The Importance of Infrastructure
Global organizations rely on a vast network of supply chain to enable them move goods from central warehouses to other countries. These organizations use a supply chain system to ensure that goods are successfully delivered to various outlets through sea, air, or inland. The supply chain is defined as the practice of managing various components involved in logistics including the planning, sourcing, procuring, and conversion of goods between intermediaries, channel partners, and customers (Ayers, 2006). However, channel partners including logisticians have in the recent experienced difficulties in their supply chain network when moving goods, especially when the country destination has deficient infrastructure, which prevents the seamless movement of goods from the source to the destination.
Logisticians face many difficulties especially in infrastructure. These difficulties occur in either shipping or air transport. Countries with deficient infrastructure for instance seaports, cannot allow large sea carriers to be able to dock due to either limited space or a shallow berth. On the other hand, logisticians may also face difficulties in inland transportation especially where wagons are used to transport goods.
In other instances, logisticians from foreign markets especially those from Chinese and Mandarin may not be accustomed to the communication patterns when approaching foreign waters. This could hinder communication among the sea going vessels. This hence highlights the role of infrastructure in the supply chain, with the main role being to ensure that goods are delivered to various locations in the least possible time and cost. Infrastructure plays the role of ensuring free movement of goods from one location to the other.
There are various logistics infrastructure within the supply chain that is used to move goods from the source to destination. These include sea, seaports, rail, air and road transport. The infrastructure can be used in a particular method of entry, with methods of entry being indirect exporting, active exporting, and production abroad. Indirect exporting occurs where intermediaries market and sell products to the international markets. Whereas direct exporting occurs when goods are sold abroad to an intermediary who assumes the whole responsibilities of marketing. On the other hand, production abroad, involves a joint venture model whereby an exporting firm and a local firm in a foreign market come together to form a subsidiary (Gouws, 2004) to enable it to handle the marketing and distribution functions.
Indirect exporting as a method used to move goods can use an export trading company, an export management corporation, or a piggyback firm to supply its goods in a particular foreign market. In active exporting, a company employs the use of agents, distributors, and sales subsidiaries in its supply chain network to help it deliver goods to various destinations, while in production abroad, a company could use the franchise method, licensing, joint venture or subsidiary within the supply chain network to move goods to other destinations.
However, these foreign market entry strategies depend on the size, growth, and potential nature of the foreign market, where the strategies may be employed. The supply chain system is a vast area under logistics that need to be managed. It is beneficial to logisticians who have put in place an elaborate infrastructure to facilitate the movement of goods from the source to the market.
Ayers, J. B. (2001). Handbook of supply chain management. Boca Raton, Fla: St. Lucie Press.
Gouws, A. (2004). Export issues for entrepreneurs. Lansdowne [South Africa: Juta.