In the United States today, there is much discussion
about supply chain problems threatening a delay in receiving goods from China
into California ports that could impact Christmas sales. Even more seriously, good on the dozens of
vessels at sea waiting to unload at Los Angeles and other ports are also items
of more immediate needs, such as medical equipment. Because we have allowed the shift of goods to
production in China – from toys to aspirin – the West Coast supply chain
blockage is broadly important to customers across America.
However,
I must ask: what about Africa’s supply chain issues? Both the federal government and the U.S.
private sector have long expressed interest in boosting U.S.-Africa trade. So, what is being done to address the challenges
that make Africa imports more difficult to receive and more costly than they
need to be?
NeatCommerce.Com
describes itself as a company that makes the world of trade more accessible for entrepreneurs, SMEs and ambitious young companies. They have presented 10 challenges for
international supply chains:
1. Lead times: Buyers increasingly expect faster deliveries. However, global supply chains often measure
shipping times in weeks and months. These long lead times make it challenging
to balance supply and demand effectively.
2. Delays: Unfortunately, long lead times can expose your shipments to
even longer delays. With so many steps in the global supply chain and such
large distances for goods to travel, there’s many opportunities for things to
go wrong.
3. Cash flow: Businesses must keep track and plan for a complex web of
expenses. But with so many entities operating simultaneously, it’s hard to know
where and when to allocate your resources.
4. Data management: To manage the
global supply chain effectively, businesses must use and customize a suitable
data management solution. A survey by Logility and APICS,
the association for supply chain management, found that:
- 36%
of respondents see the opportunity to balance supply and demand as a top
driver for their analytics initiative.
- 19%
of companies want to leverage machine learning to improve their business’s
forecast accuracy.
5. Exposure to
risk: Many countries providing
relatively inexpensive labor and manufacturing costs also typically have fewer
stable governments and currencies. Local changes in leadership and policy can
often affect the global supply chain.
6. Accountability and compliance: Companies have to consider
social compliance when doing business internationally. Unfortunately,
modern slavery, child labor practices, unacceptable working conditions and
unfair compensation are just some of the unethical practices present in global
supply chains.
7. Quality control and defects: Quality issues can also be
challenging to manage. For example, businesses must consider the differences in
acceptable defect levels in different countries. It’s essential to clarify the quality level
expected and the percentage of acceptable defects ahead of time.
8. Language
barriers: Another drawback to
consider is that many countries will conduct day-to-day operations in a
different language. You can
manage these types of issues by employing professional interpreters with
specialist industry knowledge.
9. Time zones: Times
zones can also make communication difficult. When there’s no overlap in working
hours, you can’t just pick up the phone. Instead, communication often
happens via email and messaging platforms.
10. Exchange
rate and foreign transaction costs: Exchange rate
fluctuations matter little when taking a holiday abroad. However, even the
smallest changes in foreign exchange rates can increase costs significantly
when managing a global supply chain.
Developing countries may offer the cheapest labor rates globally, but
they often have relatively unstable currencies that are susceptible to regional
influences.
Those are the relevant issues, but
in looking at how that plays out in Africa, let me put forward some
specifics. First, the lack of
established transportation linkages from production facilities to
ports/airports in Africa poses challenges in getting goods to markets abroad. There is a dearth of air or sea transportation
options that adds as much as 10% to the cost of African exports. Goods from China, even before the current
supply chain crisis, have taken a longer time to be delivered than American
consumers generally want even though Chinese transportation options are more
available.
Second, I have found that the
paperwork necessary to be filed prior to African exports reaching this country
often are not done in a timely fashion.
Too often, U.S. customs brokers fail to meet such deadlines, which
causes U.S. importers to pay unnecessary demurrage charges, as goods from Africa
sit in warehouses until U.S. Customs can clear up any discrepancies. Sometimes, such discrepancies can’t be
cleared up, and in one recent case I encountered, the good intended for New
York, ended up in Florida, and when the case couldn’t be satisfactorily resolved,
the goods had to be returned to Africa.
Third, even the perceived risk of
upheaval in African governments makes doing business in Africa appear riskier
that it may actually be. After all, the
former European colonial powers, China, Turkey and others countries have been
in Africa and are expanding, not pulling out.
Of course, they mostly have long histories in Africa, unlike the United
States. I keep remembering the saying
people at the corporate council on Africa used while I was there: “Capital is a
coward; it only goes where it feels comfortable.” Well others in the world find ways to enhance
their comfort.
Fourth, there is much talk about
enabling environments, which encompasses rule of law, human rights and good
governance. No one is born knowing how
to meet all the points involved, but we expect people on the continent, many of
who were groomed during the colonial period in which corruption, mismanagement
and denial of rights were condoned and then enshrined in practice. Untangling that is not as easy as it might
seem, although it will be necessary to do so.
Fifth, quality control has not been
consistently observed in Africa production facilities. Two decades ago, when I was engaged in trade
training in West Africa countries, I learned more about the International
Standards Organization training to ensure adherence to international standards,
but more than one country decided to establish their own standards agencies
that were not in concert with international standards. That rendered goods produced in their
countries out of step with what foreign consumers expected of them. That is not sustainable.
Sixth, e-commerce and the use of computerized
data management is increasingly an issue of concern in African countries. Documents from trade paperwork to court
decisions can now be computerized, making business and legal transactions more
efficient and effective. To not use this
resource is increasingly less acceptable, as it has now become a competitive
advantage for countries and their governments and private sectors to feature
that in competition with their neighbors.
Seventh, the management of
currencies has long been a contentious issue in African countries. One apocryphal (but apparently true) story
was that a Nigerian company inked a deal that carried significant profit in
naira and deposited the funds in a bank on a Friday. Unfortunately, they chose the wrong time for
a local currency deal because the Nigerian government decided to significantly devalue
its currency over the weekend, and by Monday, the company found itself owing
money to the bank. Such decisions by governments
have hit private sectors, especially smaller companies, to lose out because
they don’t have crony protection from government officials or foreign currency
accounts.
Finally, as for time zones and
language difficulties, they are largely being resolved as people on both sides
of the Atlantic Ocean have found ways to overcome time, distance and language.
I completely understand and accept
that much attention has to be devoted to the supply chain issue on the West
Coast involving mostly Chinese imports, but there should be significant
attention and effort devoted to ensuring that the supply chains for African
goods are not ignored.
Comments
Post a Comment