International Trade and Global Business

 

Cross Border Supply Chains are Good for Business

Cross Border Supply Chains are Good for Business
Creating an efficient supply chain opens a world of opportunity for smaller entrepreneurs. Such chains are mundane topics for many people, but they've been a key factor in delivering the benefits of globalization. Whatever the size of the company supply chains matters in a big way.

There's a California company that makes equipment for micro-breweries. They do everything, from start to finish, it can set you right up wherever you want to make the beer. They recognized the potential for expanded liters of brewed beverages consumed all over the world and the appeal of drinking beverages made close to home in smaller quantities. But the problem was where to source the vats, pots, tubes, and electronics to mix all the ingredients at the right temperature?

The company went to China in search of gear. Turns out China has, for ages, been good at making big pots of all sizes and materials. Motors, gauges, and sensors are a separate specialty but can also be sourced in China. Putting these elements together takes place at another facility, in part to protect the IP. Then they combine elements that are sent to the US for adding the secret ingredients and final assembly at the customer's venue.
Could such fabrications take place elsewhere? Not with the same quality and cost, say the American entrepreneurs.

What about added tariffs? A big problem that had increased costs but not by enough to reengineer supply chains or give up altogether. There's certainly is a price point at which negative things could happen, and another incremental increase could do it. This is not to say that creating supply chains is push-button easy and can be done by posting on a neighborhood list server. You have to know what you're looking for, know good quality components, develop strong relationships, and negotiate a good price. Returns policies for flawed work must be established.

What about those who criticize the outsourcing? It's a net gain for the US, and the criticism becomes moot unless the US is capable of making the components at a cost it can't make them now. Substantially costlier breweries will lead to fewer breweries.

Brewing up jobs

That would be a shame because it turns out that micro-breweries are engines of local employment. They employ brew masters, bartenders, accountants, managerial staff, cleaners, drivers and assorted others. And don't forget the grains, bottles and other inputs sourced locally. Since micro-breweries can be set up anywhere including rural areas, where jobs are less plentiful, they represent an important economic development tool, as well as a place where people can gather to socialize.

So supply chains that cross and crisscross borders are important for many reasons. We need to shelter them from harmful interference and understand their importance in bringing our business ideas to fruition.
 

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