have more goods when national income (GNP and/or GDP) is rising. Per capita income
measures average incomes and so it is a good way of assessing how well off the average
citizen is.
However, there are a number of issues with measuring well-being in this way. High per capita
income might mask vast differences in income between the rich and the poor. It also does not
tell us about how income is created. For example, a high and growing national income could be
the result of increased pollution. To know more about growth and development we also need to
take into account quality of life, for example as measured by the human development index
(HDI). These consider factors such as levels of education achieved and educational opportunity,
as well as access to health resources and life expectancy.

The role of education in economic growth and development

Education is fundamental to economic growth and development. The United Nations takes
into account two educational measures in its human development index (HDI).

Mean years of schooling: The average number of years of education received by people
aged 25 years and older. Expected years of schooling: The number of years of schooling that a
child of school entrance age can expect to receive.
Education is important because it is a key factor in determining how productive a society is.
Access to good-quality education enables people to advance themselves and to get better jobs
that require more skills and knowledge. Education also enables self-actualisation (achieving
one's full potential).

Reasons why countries trade with each other

International trade benefits countries because they are able to concentrate on producing
their best goods and services, and they can trade surpluses of these for goods and services
produced abroad. Importing from overseas provides a much wider and cheaper range of goods
than can be produced domestically. The four main reasons why countries trade with each other
are shown in the table below.

Not having certain assets or natural resources- A country may not be endowed with the factors
of production required to produce the goods it needs. For example, most Caribbean countries
do not have access to oil or to the large pool of skilled labor needed to staff high-tech
engineering Industries, such as automobile manufacture.

Not being able to produce a sufficient quantity or quality of goods- A country may not be able to
produce the goods and services it needs in the quantities or of the quality required. For
example, many Caribbean countries import plastics, perfume, corn, soya beans and computers
rather than produce them in large quantities domestically.

Limitations of climate- A country may not have the climate to grow certain foods. For example,
countries in northern Europe import many tropical fruits and vegetables from the Caribbean,
such as mangoes, guavas, oranges, pomegranates and coconuts. In contrast, many Caribbean
territories import fruits such as apples, grapes and strawberries, which grow in colder climates.

Foreign direct investment- International trade allows for foreign direct investment, allowing
individuals in one country to invest money in foreign companies and other assets.

Comparative advantage- Countries trade with each other because of comparative advantage,
because one country can produce goods at a lower opportunity cost than its trading partner. The
term 'opportunity cost' refers to what is given up when one of many options is chosen. For
example, when Trinidad and Tobago produces and sells building aggregates such as cement to
other Caribbean countries, the opportunity cost to Trinidad and Tobago is relatively low because
the country is relatively efficient at producing cement. Another country, such as Saint Lucia,
could produce building aggregates rather than buy them from Trinidad and Tobago, but only by
stopping or reducing production of other goods. In simple terms, if you are not very good at
making something (compared with another producer) then it makes economic sense to buy it
(import it) from a more efficient producer.

Caribbean Community (CARICOM)- A community of 15 Caribbean member states and

associates, which enables economic cooperation and integration between members.

Caribbean Single Market and Economy (CSME)- A free trade area where there are no tariff
barriers between countries. Key features include:
free movement of goods and services free movement of capital
free movement of agreed categories of workers such as nurses
a common external tariff with countries outside the CSME
the right to establish a business in another CSME country.

Caribbean Development Bank (CDB)- A regional development bank that encourages

development in the Caribbean area and provides funds for development projects.

International Bank for Reconstruction and Development (BRD)- An international financial

institution which is part of the World Bank. It provides funds for development projects such as
improvements to transport, education, the environment, energy and healthcare.

World Bank- A large international financial institution made up of 158 countries. It is the world's
largest source of funding for developing countries, and seeks to end poverty and promote
shared prosperity around the globe.

International Monetary Fund (IMF)- Provides overall supervision of the world banking system. It
lends money to governments in times of financial crisis. Central banks in the Caribbean (and
elsewhere) work closely with the IMF to create a sound international financial system.
World Trade Organization (WTO)- Establishes rules and agreements between countries
regarding trade. Seeks to reduce tariffs in order to increase world trade, Mediates in situations
where countries have trade disputes.

Organization of American States (OAS)- Aims to strengthen peace and security in the Western
hemisphere, to promote peaceful settlement of disputes, and to encourage economic and social
cooperation.