As the global marketplace becomes increasingly interconnected, it’s not only giant corporates who are looking to navigate cross-border challenges in supply chains. Small and medium sized companies, including in the food and beverage space, are also looking to expand their global footprints.
In my discussion with Lorenzo Fornaroli for episode 17 of International Expansion Explained, we also discussed this topic.
You can find an introduction to Lorenzo and the full range of his experience here.
Table of Contents
Greatest Challenges in Global Supply Chains in the Coming Years
In the rapidly evolving landscape of cross-border trade, companies face several significant challenges in their supply chain management. The pandemic clearly highlighted the risks of over-optimisation where manufacturers had little or no stocks of their raw materials to hand, and the supply was scheduled to be delivered from a single vendor on the opposite side of the planet.
When costs exploded and lead times increased beyond what could previously be imagined, companies started to realise that they need to reconsider how they structure their businesses for the future. The geopolitical events with China and Russia have introduced also increased uncertainty into an already volatile mix.
The following are some of the key cross-border challenges in supply chains that Lorenzo foresees for the next 3-5 years:
Supply Chain Disruptions and Resilience
Global supply chains have become susceptible to various disruptions, such as natural disasters, geopolitical uncertainties, and pandemics. Building resilience and mitigating risks within the supply chain will be crucial. And we’re not just talking about “black swan” events here – even smaller crises can be a disaster if they hit your supply chain. eg. My orders were once hit by a major fire at the factory of a manufacturer.
Whilst there are no simple fixes for most supply chain questions, analysing your risks and considering what steps you can take immediately to spread the risk and reduce your exposure is a wise step.
Should you be working with a +1 manufacturing or raw material supplier (ie more than one supplier, from more than one jurisdiction)? Probably. It’s rarely a bad idea to have a contingency plan.
Yes, this is a more expensive option, because you have to audit and manage both, and the set up costs are often “not negligible” (not to mention some loss in the economy of larger orders) BUT it means you don’t have “all your eggs in one basket”, and gives you options for the future.
I should add here, that having a +1 policy isn’t just a great insurance should problems arise, it also can really help you take advantage of opportunities if for example your sales should unexpectedly take off in one of your larger markets. Believe me, it’s REALLY frustrating to work for months on growing sales only to not be able to fulfill orders when things finally do take off.
So on the one hand, companies usually consider sourcing from China due to it’s cost-effectiveness and the well established infrastructure, however if you want to diversify risk or avoid Chinese ownership of any part of your supply chain then you probably also need to look for alternatives. Like I mentioned, the best option is probably a +1 approach where you look for a supplemental supplier rather than to entirely replace the supply chain you’ve already built up. Indeed many Chinese companies are also setting up companies now in Vietnam in order to offer that kind of flexibility together with established partners.
Near-shoring (bringing your production back closer to home) is also an option, with eg many European companies looking at Turkey or Eastern Europe, whilst US companies are perhaps considering Mexico.
This isn’t something that can be done overnight though, so make sure you start thinking about this strategically now, if you didn’t already.
Technology and Automation will play an increasingly important role in the Digitalisation of Supply Chains
The emergence of new technologies like artificial intelligence, blockchain, and various automation options presents both opportunities and challenges for anyone working in supply chain management. Adopting these technologies can enhance efficiency and visibility, but it also requires investment and adaptation if you’re going to get the most out of the potential they offer.
If the digitalisation of supply chains is a priority for you (& it should be) then you need to also consider how to train your teams to really fully utilise the tools in order to get the best value for your financial and time investment. It’s not enough to build up a huge tech stack (that can get expensive really fast) if you’re not going to leverage the advantages it can bring you.
Sustainability and Environmental Considerations in the Evolution of Global Supply Chains
As consumers become more conscious of environmental issues, companies need to incorporate sustainability practices into their supply chains. This includes reducing carbon emissions, minimizing waste, and sourcing ethically-produced goods.
It sounds quite simple when you say it fast, but it really means examining each link in the chain to make them as sustainable as possible.
eg COSCO launched their first electric container ship on July 26th 2023 and has pledged to expand their fleet.
eg Many European companies started to consider rail transport instead of airfreight on routes to China.
Whilst it’s possible now to build net zero carbon factories, for the future owners will have to consider:
- how to upgrade any existing facilities
- how to evaluate emerging technologies to see which ones become financially viable, and when
- how to maintain cost competitiveness
- which market factors will evolve in which ways eg regulatory, technological etc – how can this be forecast and anticipated?
- which sourcing factors need to be considered?
You can see it’s a complex decision and one that will be challenging to implement, even once you’ve brought all of the stakeholders on board with the idea.
However, at present, there are still companies who see the topic of ESG as a simple box ticking exercise and that will have to change.
Regulatory Compliance will remain one of the greatest cross-border challenges in supply chains
Navigating complex and evolving international trade regulations is another significant challenge. Companies must stay abreast of changing regulations and ensure compliance to avoid any legal complications.
Unfortunately some jurisdictions make decisions seemingly at the drop of a hat and implement them backdated to yesterday with little care for the practical implications of their idea. eg Back in around 2010 (I’m not sure of the exact date) Turkey introduced a law requiring all food imports to be analysed in local labs before they could pass customs. They didn’t consider that were not enough certified laboratories o take care of this process immediately and the result was several thousand trucks stuck at customs on the European side in Istanbul…
That is just one example, but rapidly changing regulatory environments are a frequent issue.
Adapting Customer Service Across Borders
Supply chain professionals should not overlook the impact of customer experience on the success of their global expansion. As companies venture into new markets, understanding and adapting to diverse customer expectations and preferences is crucial for sustainable growth. For Lorenzo, his present project is the first where he has been in charge of the customer service department.
It’s always a discussion in companies whether customer service belongs to sales or the supply chain, however in the end it’s irrelevant as long as the job is done well. Let’s face it, those 2 departments have to collaborate closely to make the best decisions for both the customers and the company.
To meet customer expectations across borders, customer service departments must focus on:
Effective Communication
Clear and culturally sensitive communication is key when dealing with customers from different countries. Companies should employ multilingual customer service teams and utilise cross-cultural training to bridge communication gaps.
However it’s not purely a linguistic question as customers in different parts of the world have hugely varying expectations both regarding the way you communicate (eg chat bot vs human), the timing, what actions are expected, how soon are solutions expected etc.
Tailored Services
Recognising that customer needs may differ across markets, supply chains must be adaptable to meet the specific requirements of each region. This may involve customised packaging, localised product offerings, or flexible delivery options.
For example, in Europe I’m generally quite happy if my ordered package arrives within the week after I ordered it whereas in Shanghai delivery might even take place within the hour.
Technology needs to be leveraged to enhance the customer experience and not “just” to reduce costs. Here, collaborations with companies such as QContact can help you keep things under control whilst improving the customer experience.
Seamless Returns and Exchanges
Offering hassle-free returns and exchanges is essential for building customer trust and loyalty. Establishing standardised processes and collaborating with local partners can simplify the return process as it usually isn’t possible to send things back across borders unless they are faulty and need to be checked.
This is a topic where you also need to be fully aware of your legal obligations under local law.
How DO customers complain about products? In Cyprus for example a customer is not soooo likely to call the company about a product (unless it was a huge investment) whereas in Vietnam the number of calls received can be really high. A question of culture.
Supply Chain as a Strategically Important Part of the Business
The importance of supply chain management has become increasingly evident in the post-pandemic world. Traditionally considered as a back-office function, supply chain management now plays a pivotal role in the success of companies after they realised that without raw materials or products there’s no business to be done..
To secure their supply chains, companies need to approach this topic strategically. This means viewing the supply chain as a strategic asset and aligning it with the overall business goals. A comprehensive strategy includes assessing supply chain risks (including cybersecurity), investing in technology and infrastructure, fostering collaboration with partners, and continuously evaluating and optimising processes. Managing working capital is a core part of the role and one of the main reasons that Supply Chain Management is such an important part of any business, as the impact on financials shouldn’t be underestimated.
It also means aligning supply chain reality with projects at an early stage to ensure that timing plans etc are realistic. I discussed this with Lorenzo back in 2020 during our first discussion.
The Role of Supply Chain Management in Senior Leadership
In the wake of the pandemic and the disruptions it caused, the role of supply chain leaders has rightly gained prominence. Previously, supply chain management may not have been given the attention it deserves at the top table of management. However, the pandemic highlighted the vulnerability of global supply chains, prompting businesses to recognise the critical role of supply chain leaders in ensuring resilience and continuity.
Post-pandemic, supply chain leaders are increasingly involved in strategic decision-making within organisations. They provide valuable insights into risk management, operational efficiency, and emerging trends, contributing to the overall success of the business. That means that a good understanding of financials and working capital is required.
After all nobody wants their cash to be tied up in raw materials stuck in a striking French port, or finished goods stuck at customs in New Delhi.
Adapting to New Cultures as an International Professional
When taking on a new international role, it is essential to prepare for the cultural differences and challenges that come with working in a new environment. By adapting to new cultures and fostering strong relationships with diverse teams, supply chain professionals can thrive in global business settings.
Some aspects recommended by Lorenzo to focus on include:
Cross-Cultural Awareness
Gaining an understanding of cultural norms, values, and customs enables more effective communication and collaboration. Invest time in learning about the local culture and its impact on business practices.
Building Relationships
Make the effort to forge connections with local colleagues, partners, and stakeholders. Building trust and rapport is crucial for successful collaboration and overcoming potential cultural barriers.
Flexibility and Adaptability
Remain open-minded and adaptable to different working styles and practices. Be prepared to adjust your approach and find common ground while still upholding your company’s objectives and values.
The Future of Global Supply Chains will also shape Business
Navigating the cross-border challenges in supply chains is a complex yet vital endeavour for small and medium-sized food and beverage companies seeking to successfully expand globally. To overcome these challenges, companies must address the greatest challenges of the future, approach supply chain management strategically, consider customer experience, ensure supply chain security, elevate the role of supply chain leaders, and adapt to new cultures as international professionals. By embracing these strategies, companies will be better placed to enhance their global footprint and thrive in an increasingly interconnected world.
The challenges will vary across different industries and markets, but the supply chain industry will need to evolve in order to support the developing needs of trade and industry.
Full Interview
You can find the full discussion with Lorenzo here:
You can reach out to and connect with Lorenzo here: https://www.linkedin.com/in/lorenzofornaroli/
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Kathryn firmly believes that business is done between people, and therefore places her focus on building strong relationships that form a solid foundation for doing business.
When she's not travelling around the world, Kathryn enjoys playing clarinet in her town's wind orchestra or sharing her love of the outdoors with her Scout group.